For quick results, finance minister Yashwant Sinha should enhance public spending on physical infrastructure, like power, roads, ports, to stimulate demand for basic and capital goods industry. This may affect the fiscal deficit but care should be taken to control the revenue deficit. Infrastructure status should be given to integrated township development where 100 per cent foreign direct investment has been allowed.
Mr Sinha should increase the disposable income of the middle class by raising the zero tax slab to Rs 75,000, 10 per cent slab to Rs 1,00,000 and 20 per cent slab to Rs 2,00,000.
For medium-term results, Mr Sinha should encourage industry-level restructuring by simplifying policies and procedures with regard to mergers, demergers and acquisitions. India needs to become a common market through harmonisation of competitive taxes at the state-level, abolition of central sales tax and allowing free movement of goods. There is also need to ensure flexibility of labour.
Agriculture reforms are a must. Measures to restructure the crop pricing policy will help avoid the perpetual scarcity of certain crops and excess production of certain others. It is time we lifted all restrictions on processing, stocking, movement and marketing of agro produce. Further, the milk and milk products order should be withdrawn.
We also need to evolve an integrated irrigation and rural development plan for private sector participation on the lines of integrated township development plan. Unused land can be earmarked for this purpose. This will enhance agriculture, forestry and bring this land into productive use. For long-term results, the social sector, such as education and health, must be given higher budgetary allocation.
Exports should be given additional fillip by allowing exporters to create a foreign exchange fluctuation reserve out of pre-tax profits. The current slab of taxing 20 per cent export profits may be retained for two years and the prevailing DEPB (duty entitlement pass book) scheme should also be retained for similar period. Simplification of rules for transfer pricing and allowing a 15 per cent price range and placing deemed exports at par with physical exports will help India become a preferred manufacturing base.
The finance minister can take several steps to mobilise additional funds. He should implement a zero-based budget exercise, accelerate expenditure reforms, as suggested by the Expenditure Reform Commission, and introduce the Fiscal Responsibility Act as promised in the last budget. In addition, the tax base should be broadened by bringing more services into the tax net while simultaneously ensuring that tax on services is made Cenvatable. Disinvestment proceeds require further acceleration. Assocham is encouraged by the recent positive steps taken by the government and the Supreme Court. We should also consider export of two-thirds of current foodgrain stocks (40 million tonne at best available price) to generate surplus Rs 20,000 crore.
The finance minister should have a re-look at the depreciation provisions and various exemptions. The minimum alternative tax (MAT) needs to be eliminated.
Lastly, the Securitisation Bill should be introduced at an early stage.
(The author is President, Associated Chambers of Commerce and Industry of India)