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Don't raise taxes in Budget: CII to Govt

Amid apprehensions that taxes may be raised in the Budget, industry body CII today asked the government to give a fillip to growth by refraining from increasing excise duties and service taxes.

"Keeping in mind the challenge to the fiscal situation, CII has desisted from asking for a direct fiscal stimulus which would entail reduction of excise duties," the chamber said in its pre-Budget memorandum to the Finance Ministry.

However, it has strongly advocated against "any increase in excise duty and services tax and reduction in customs duty until the situation returns to normal".

Faced with revenue gaps in the backdrop of economic slowdown, there are fears in the minds of industry that the government may completely withdraw the stimulus provided during 2008-09 global crisis and raise taxes.

Economists in the government have been stressing on consolidation of government finances in the wake of growing fiscal deficit which may overshoot the target of 4.6. per cent of GDP in the current fiscal.

Industrial growth as measured on the Index of Industrial Production (IIP) has moderated, though there was an uptick in factory output during November.

The government has lowered the country's economic growth prospects for the fiscal to about 7 per cent from around 9 per cent estimated at the time of last Budget. The GDP growth during in 2010-11 was 8.5 per cent

The industry body further said the government should come out with a five-year roadmap for disinvestment, reduce subsidy and also amend the Fiscal Responsibility and Budget Management Act.

"CII has advocated the need for an amendment in the FRBM Act, entailing roadmap for reduction in fiscal deficit over the next five years...," the chamber said in a statement. CII Director General Chandrajit Banjeree said fiscal consolidation is possible through tapping of larger revenue options and rationalisation in expenditure by improving productivity and reducing subsidy.

Increase in subsidy bill, which may reach a mounting Rs 2 lakh crore, is also putting much pressure on government finances. Besides, the government has not been able to mop up any substantial resources from disinvestment. Against the target of Rs 40,000 crore, the government could divest its stake in PSUs only to the extent of Rs 1,145 crore due to adverse capital market conditions.