During the IMC Chamber of Commerce and Industry’s pre-Budget presentation/suggestions before the Finance Minister on the forthcoming Union Budget, Dr Lalit Kanodia, President, IMC, advised the Minister that he had continuously emphasised the need for a stable tax regime and had committed to reducing corporate tax to 25 %. IMC expected that the Finance Minister would honour his commitment, it said in a release.
IMC indicated out that the US government has reduced corporate tax to 20 % and that the US Fed was going to increase a person’s eye levels. This would have a significant effect on India—the dollar would enhance and the rupee would damage as a result. This is also likely to reduce India’s forex trading inflows.
IMC emphasised that the present need of the country was to accelerate growth and increase employment. Two latest reports, by McKinsey and the Boston Consulting Group, have indicated out that the country has created only 7 million jobs in 5 years, in contrast to the need of 60 million jobs.
“Both development and job development are conditional upon private investment. To encourage this, interest rates need to fall (though this is outside the acumen of the Budget). We have a paradox. Banks are flush with funds, corporate need credit, but banks are not loaning. There is a state of chaos due to the worry of NPAs. Hence, the Finance Minister should motivate banks to lend on the basis of cash flow, rather than only because of assets, as is done in the US. Another out-of-the-box idea is to allow corporates to devalue assets at will, as was done in Germany after World War II. This will speed up private investment,” it opined.
IMC indicated out that tasks are manufactured mostly by the MSMEs and start-ups. Around 60 % of the jobs in Europe are by MSMEs. Hence, the Budget must provide support to MSMEs and start-ups.
IMC described that almost every nation that has obtained fast economic development post-World War II, such as Germany, Japan, Taiwan, South Korea and China, have stressed the significance of exports. Hence, it is best that India encourages export. Currently, the difference between India’s exports and imports is about $100 billion dollars. There is no reason why Indian cannot become current account surplus if it is to engage in the right policies. As an illustration, IMC indicated out that the strong decision of the delayed Mr Pramod Mahajan to exempt software exports from income tax for 10 years resulted in exports of $116 billion of software last year.
SEZ policies should be analyzed. They result in employment, foreign exchange earnings and the import of technology into India. Unfortunately, SEZs in the past became land deals. MAT should not be charged on SEZs’ profits from exports.
The effect of GST on exporters also needs to be analyzed. At present, they have to pay GST and then claim a refund. This results in a serious strain on their cash flow.
The govt should motivate exports of products where India has an aggressive advantage. For example, India is the biggest exporter of motorcycles and milk in the world. Such products should be given appropriate tax rewards, to improve their exports.
IMC had previously given the Finance Minister a list of several other recommendations pertaining to the forthcoming Budget.
The Finance Minister provided a very patient hearing to and IMC is expecting that he takes its suggestions into consideration while creating the Budget, the release said.