A week ahead of the Union Budget, industry body ASSOCHAM today impressed upon the government, RBI and the banks to ensure adequate liquidity into Non Banking Financial Companies (NBFCs), provide investment incentives and cut corporate tax rates for revival in the economic growth and creation of new entrepreneurial opportunities.
Addressing a joint press conference in New Delhi, ASSOCHAM president, Balkrishan Goenka and senior vice-president, Niranjan Hiranandani sought specific measures to address the liquidity issues being faced by NBFCs.
“It could be a special window, one-time roll over or any other step. Rushing companies into NCLT because of liquidity shortages is not the solution,” said Goenka.
“We demand 100 percent depreciation in the first year of new investment. A five percent cut in the corporate tax will revive investment,” he further added.
The ASSOCHAM president Goenka said, “We are fully with the government for boosting the agriculture sector; while the aim of doubling farmers’ income by 2022 may sound ambitious, it is doable if massive investment is made in agriculture and the entire rural infrastructure like irrigation projects, cold storage, supply chain, road and rail connectivity. Linkages with the food processing industry would make a huge difference along with the technology enabled aggregators. We expect the Budget to give a major boost to this sector by fiscal and administrative measures, taking states on board.”
Along with the agriculture, social infrastructure, education and health, would also require immediate intervention. We would request the government to make further ease for enhanced role of the private sector in both these sectors through public-private-partnership mode, the ASSOCHAM has recommended.
Talking about the significant potential in India’s tourism sector, Goenka said, “There are more than 1,200 islands which need to be developed with PPP model. These could be handed over to developers for 20-30-40 years to develop the infrastructure for better connectivity. Besides, visa on arrival facility should also be extended to ensure hassle free visit of foreign tourists.”
Certain segments like automobile, construction, housing, NBFCs, aviation and exports are facing rough weather owing to multiple factors and require a delicate handling in terms of policy and fiscal measures. Along with these measures, the GST Council may be impressed upon for rationalising taxes on vital sectors like automobile and cement to lower slabs of 18 percent for demand generation while sectors like jewellery making may be helped with lowering of import duty on gold, as prices of the yellow metal are shooting up in the international market. Revival of the NBFCs with the help from the RBI and the banks, is key.
For boosting consumption demand and investment, ASSOCHAM has made a recommendation for raising the personal income tax exemption to Rs five lakh and reduce the corporate taxes to 25 percent to spur consumption and investment. FDI threshold for some key sectors like defence and insurance may be revised upward or eliminated.
In his remarks, ASSOCHAM Senior Vice President Hiranandani said, “The sectors like housing, real estate, construction have a huge multiplier effect on the economy, creating millions of jobs, adding immense wealth to the exchequer and lifting the consumer sentiment. So, there is a great expectation from the Finance Minister, particularly with regard to these sectors.”
“Narendra Modi Government had done a commendable work in affordable housing during its first term. The focus on affordable housing is expected to continue with further refinement in the scope of the scheme for interest subvention. Besides, the issue of redevelopment of land and making land available in the metro cities for bringing prices in the affordable range would require the urgent attention. He said with retail trade being the backbone of the economy, commercial real estate is critical for growth of organised retail which must come up manifold in malls and specialised complexes,” Hiranandani added.
The suggestion for creating a stress fund for the stalled housing and real estate projects should be pressed for as with not too large a corpus for short term, projects worth lakhs of crores of rupees would come to fruition, providing a big relief to the home buyers and revival of sentiment in the sector.
“The Insolvency and Bankruptcy Code is an effective tool, but we need broader approach to even avoid companies landing in the IBC process. A clearer approach would be available in the Budget and even afterwards. Speedy disposal of IBC cases and lesser litigation can make a big difference to the resolution process,” Goenka said.