FICCI: FM balances fiscal deficit and growth

The Union Budget is growth oriented and forward looking, preparing the Indian economy post global financial meltdown for a sustained course to attain double digit growth. The Finance Minister has done a fine balancing job under trying circumstances, astutely managing fiscal deficit while keeping an eye on growth, observed Mr. Harsh Pati Singhania, President, FICCI.

In the face of pressure for stimulus withdrawal, the Finance Minister has only partially increased the CENVAT rate from 8 percent to 10 percent. Secondly, he has not increased the service tax rate. Thirdly, he has restructured the income tax slabs in a manner which will leave more money in the hands of consumers and thereby encourage demand, Mr. Singhania observed. By and large, the Finance Minister has provided a stable tax and policy framework for the Indian Economy to move forward, he added.

However, industry is disappointed that the Finance Minister had raised the MAT rate from 15 percent to 18 percent when industry was demanding a cut down to 10 percent. Further, the impact of excise duty hike across the board coupled with increase in excise duty on petrol and diesel will add pressure on the price line in current circumstances, Mr. Singhania noted.

However, industry appreciates the need for some fiscal correction. Mr. Singhania noted that the Finance Minister has laid out a roadmap for fiscal correction as well as radical reforms of the tax regime through introduction of GST and Direct Tax Code. He has given a little time for preparation for introduction of these from only next year, thereby providing time for further public debate on DTC and fine tuning administrative machinery for GSTT, he said.

FICCI President also noted with satisfaction the emphasis the Finance Minister has placed on overall development of critical sectors such as agriculture and rural development, which FICCI has been emphasizing. Enhanced outlays for infrastructure projects would also add to the growth momentum.

The Finance Minister's announcement to infuse more capital into Public Sector Banks is good for credit growth as this will enable banks to lend more for productive economic activities. The reduction of surcharge on corporate tax rate has also been welcomed by Mr. Singhania.