Its that time of the year when industry leaders, economists and business confederations are preparing their wish-list to be forwarded to the Finance Ministry. Pre-budget preparations have begun for the Annual Budget 2008-09 to be presented in the Parliament on 29th Feb 2008.
Indian Finance Minister Palaniappan Chidambaram preparing his fifth consecutive budget said that his cause of concern will be some sectors that are under stress due to rupee appreciation. The FM pointed out that there has been an unsatisfactory delivery of promised goods and services but was positive that there is enough time for improvement in that area.
The FM refused to accept the next budget as an “election budget” but said that his next budgetary exercise will be the last “full budget” of the UPA government. He said that the budgets do not decide elections. In fact, the budget only gives outlays and does not decide outcomes. Between outlays and outcomes there lies governance and delivery.
The UPA Government’s term has seen many ups and downs both due to external and internal factors. Rising indices, rupee, oil prices and almost controlled inflation have been important economic factors. The FM is confident of a 9 per cent economic growth in the current fiscal year, his thrust for the budget (2008-09) will be to maintain high growth and ensure that the growth process endorses and includes larger sections of the people.
A key element this time is the near-unanimity on tax concessions. On the direct tax front, FICCI has sought a reduction of the existing tax incidence of 42 per cent (exclusive of the fringe benefit tax) by bringing down the corporation tax rate to 25 per cent from 30 per cent. The CII has sought abolition of surcharge on corporation tax.
FICCI President Habil Khorakiwala said: “Research and Development (R&D) and innovation in all sectors should be promoted by giving incentives.” He also sought infrastructure industry status for hospitality and renewable energy. The association has also sought additional deduction limit of Rs. 1, 00,000 for long-term investments such as life insurance premium, pension and annuities.
Ranbaxy’s Malvinder Singh and Nicholas Piramal’s Swati A Piramal demanded tax benefit to standalone R&D companies in the pharmaceutical sector.
Other demands from the industry include cut in excise duty rate from 16 per cent to 14 per cent, infrastructure status for cold-chains, basic food items made tax free, extension of tax benefit for IT and software beyond 2009, removal of dividend distribution tax, lower tax rate for repatriated profits and gains from overseas.
They also suggested reforms in agriculture, strengthening manufacturing and infrastructure sectors, encouraging savings and investments, and widening the tax base to sustain the buoyancy in the economy.
With the pre-budget preparations in full swing people are once again looking for some surprises in the FM’s briefcase when he walks into the Parliament on D-day.