2008-09 Budget Proposals for Indian Inc. will be traditional: ASSOCHAM survey

Mumbai: Budget proposals of fiscal 2008-09 are likely to be traditional for Indian Inc. as the primary challenge for the government would be to sustain growth momentum and thus no significant tax cuts are anticipated.

According to the report, Finance Minster Chidambaram's top priority will be to hike revenue collections for higher budgetary allocations to sensitive sectors like agriculture, education, health, defence and manufacturing.

The above findings have been derived from a randomised survey conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), in which 300 CEOs were polled seeking their opinion on Budget Expectations for fiscal 2008-09.

Around 85 per cent felt that forthcoming parliamentary and assembly elections would have no influence on the Finance Minister to inspire him for fiscal concessions towards Indian Inc.

The common man might be a gainer from Chidambaram's budget proposals, though Indian Inc. may not as the government would like to maintain growth inertia to honour its commitments for better infrastructure, improved agricultural conditions and even hike  subsidies for sector such as food, fertilizer and petroleum by nearly 10 per cent.

Releasing the findings, ASSOCHAM President Venugopal Dhoot said that over 90 per cent of the CEOs from all segments of Indian Inc. felt that the finance minister would like to effect a very conscious balancing act in his budget proposals to appease Indian Industry as they hoped, "that there shall not be any additional cess in the budget of 2008-09. 
The survey showed that 270 CEOs held this view and argued that they do not even anticipate considerable fall on customs tariffs as the government would prefer to defer some of its statutory obligations towards WTO in a bid to spur up revenues collections.

According to Dhoot, Majority of CEOs, numbering about 260 held that personal income tax ceiling would be raised by nearly Rs30,000, but those whose annual salary package exceeds Rs5 lakh would not get any relief in the income tax slabs, as these would be continued to be taxed under the existing income tax slabs.

However, 15 per cent of the CEOs maintained that the finance minister would not like to ignore the demand of Indian Inc. for reduced taxation structure, arguing that fair tax structure that was put in place over the years, given the buoyancy in tax collection  - both direct and indirect – that has been witnessed in government revenues as a result of better tax compliance. Therefore, there would be some legitimate cuts in the duty structure in budget 2008 - 09.

However, a majority of CEOs have out rightly rejected this view and even felt that they do not expect even a slight reduction on excise front because the finance minister would like to draw the maximum possible taxation through excise tariff as long as a hue and cry is made out of it.

In the meanwhile, the chamber has recommended that the government should ensure 15 per cent manufacturing growth and keep the inflation at 5 per cent in the next 10-15 years by giving manufacturing lot of incentives and regulate prices by making supply side management stronger.

In the absence of double-digit growth, which has to be achieved primarily on the strength of manufacturing sector, it may be difficult for the economy to maintain 9 per cent plus growth.  Therefore, it is imperative that particular thrust is given to development of real sectors - agriculture and industry. 

Needless to say, there is strong correlation between them.  Any strategy to ensure 15 per cent growth in manufacturing sector cannot be exclusive of a strategy for growth in farm sector.

The ASSOCHAM is also of the view that the concept of inclusive growth, implying greater employment opportunities for the unemployed, would be difficult to achieve in the absence of higher growth and better spread of manufacturing activities. 

The higher the manufacturing growth, greater is its capacity to absorb surplus labour from agriculture and other land-based rural activities.