Budget 2013 may offer income tax breaks to spur savings
Many experts believe that the budget has to focus on reviving investment considering that the investment rate has fallen to 35% of GDP in 2011-12 from 36.8% in 2010-11. The investment rate cannot be raised significantly unless the government revives the savings rate, which has fallen to an 8-year low of 30.8% of GDP in 2011-12 from 34% in 2010-11.
Though much of the slowdown in investment was due to delay in land acquisition and forest clearances, sources said the finance ministry is serious in reviving private investment through a mix of policy initiatives including tax breaks, credit enhancement and re-energising the corporate bond market by incentivising bourses to launch trading platforms for retail investors.
“The Budget may announce setting up a bond guarantee fund,” an official close to the development said.
The proposed bond guarantee fund will help reduce the reliance on government guarantees for various projects, especially public-private partnerships and enhance fund flows to private companies.
While IIFCL has started a credit enhancement facility — a mechanism to provide partial guarantee to special purpose vehicles (SPVs) involved in infrastructure projects so that their bond ratings are raised to investment grade of “AA”, the government wants to institutionalise the facility through setting up of a bond guarantee fund. Such a
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