FICCI welcomes budget

New Delhi, February 28 : The Federation of Indian Chambers of Commerce and Industry (FICCI) has welcomed the Union Budget for 2013-14 which underscores the importance of bringing the economy back on to the high growth path.

“FICCI welcomes the Finance Minister’s resoluteness to impart momentum to the growth trajectory and make development both inclusive and sustainable”, said FICCI president, Ms. Naina Lal Kidwai.

The measures announced in the budget to further strengthen the social development programs with special emphasis on women, youth and poor are a step in the right direction. The signal clearly is stability and postiveness for the future growth of the Indian economy.

“Even as the Finance Minister has increased outlays on the government’s flagship programmes, he has also introduced a series of steps that should propel investments in industry and infrastructure”, added Ms. Kidwai.

The present budget was presented in a difficult economic environment with both the fiscal deficit and the current account deficit being out of the comfort zone. The Finance Minister had targeted 5.3 per cent as the goal and has reined in the fiscal deficit to a level of 5.2 per cent this year. This is a very important signal and should reassure investors both domestic and foreign.

Agriculture is the mainstay of the Indian economy and this sector has received the desired attention in this budget. FICCI’s suggestion of providing interest subvention for crop loans by private sector banks has been accepted. This would help give a fillip to farm sector as well as enable the private sector banks to meet their priority sector target. The support extended to Farmer Producer Organisations, which are a critical link between the farmers and the private sector, will help improve farmers access to the market mechanism.

“On the infrastructure side, the government’s focus to promote Infrastructure Debt Funds further, offer credit enhancement via IIFCL-ADB partnership to infrastructure companies that wish to tap the bond market and allowing notified institutions to raise tax free bonds up to Rs. 50,000 crore will help spur investments in this sector”, said Ms. Kidwai.

Further, the decision to set up two more green field ports in West Bengal and Andhra Pradesh will help ease some pressure on the existing infrastructure.

The government has continued with its plans to encourage FII flows into the country by simplifying the registration procedures, allowing participation in exchange traded currency derivative segment to the extent of their Indian Rupee exposure in India and permitting use of investments in corporate bonds and government securities as collateral to meet the margin requirements.

However, the major thing that caused disappointment to FIIs is the Mauritius bar that has had a negative impact on the market sentiment.

The increase in the rate of withholding tax from 10 per cent to 25 per cent in case of nonresidents will also send negative signals to Diaspora investors and FICCI would urge that status quo be maintained.

On the GST, FICCI is happy to note that the Finance Minister has set aside Rs. 9000 crore in 2013-14 for compensation to the states for the reduction in CST. This is a step to reach out to the state governments to resolve the impasse over this issue. However, a clear road map on the introduction of GST still remains elusive.

Finally, FICCI welcomes the proposal to set up a Tax Administration Reform Commission to review the application of tax policies and tax laws to strengthen the capacity of our tax system. Given the amount of revenue locked up in litigation there is an urgent need to improve the dispute resolution mechanism of the tax departments. INN