Hike investment limit for small, medium sectors

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: The focus of the Budget this fiscal should be on programmes that instil competition and competitiveness to ensure the growth of the small and medium sector.

Finance minister Yashwant Sinha should take up drastic reforms in customs duty and deepen reforms in the central sales tax restructure.

In times of economic slowdown, the small and medium sector needs to be given a major boost as it contributes around 40 per cent to India’s industrial production and has a share of 35 per cent in direct exports, which is very low.

Since reforms in the sector are of critical importance to the growth of the Indian economy, the investment limit should be increased and the sector should be dereserved for the development of a dynamic future market which in turn will enable the entrepreneurs to bring in state-of-the-art technology .

Further, Mr Sinha must refrain from reverse tariff escalation, especially in areas such as iron and steel, copper, aluminium and plastic raw material wherein artificially high tariffs have been pegged at a time when global capacities have been created in the country and half the produce is being exported profitably.

Similarly, Mr Sinha must go in for a drastic cut in customs duty in these areas as most of the intermediate and finished goods manufactured by the small sector attract lower duties and thus become uncompetitive. At the same time, he should keep in mind the real issues of protection by the developed world and the cost disadvantages that Indian industry faces.

The initiatives on value-added tax (VAT), however, are a welcome step, but if central sales tax is not made zero or VATable, VAT would prove disastrous for industries in general and small and medium ones in particular.

Till now, the support agenda of the government for the small sector has not made a dent. Mr Sinha should, therefore, seek assistance from self-help groups and industry associations with regard to the delivery mechanism instead of relying on public institutions.

The initiatives that need the government’s support include facilitation in participation of trade fairs abroad, in acquiring Intellectual Property Rights as patents, trademarks and in conducting research and market studies.