| Members of the Confederation of Indian Industry in Delhi on Friday. A Telegraph picture
New Delhi, Feb. 28: Industry is ecstatic over the slew of exemptions and tax breaks that finance minister Jaswant Singh has doled out to them — but has been chary of making immediate predictions about whether this will help them ratchet up industrial growth to levels that will enable the country achieve its ambitious 8 per cent GDP growth target.
Ficci president A. C. Muthiah said there were three key aspects in this year’s budget: rationalisation of the tax structure in general and introduction of VAT in particular, emphasis on the development of infrastructure with initiation of new projects on airports, ports, roads and railways, and the introduction of fiscal consolidation measures including cash management system in government departments.
“The budget should help spur job creation in the country with its focus on employment intensive sectors like textiles and small-scale sector. It would surely give rise to a feel-good factor in the economy,” he added.
Ficci complimented the finance minister for providing a framework for a smooth transition to the value added taxation system. By offering to pick up the tab for the losses that the states will suffer on account of the introduction of VAT for three years, the finance minister has disarmed the main opposition to the introduction of VAT and that too through a process of consensus, the chamber said.
Muthiah said the proposed infrastructure projects will stimulate demand and help buoy manufacturing activity in the core sectors. Retention of tax sops on interest payment on housing and 100 per cent depreciation granted for drinking water projects for housing sector are innovative steps. The pharmaceutical sector also got to swallow a sweet pill of duty cuts.
The benefits granted to the sector at par with IT sector will substantially boost the prospects of Indian pharmaceutical sector. Telecom sector will also benefit from the duty cuts and also from the decision on hike in FDI in the sector. It also welcomed the decision to raise the FDI ceiling in banks and allow full voting rights to investors in private banks.
“The budget takes into account almost all of CII’s recommendations and, in fact, has exceeded all our expectations,” CII president Ashok Soota said.
CII vice-president Anand Mahindra said, “Not only does this budget set a sensible, reform-driven fiscal framework for sustained economic growth, but it is also written in simple, no-nonsense, and wonderfully constructed language.”
“I am delighted to see so many reform measures covering direct as well as indirect taxes, infrastructure, reduction in interest rate on small savings, and several other areas. Personally, the automobile industry is delighted that excise duty on motor vehicles and MUVs have been reduced from 32 per cent to 24 per cent,” he added.
The chamber was also delighted with the halving of the corporate surcharge — with the hope that the remaining half will become history in the next budget. The CII was elated with the importance to manufacturing by helping consolidate recent gains through a creative fiscal package. The chamber acknowledged major fiscal reform package for textiles, apparels, garments and made-ups.
The boost to tourism by withdrawing expenditure tax and by extending infrastructure status under section 10(23G) of the Income Tax Act was highly lauded by the chamber.
Giving an overall perspective of the budget for year 2003-04, S. M. Dewan, Director General of the Standing Conference of Public Enterprise (SCOPE) said, “The Rs 60,000 crore expenditure under BOT scheme would create an additional demand for steel and cement sectors in particular.”
He added, “SAIL and Cement Corporation of India in the public sector have welcomed the move. Public sector undertakings in the power sector such as NTPC, BHEL, PGCIL also welcome the initiatives and reduction in import duty for the power transmission equipment.”
The reduction in the custom duty on LNG re-gasification would benefit CNG consumers. Employees of PSUs welcomed the resumption of the LTC scheme and clarifications on calculation of voluntary retirement scheme (VRS) for purposes of income tax exemption, reiterated Dewan.