Govt pegs GDP growth at 6.9 per cent

Manufacturing will continue to propel the economy with a 8.9 per cent growth in 2004-05, while service sectors like trade, hotels, transport and communication will sustain the boom period with a 11.3 per cent growth in 2004-05.

Experts feel the country has shown the resilience to overcome the adverse impacts of spiralling fuel and metal prices in international markets, scanty rains in many parts and the devastating tsunami that swept away growth prospects in the eastern coast last year.

Finance Minister P. Chidambaram, who had earlier said any GDP growth figure above 6 per cent should be regarded as ‘‘satisfactory’’, has reason to rejoice as higher economic growth would ensure greater revenue collection and lower fiscal deficit in 2004-05.

The government is planning to bring down the Central Sales Tax (CST) to 2 per cent (from the current 4 per cent) after a year, when CST will come up for review after the implementation of value-added tax (VAT). This was stated by Ramesh Chandra, Secretary, Empowered Committee of State Finance Ministers on Monday while addressing a seminar on VAT— organised by The Clothing Manufacturers Assocation of India.

Chandra added that opinions were sought from many countries, including Brazil, Canada and Australia, and all suggested that CST should continue. CST will continue at least for one more year, he said, adding that it is helpful in tracking inter-state transactions. He did say, however, that “I am given to understand that the CST rate may be cut to 2 per cent next year.”

Chandra added that a software called TINXSYS, to track inter-state transactions, is in place and will take one year to be fully operational.

Stating that post VAT, prices of goods are expected to go down, Chandra said that in most countries, which have implemented VAT, prices have come down. “In South Africa, prices went down by as much as 5 per cent”, he said while adding that in India too, prices should go down after VAT.

Chandra also added that the political leadership in Uttar Pradesh does not have any doubt that VAT should be implemented. “They are just expressing some apprehensions which exists in the state and they should do that,’’ Chandra said. Both the Centre and the states have embarked on a Rs 50 crore publicity campaign on VAT to allay fears on the new tax regime.