Indian Budget 2011-12 is growth oriented Budget: CII President
Feb 28, 2011
The Finance Minister Mr. Pranab Mukherjee has presented a growth oriented Budget that addresses some of the structural constraints in sustaining growth in the medium term, observed Mr. Hari Bhartia, President, Confederation of Indian Industry (CII) while commenting on the Union Budget 2011-12 presented in the Parliament today. In particular, he praised the measures to increase investment in the infrastructure and agricultural sectors.
The Finance Minster has taken ample initiatives to enhance investment in infrastructure. His initiatives in terms of increase in allocation of funds to the sector, increase in FII limits for investment in corporate bonds and provision of tax free status to infrastructure bonds would enhance the flow of funds to the sector. Tax rates applicable on interest paid on overseas borrowing in case of infrastructure debt funds are reduced to 5% instead of the regular withholding tax rate of 20%. This is in line with CII recommendations that have made it clear that infrastructure development is a pre-requisite for manufacturing and agricultural sector growth.
The importance of agriculture is underscored by several measures to remove supply-side bottlenecks in production and distribution of food items. Capital investment in storage capacity will now be eligible for viability gap funding. The move to give infrastructure status to the fertilizer industry is an innovative way to underline the importance of delivery of quality agricultural inputs.
CII is especially happy to note that fiscal deficit for the current year stands at 5.1%, lower than the budget estimate of 5.5%. What is even more heartening is that the fiscal deficit for next year is budgeted at 4.6%; which is even lower than 4.8% suggested by the Roadmap of the Thirteenth Finance Commission report. This would help in checking the rise in inflation and interest rates and facilitate larger credit availability to the private sector, added the CII press release.
The Budget has also provided direction to some path breaking reform. The move to direct transfer of subsidies for kerosene, fertilizer, and LPG for BPL families will remove the inefficiencies that plague our delivery of welfare measures to under-privileged sections. This is in line with CII recommendations to plug the leakages in our public delivery system.
The Minister has also indicated that significant reforms are underway in Customs and Excise collection. There is a clear commitment towards moving towards a service oriented system. Exporters and importers would be allowed to self assess their duty obligations, and there is a move to improve the IT infrastructure for Excise collection.
With no increase in excise duty, the Budget has sought to keep the consumption momentum of the economy going without further inflationary pressure. Increasing the income tax exemption limit and deepening of the rural and agriculture related incentive schemes are other measures that will drive consumption. By focusing on incentives for agriculture related infrastructure, expansion of rural credit and interest subvention for short-term loans for farmers, and prioritizing the development of agro supply chains, the Minister has ensured that rural incomes would continue to rise and become an engine of sustained economic growth.
CII also welcomes the intention of the government to raise the share of manufacturing in GDP from 16 per cent to 25 per cent over the next 10 years and hopes that the national manufacturing policy that was promised to be on the anvil by the Finance Minister would be instrumental in achieving this target.
Another welcome initiative has been the move to allow SEBI registered Mutual Fund to accept subscription from foreign investors for equity schemes. This would allow Indian businesses to raise funds directly from investors abroad. Special mention was given to various legislations that will take forward the process of financial sector reform. Another welcome reform is the announcement to amend the Banking Regulation Act to allow additional banking licenses to private sector players.
CII is happy with most of the changes announced in tax rates. It is particularly happy that the Finance Minister has retained the excide duty and service tax at the same rate. Any hike in duty at this point of time would have been counter productive for inflation. It would also not be in line with the proposed rate for Central GST. The roll-out of Goods and Services Tax has been paved by the proposal to introduce necessary legislation and put in place IT infrastructure. CII also welcomes reduction in tax rates on dividend received from foreign subsidiaries by resident companies.
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