Industry executives on Monday sought tax cuts, lower interest rates and bold reforms in land acquisition and labour laws in a blueprint prepared to aid the Modi administration in adding momentum to economic growth.
Vikram Kirloskar, chairman and managing director of Kirloskar Systems Ltd. and president of industry chamber Confederation of Indian Industry (CII), said at a briefing that sharpening the competitiveness of businesses is key to overcoming the risks to economic growth such as protectionist trends in global trade, tighter liquidity conditions at home and abroad and volatile oil prices.
The industry chamber expects the Indian economy to expand at 7-7.4% in 2019-20. Economic growth had slowed down to 5.8% in the March quarter of 2018-19, its lowest pace in five years, Mint reported on 1 June. The Modi government will present its first budget of the second term on 5 July, which will indicate the direction of economic policies India will adopt in the near future.
Industry executives cited the tight liquidity condition as one of the speed breakers to growth. Kirloskar urged the government to explore reducing taxes on the returns that equity investments fetch, whether it is capital gains or dividends distributed by companies, to make such investments more attractive.
“With a landslide electoral victory and new council of ministers in place, we expect the government to engage strongly with industry to ideate and implement impactful policy solutions for double-digit growth, said Kirloskar. A statement from the industry chamber said it has in a pre-budget wish list sought reduction in the corporate tax rate to 25% for all companies and progressively lowering it further to 18% without exemptions. At present, new manufacturing companies and companies with annual sales up to ₹250 crore are taxed at a concessional rate of 25%.
Uday Kotak, founder and managing director and chief executive officer of Kotak Mahindra Bank and president-designate of CII, who was present on the occasion, explained that equity is getting taxed at multiple levels, which makes savers more comfortable putting their money in debt. “Then you don’t have enough risk capital available in the country for building new businesses or for expanding existing ones,” said Kotak. He said taxes on equity returns have to be such that these encourage investors to take equity risks.