It146;s the bottlenecks, silly

India Inc is aspiring for an investment-led, consumption-oriented Budget 2005-06. Sectors impacted by the quota era8217;s end 8212; such a...

India Inc is aspiring for an investment-led, consumption-oriented Budget 2005-06. Sectors impacted by the quota era8217;s end 8212; such as textile 8212; and by the upcoming Patents Bill 8212; like pharma and software 8212; have fingers crossed for growth and consolidation.

But power, communication and transport bottlenecks still cast their shadow over Budget-day demands of core and manufacturing sectors.

Industry associations FICCI and CII are hoping the regulatory mechanisms for ports, roads, power and airports will be in place by April, as will be the task forces for IT, BPO, textile, manufacturing and other sectors. They have also sought measures to increase FDI inflows by removing procedural constraints, and for a fresh thrust to the disinvestment policy. As public debt becomes an eyesore, industry wants corporate taxes lowered to 30 per cent from 36.6 per cent and removal of MAT Minimum Alternate Tax, even though they want the tax base to be raised. This year, industry has also resigned itself to the growing service tax net. India Inc wants even agricultural income above Rs 5 lakh to be taxed. A flat 15 per cent rate has been suggested.

Steel vision

8216;8216;In the next fiscal, the government must draw out its 8216;steel vision8217;,8217;8217; says Jindal Strips8217; Arvind Parekh. The steel vision must ban ore exports, promote finished steel-making and target an industry-size of 70-80 million tonnes, from today8217;s 36 million tonnes, he adds. Parekh says despite the rising steel prices, India still compares poorly with China where nine times more steel is consumed per capita. Though steel makers say prices are largely independent of tax rates, the consumer goods sector, dependent on its raw material inputs, wants the government to rethink taxes. Says Soumitra Ghatak of Godrej Appliances, 8216;8216;The budget must enable infrastructure development 8212; so that the quality of production here goes up. More people must also be able to buy and use new products. The tax structure must also be rationalised, to widen the base.8217;8217;

Consumer goods

The consumer goods industry has long demanded lower taxes than the current average 13-20 per cent, arguing that it would boost consumption and allow prices to fall. Currently, consumer goods penetration is low in India. Refrigerators, for instance, are used by only 17 per cent households or 3.6 million people compared to 14 million in China. Washing machines add up to 3.3 million in India, and 17 million in China. 8216;8216;Given urbanisation, we can do a lot better if domestic manufacturing gets a boost and buying power is enhanced,8217;8217; Ghatak adds.

Textile sector

The textile industry has its own grand worry for the Budget day. Growth here has been steady 8212; at 15-16 per cent 8212; over the last year, ending an earlier quagmire. But the pet concern is 8212; where will growth come from?

8216;8216;We don8217;t want to disturb the situation or create alarm, considering the sector has emerged out of the doldrums only just now. We want the government to help consolidate the situation further 8212; reform labour laws and enhance the duty drawback scheme,8217;8217; says H.M. Shah of Indian Clothing Manufacturing Association ICMA. Textile exporters get refunds on cenvat and excise duty, which have decreased over the years. They are not entitled to refunds on octroi, excise, sales or service tax, that they say, have risen. They want the anomaly to go, as, sales tax and cenvat included, the total tax adds up to 12-20 per cent on textiles and finished clothing.

New economy

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Even the New Economy is lobbying for tax changes. The Indian Music Industry IMI, for instance, wants the sales tax on blank CDs and cassettes enhanced to discourage piracy. 8216;8216;And we want government to finance anti-piracy by using the funds generated from taxing blank CDs and cassettes,8217;8217; says Vijay Lazarus of IMI. Music and video piracy in India rose from the lowest 45 per cent in 2003-04 to about 65 per cent 2004-05, he says, because of MP3s sold using cheaper, blank CDs.