ASSOCHAM submits Reviving Growth Momentum report

Cutting down wasteful expenditure and finding other ways to improve revenues including widening the tax net are putting the authorities on high alert

October 04, 2012 3:32 IST | India Infoline News Service
ASSOCHAM has submitted “Reviving Growth Momentum” in important sectors of the economy while submitted paramount agenda to Finance Minister, P. Chidambaram called on Wednesday.

The report consists of concerns of the investors and their possible remedies. The government, of late, has initiated policy reforms on some of the suggested measures that have brought about a perceptible change in the outlook of the economy as reflected in the positive impact on capital markets and rupee appreciation. Though issues of high Twin deficits and high inflation remains the challenge of the government.

Investment Scenario
The persisting negative perception of the international lenders, slowdown in the reform momentum in India, doubts on the viability of projects owing to uncertain macro-economic conditions and slow demand, and subdued business confidence has upset the investment scenario in the country. This needs to be dispelled by clearing the air on contentious issues like GAAR, reduction in key policy rates by RBI, fiscal consolidation and sustainability with consistency in policies and tax reforms.

The consistently high inflation and tapering of demand in interest-sensitive sectors, expansionary fiscal policy with main focus on revenue expenditure, low capital spending with poor supply response, and MNREGA  have all  contributed to slowing down of the GDP to 10 years low. It calls for structural reforms in agriculture including  Free movement of agriculture commodities, augment the supply of goods and services rather than moderation of demand, Support to industries in augmenting their capacities, manufacturing investment promotion through 80 (J), MNREGA must necessarily create capital assets. A social audit will create confidence and ensure end use of such schemes. The recent government directive to credit beneficiaries bank accounts  will reduce leakages and ensure compliance on a larger scale.

Fiscal Deficit and Subsidies
Due to growth moderation tax revenues, have been impacted. Large portion of borrowings are being used to finance the revenue deficit, low resource availability to undertake capital outlays, shortfall in achieving disinvestment targets, financing of fiscal deficit through market borrowings pushes up yields and crowds out the private investment, additional burden when the proposed Food Security Bill is implemented. Cutting down wasteful expenditure and finding other ways to improve revenues including widening the tax net are putting the authorities on high alert.

In the current slowdown of GDP it is paramount to cap the fiscal deficit, sprucing the subsidies, increased disinvestment of PSUs , generating more economic activity by announcing incentives,  curb procedural delays in large and mega projects in critical sectors like power, roads and ports., Growth at all costs should be the buzz word.
Current Account Deficit and Foreign Trade
The growing current account deficit needs to be addressed with conviction and action.  NRI Investments should be addressed and focused upon adequately, As import demand for oil and gold widens the trade deficit, Exports of software and business services  have been affected by cut in the IT budgets of advanced economies.

On ease of doing business India ranks pretty low, the practice of financing CAD with debt and FIIs needs to be changed, Policies are not conducive for NRIs to return to India and invest here. Larger tax clarity as well as incentives are needed to induce larger participation in India growth story. To give further push to the exporting fraternity, concessional export credit be provided, further opening up of FDI in other sectors, cost of realizing exports be reduced from 10% to 4% as per international standards by improving productivity and infrastructure.

The other sectors of the economy moving in slow motion like infrastructure development, Agriculture sector reforms including the land acquisition, allocation of scarce natural resources , market driven pricing, real estate regulator, clear and transparent tax regime, financial sector reforms like GST, DTC, Companies Bill etc cannot be wished away but require speedy address.

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