India Inc on Wednesday requested finance minister Pranab Mukherjee to roll back the three per cent increase in the minimum alternative tax (MAT) and put in place investment-linked incentives in the budget to spur investment and industrial growth.
The demand for the rollback was raised at the national council meeting of the Confederation of Indian Industry (CII), which Mukherjee attended in the evening.
Mukherjee said he could not make any comment on the matter as Parliament was in session. However, he said the government has been open to considering proposals submitted even after the presentation of the regular budget and making changes. But this can only be announced in Parliament, he added.
The captains of Indian industry, who were surprised by the increase in MAT from 15 per cent to 18 per cent, consider the step to be too harsh.
Mukherjee said, "I am confident that economic growth will pick up in the fourth quarter of the current financial year."He said the economic growth rate had slipped to six per cent in the third quarter as agriculture had posted a negative growth of minus 2.8 per cent due to the weak monsoon.
Mukherjee said domestic demand was buoyant and his budget had reduced the income tax rate so that individuals would have more cash to spend on goods, which help industry to grow.
He said the income tax concession would cost the government Rs 26,000 crore and was in the form of a second stimulus package. The finance minister said the economy was firmly on the growth path and would close the year with a 7.2 per cent growth rate and industry should be optimistic in making investments to expand capacity.
He also emphasised that as much as 46 per cent of the plan allocation in the budget had gone to the infrastructure sector and this would boost growth to over eight per cent in 2010- 11.
Mukherjee admitted that the recovery needs to be more broad- based but this would happen only when the economies of North America, Europe and Japan pick up further momentum and the demand for Indian exports goes up again. " These countries account for two- thirds of our exports and have not yet returned to the growth path,"he lamented.
Mukherjee said he had no option but to increase the excise duty as the large fiscal deficit and huge government debt burden were not sustainable in the long- run. " I have taken steps to revert back to the path of fiscal consolidation by reducing the budget deficit to 5.5 per cent,"he added.
Mukherjee said the doubledigit food inflation is a major concern and the Centre is taking steps along with the states to cool the surging food prices in the next few months.
He said the difference between the farmgate prices and what the consumers were paying was too high. " The cost of intermediation is too high and has to be brought down,"he added. He said the government would have to find ways to improve the food distribution system and ensure more competition in this segment.
Mukherjee also ensured India Inc that the new financial regulator that the government had in mind was in the nature of an " overviewing body"and would not replace other regulators such as the Reserve Bank of India ( RBI) or the Securities and Exchange Board of India ( Sebi).
The govt has been open to considering proposals submitted even after the presentation of the regular budget and making changes.
The income tax concession would cost the government Rs 26,000 crore and was in the form of a second stimulus package.
The economy was firmly on the growth path and would close the year with a 7.2% growth rate.
Industry should be optimistic in making investments to expand capacity.
As much as 46% of the plan allocation is to the infrastructure sector, which would boost growth to over 8% in 2010- 11.
The difference between the farmgate prices and what the consumers were paying was too high.