Mr Sinha said the government was committed to bring down the customs tariff rate to 20 per cent in three years and would take forward the process of rationalisation and simplification of tax rates as also a cut in interest rates. But the businessmen present unanimously opposed a further cut in custom duty and sought a status quo as further reduction could spell doom for the manufacturing industry, said an industry source who was present at the meeting.
We have asked Mr Sinha not to reduce customs duty as it will have an adverse impact on our industries. The Budget should promote employment and industrial growth and the country should not be reduced to a trading nation, Bajaj Auto chairman Rahul Bajaj said after the meeting. Other issues on which all industry representatives were unanimous included a reduction in the corporate tax rate from the prevailing 35 per cent to 30 per cent, implementation of the value added tax (VAT) regime, withdrawal of minimum alternative tax (MAT), reduction in subsidies, stepping up of the pace of divestment, speeding up the process of labour laws reforms, and a cut in the lending rates.
Industry sources told The Financial Express that Mr Sinha clearly indicated that textile and housing sector would benefit from his forthcoming Budget. The finance minister has patted the agriculture and service sectors for doing well and said the performance of the industry and infrastructure sectors was much below his expectations. The economy is presently passing through a difficult situation with industrial slowdown and a great deal of uncertainty in global outlook, he told them, said a source.
While many prominent industrialists like Mukesh Ambani, Ratan Tata, Sanjiv Goenka, Rahul Bajaj, Suresh Neotia, AG Piramal, Ashwin Dani, VN Dhoot and Nusli Wadia attended the meeting, two of the biggest names from information technology industry NR Narayana Murthy and Azim Premji could not make it.
Confederation of Indian Industry (CII) president Sanjiv Goenka said the government should come out with policies to spur investments. We asked for a thrust on media and entertainment sectors which are worth Rs 14,000 crore and are expected to grow to Rs 48,000 crore by 05. This industry should be treated at par with the IT industry, said Mr Goenka.
CII also sought measures aimed at boosting the manufacturing sector and proposed re-introduction of investment allowance for five years at the old rate of 25 per cent. We also asked the finance minister to persuade the Reserve Bank (RBI) to further reduce prime lending rates which at 12 per cent is still very high, he added.
Federation of Indian Chambers of Commerce (Ficci) president RS Lodha raised drastic cut in commodity tax and taxes on demand elastic items to push overall demand and reverse the current economic slowdown. Ficci has further asked for making the process of corporate recast easier by reducing the stipulation for continuing business of the amalgamating company to two years from the current five years. Service tax needed to be made applicable in case of all services and exemptions should be confined to public services, essential public utilities and important merit goods etc, Mr Lodha said.
Associated Chambers of Commerce and Industry (Assocham) president KK Nohria stressed on the need of having a realistic Budget and not an ideaslistic one. Everybody present was unanimous that there was a need for public capital spending on infrastructure, he said.
Tata Sons chairman Ratan Tata raised the issue of having a comprehensive policy on intellectual property rights. He said the Budget should encourage to add new capacities and should help the free movement of agricultural goods.
Videocon group chairman VN Dhoot said the consumer component industry needed protection and at zero per cent customs duty, the domestic consumer electronics industry was struggling. He suggested declaring consumer finance as a priority industry so that consumers could buy durables at low interest rates which in turn would boost demand.
FIEO suggested cut in customs duty on raw materials and components to a rate lower than that on finished goods. It also proposed restoration of section 80 HHC of the Income Tax Act.