Continuous reforms in agriculture sector to improve farm productivity and income levels, increased disposable income of the middle class vis-a-vis rationalisation of the direct taxes would give a further boost to the overall economic growth of the country, said Mr Rajeev Talwar, President, PHD Chamber of Commerce and Industry while releasing a press statement on expectations from the forthcoming interim budget to be presented by Hon’ble Finance Minister, Mr Arun Jaitley ji on 1st February 2019.
The last five budgets of the present Government have focused on each and every segment of the economy and the intent of the Government has been to do welfare for every citizen of India. Going ahead, we look forward to continuation of the dynamic reforms in the forthcoming budget also, said Mr Rajeev Talwar.
Consistent indirect tax revenue growth along with reduction in GST rates by the government indicates that the tax base is widening and economic activity is rapidly expanding in India. At this juncture, the economy needs further bold measures to boost the investment environment and to trigger demand growth to the next level.
Time has come to rationalise the direct taxes starting from reduction in Corporate Tax to a level of 25% for all corporate tax payers, without any turnover criteria. This will provide a boost to economic growth and would result in widening of the Direct Tax net, enhance collections and promote compliance further, said Mr Rajeev Talwar.
Income up to Rs.3.5 lakhs should be considered for tax exemption, instead of the present Rs.2.5 lakhs. The maximum personal income tax rate should be towards 25% to increase the personal disposable income which will boost demand in the economy. The Maximum marginal slab should also be raised to Rs.15 Lacs instead of Rs.10 Lacs, said Mr Talwar.
The low hanging fruit will be to examine the tax measures taken by the NDA-1 government and index them for inflation between 2004 and 2015. These will, by themselves cause a spurt in demand in all sectors of the economy. It is a settled principle that reduction in tax rate widens the tax net and promotes compliance, he said.
As international experience shows, start-ups have been major employment creators in most of the economies. In India too, start-ups have made good strides to foster a new business environment. Going ahead, government should provide an exemption from angel tax to the start-ups to attract more and more innovative minds in entrepreneurship, said Mr Rajeev Talwar.
We appreciate the Government for maintaining macro-economic stability in a highly uncertain global economic environment; we are proud that India is the fastest moving economy in the world economic system. The credit certainly goes to the Prime Minister and Finance Minister, said Mr Talwar.
The macro-economic environment has improved significantly during the last four years. Inflation has been contained remarkably, fiscal consolidation is on the right path and foreign investment flows are growing year after year, he said.
During the last few years, government has undertaken a plethora of reforms for each and every segment of the population starting with Make in India, Implementation of GST being the foremost and perhaps the biggest tax reform since independence, said Mr Talwar.
At the global charts, the Indian economy is looking remarkably attractive due to its performance in the last five years. The improvement in the Ease of Doing Business from 142nd in 2014 to 77th in 2019 is the significant outcome of the diligent efforts of the government towards improving the business environment in the economy. What needs to be accelerated is a much greater interaction with Indian Businesses at the highest level in the Government of India.
During the last four years, the government has been making continuous efforts to uplift industrial growth which has increased significantly from 3.8% in FY14 to 5.5% in FY18 and is expected to be 7.8% in FY19.
To bolster the industrial sector further, double digit manufacturing growth with increased participation of manufacturing sector MSMEs would create maximum opportunities for employment for the growing young workforce in India, said Mr Rajeev Talwar.
Land reforms such as increase in the lease period and creation of land banks for the use of industry should be strengthened. Further reforms in labour laws and an emphasis on productivity are required to facilitate the manufacturing firms to enhance their competitiveness, although Tenure Employment is a great step forward.
Continuous reforms in housing and construction sector would definitely create employment opportunities for millions of unskilled, semi-skilled and skilled workforce. It should be noted that urbanization has potential to shift disguised unemployment in agriculture sector to construction activities, said Mr Talwar.
Agriculture Export Policy of the Government is very encouraging and has the potential to double agricultural exports from present USD30+ billion to USD60+ billion by 2022. Further reforms in rural infrastructure logistics and a cold chain would help in increasing the level of food processing and rural entrepreneurship.
These would lead to increased participation in the global agriculture and food exports, said Mr Rajeev Talwar.
The increase in public investments in agricultural infrastructure would attract private investments in cold storage, warehousing and supply chain of agriculture produce in order to reduce food wastage and get them to urban citizens at moderate rates. It shall also raise the returns to agriculturists, said Mr Talwar
Current level of food wastage of more than 25% should come down to below 10%, he said. Credit availability to small and marginal farmers would enable them to adopt farm techniques, diversification in the crop pattern and increase in farm productivity.
Infrastructure sector has a huge untapped potential and could be the main driving force for achieving double digit economic growth. To facilitate further infrastructural development, strengthening of integrated public transport projects such as roadways, railways and waterways would reduce the logistics and time costs to businesses and enhance employment creation. Privatization of railway and road transport on the lines on aviation industry is the answer for the future, said Mr Rajeev Talwar.
Tourism is the low hanging fruit for the Union and State governments. More than 25 million Indians travelled abroad in 2018 and domestic tourist trips numbered 180 crore trips in 2018. This is the largest investment market in India, which has the larger number of stakeholders even than the stock exchanges in India. It is time to give this a further boost in private sector investment by not considering it a luxury.
Focus on twin merit goods of education with skill development and basic health with safety should continue with a longer term vision.
Education expenditure as a percentage of GDP needs to be increased to the level of 6% of GDP. There should be a school in the radius of 1 km and a college in the radius of 10 km in the next 5 years, said Mr Rajeev Talwar. But that should also mean easier private sector investment rules for Teacher Training facilities. Today, we are increasing a large number of Schools but fewer teachers of a modest calibre.
Health expenditure as percentage of GDP should be increased to 2.5% of GDP. For the inclusive health facilities, there should be a health centre in the radius of 1 km and a good state of the art hospital in the radius of 5 km, said Mr Rajeev Talwar.
For all the above sectors to come of age, India needs to be a more tax compliant nation. For this reason, it is time to invest in Big Data analytics to ensure that all potential tax payers pay all the taxes that they should be paying. And let us not do it through raid-raj or tax terrorism, but with the help of data mining and making an example of major offenders and doing away with exemptions.
