Dr. Kanodia reminded the Finance Minister that he had repeatedly emphasized the need for a stable tax regime and had committed to reducing Corporate Tax to 25%. IMC hoped that the Finance Minister would honour his commitment.
• IMC pointed out that the US Government had reduced Corporate Tax to 20% and that US Fed was going to raise the interest rates. This would have a significant impact on India, the dollar would strengthen and the rupee would weaken as a consequence. This is also likely to reduce our foreign exchange inflows.
• IMC emphasized that the present need of our country is to accelerate growth and increase employment. Two recent studies by McKinsey and the Boston Consulting Group have pointed out that the country has created only 7 million jobs in 5 years, in contrast to the need to create 60 million jobs.
• Both growth and job creation are contingent upon private investment. To encourage this, interest rates need to drop (though this is outside the purview of the budget). We have a paradox. Banks are flush with funds, Corporates need credit, but banks are not lending. There is a deadlock due to the fear of NPAs. Hence, the Finance Minister should encourage banks to lend on the basis of cash flow, rather than only on the basis of assets, as is done in the US. Another out of the box idea is to allow Corporates to depreciate assets at will, as was done in Germany, after World War 2. This will accelerate private investment.
• IMC pointed out that jobs are created largely by the MSMEs and Start-ups. 60% of the jobs in Europe are by MSMEs. Hence, the budget must provide support to MSMEs and Start-ups.
• IMC mentioned that virtually every country that has achieved rapid economic growth, post-World War 2, including Germany, Japan, Taiwan, South Korea and China, have emphasized the importance of exports. Hence, it is of paramount importance that India encourages export. Currently the difference between our exports and imports is about $100 billion. There is no reason why we cannot become current account surplus, if we are to pursue the right policies. As an illustration, IMC pointed out that the bold decision of Mr. Pramod Mahajan to exempt software exports from income tax for 10 years resulted in exports of $116 billion of Software last year.
• SEZ policies should be reviewed. They result in employment, foreign exchange earnings and the import of technology into India. Unfortunately, SEZs in the past became land deals. MAT should not be levied on profits from exports from SEZs.
• The impact of GST on exporters also needs to be examined. At present they have to pay GST and then claim refund. This results in a severe drain on their cash flow.
• The Government should encourage exports of items where India has a competitive advantage. For instance, India is the largest exporter of motorcycles and milk in the world. Such items should be given appropriate tax incentives, to boost their exports.
IMC had earlier given the Finance Minister a list of several other suggestions relating to the forthcoming budget.
The Finance Minister gave a very patient hearing and IMC hopes that he will take IMC’s suggestions into consideration while drafting the Budget.
Set up in 1907, IMC is an apex Chamber of trade & commerce with headquarter in Mumbai. It has about 2700 direct members, comprising a cross section of the business community, including public and private limited companies and over 215 trade and industry associations through which the Chamber reaches out to over 2,50,000 business establishments in the country. IMC is the first Chamber in India to get ISO 9002-2000 certification which has since been upgraded to ISO 9001: 2008. IMC is the only business Chamber in India where, the Father of the Nation, Mahatma Gandhi, was associated as an honorary member