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January 13, 1999


Industry captains urge FM to focus on medium-term perspective

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Captains of industry on Tuesday pleaded with Finance Minister Yashwant Sinha to retain the special import levy in the Budget 1999-2000 to provide a level playing field to the domestic industry.

In a pre-budget meeting in New Delhi with Sinha, the industrialists also stressed the need to devise and put in place tax measures, which promote restructuring of the companies through mergers, acquisitions and consolidation.

The four per cent special additional duty levied in the last budget was criticised by foreign business as protectionist even though the government justified it on the ground that it was done to counter the impact of domestic duties whose cumulative impact was higher in India than abroad.

Demanding early implementation of the recommendations of the various taskforces set up by the Prime Minister's Office, the industrialists said the budget should not focus exclusively on the short-term but unfold initiatives and measures from a medium-term perspective.

Apart from heads of major industry associations and public sector Undertakings, there were several leading industrialists such as Ratana Tata, Nusli Wadia, Dr Parvinder Singh, R P Goenka, Rahul Bajaj, A C Mutiah, Shashi Ruia, Mukesh Ambani and Mukul Kasliwal.

Inaugurating the meeting, the finance minister said that government has taken a number of policy steps to strengthen and reinforce the process of economic reforms over the past months.

These should dispel impressions regarding the slowdown in reforms. Although there has been an economic slowdown, there are some positive signs which augur well for the economy, he said.

Foreign exchange reserves are in a comfortable position and inflation is low. At the same time, government will endeavour to achieve the fiscal deficit target by controlling expenditure and also achieve the disinvestment target. The finance minister expressed the hope that this meeting will provide an opportunity for a fruitful industry-government interface. He sought concrete suggestions in this respect.

The meeting was attended by Finance Secretary Vijay Kelkar, Industary Secretary Ajit Kumar and senior officials of the finance ministry.

The participants made the following requests and observations:

1) Fundamentals of the economy are sound. There has been a growth slowdown in comparison to the earlier year but the growth is much higher when compared with the countries in East Asia.

2) There was consensus among the captains of industry to widen the tax base by eliminating exemptions. In particular, there is need to reduce the number of duty rates in excise to three to five slabs.

3) Restore 100 per cent admissibility of MODVAT (modified value added tax) credit instead of 95 per cent at present; need to dispense with differential excise regime for branded and unbranded products as this hampers participation of organised sector in the food-processing sector.

4) The department of revenue should strive for uniform interpretation of laws and rules pertaining to excise and customs so as to promote better compliance and reduce litigation.

5) Kickstart the economy by increasing the plan expenditure, quick financial closure and implementation of infrastructure projects.

6) Implement recommendations of the various taskforces set up by the PMO. In this regard attention was drawn to implement some of the recommendations pertaining to the food-processing industry.

7) Ease pressure on interest rates as it will stimulate domestic demand, reduce cost of production, which may help in reviving the equity market.

8) Seek political consensus across the various political parties on the need to reduce fiscal deficit.

9) Stregthen antidumping measures and speedier disposal of such cases.

10) Greater flexibility in the use of Public Provident Fund resources. These are in the nature of long-term funds and can be used for infrastructure and revival of stock market.

11) Government should not only focus on growth but also on creating employment opportunities. Three sectors were mentioned from the point of view of employment potential. These included housing and construction, tourism and agriculture.


Pre-budget parleys

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