1. The backdrop
The slow down of economic performance since 2011-12 fiscal has emerged as the single most important concern to the nation. While all the estimates of GDP growth indicate the economy registering a sub 5 percent growth in the 2013-14 fiscal, further projections for 2014-15 indicate the GDP growth would remain subdued and much below the potential of the nation. As industry and trade are directly hit by the slow economic activity and also keeping in view its objective of ensuring all round development of the nation, ASSOCHAM has reflected on the state of the economy and the immediate corrective measures needed. The Advisory Council of the Apex Chamber observed that the current economic slowdown is marked with the following:
- Fall in foreign capital inflows due to global and domestic uncertainty
- High cost of domestic credit affecting both debt-financed investment and consumption.
- Decreased levels of savings and investment activities
- Increasing input costs and low demand and
- Lack of policy support and governance deficit
- The current state of finances of Government of India leaves very little scope for the new government to announce any counter cyclical fiscal stimulus measures
In this backdrop, the Apex Chamber has identified the following set of measures for the consideration of the to be formed new Union Government.
Key Recommendations
|
Action |
100 day Agenda |
One Year |
Beyond one year |
| Restoring Investor Confidence | Escort officers to investors for getting the necessary clearances in the Govt. Depts.
Conducive policy and incentives for NRI investors
Utilise surplus cash reserves of PSUs to kick start investments
Single window clearance system for investment in the Country |
Investment opportunities must be made transparent
Cross functional teams like EGOM, CCI, Committee of Secretaries, to meet regularly with clear mandates and timelines
No retrospective Acts
|
System for time bound clearance of stalled projects
Infusing simplicity, transparency and predictability into the Government Policies
A shelf of viable investment opportunities must be made available |
| Employment | Identify sectors that can create 150 million jobs and allow self regulation in those sectors and provide tax incentives to those sectors
Tax incentive for skill development under section 35CCD needs to be extended to those training institutions which are affiliated to the NSDC and the Sector Skill Council also. |
Initiate Labour and pension reforms
Schemes like MNREGA must work for both employment generation and creation of lasting infrastructure |
Assure industry on availability of skilled and semi-skilled workforce |
| Agriculture | Scrap the APMC Act
Crop insurance and buy back agreement to agriculture produce
Formulating a single point market fee system that facilitates the free movement of produce
In all slow and fast passenger trains compartments need to be added for carrying perishable goods at nominal charges |
FPOs must be encouraged with incentives like exemption from income tax, preference in govt. purchases, export promotion incentives, and allotment of space in warehouses, railway, ports etc.
|
Massive investment for inter-linking of rivers
Ensuring that all Indian farmers are served by the formal agriculture extension system
Encouraging value addition at the farmer level or the bottom of the chain |
| Mining and Minerals | The strategy of exporting raw materials and ore and importing final products must be relooked
Linkage of iron ore with OMC/ OMDC for regular supply of iron ore
Price fixing of iron ore by NMDC must be made transparent
Import of second hand/defective steel must be curtailed |
Pit side infrastructure of coal mines needs to be improved
Coal must be beneficiated at coal mine only in order to bring efficiency to operations |
Correct the anomaly of keeping raw material under govt. monopoly and finished product under regulator as in the case of coal
Open coal sector as in the case of telecom, petroleum, steel, aviation etc. |
| Manufacturing | Sectors where imports from FTA countries are more than 50 % of total imports, provide zero duty benefit.
Investment allowance eligibility limit needs to be slashed to Rs. 1 cr from the existing Rs. 100 cr
Implementing domestic transfer pricing needs to be postponed till international transfer pricing issue is resolved
A negative list principle for SEZs need to be introduced
Manufacturing investment promotion through 80 (J)
Approvals and clearances for SME sector must be made on self-assessment basis
Formation of national standardization regime by comprehensive revision of BIS Act |
Replacing the incentives based approach with infrastructure based approach
Leveraging IT and holding the officials accountable
Integrated inspection system in the place of existing one.
Simplify the procedure of setting up a manufacturing unit Reduce the delays in disbursement of incentives announced for industries
Subsidizing electric/hybrid cars and ‘cash-for-clunkers’ scheme to incentivize replacement of older vehicles with brand-new ones. |
Indiscriminate import of second hand machinery needs to be discouraged
|
| Infrastructure | Alternative financing system to suit capital intensive and longer repayment schedule
Infrastructure funding through EPFO
Norms for the takeover of long term loans from banks by financial institutions need to be framed
|
PPP framework needs revisit as private capital is extremely demanding, and it is difficult to satisfy those demands, public money needs to be used for infrastructure creation
|
Separate institute for infrastructure finance needs to be created |
| Taxation and Public Finances | Capping the fiscal deficit
GST implementation by taking states on board even by giving extra concessions
Mechanism for unlocking money locked in tax disputes
Advanced Ruling Authority and Appellate Forums for tax matters need to be strengthened
Tax officers with quasi-judicial powers must be made accountable
Income tax exemption for investment in long term financial assets ( capped at Rs 1 lakh per annum) needs to be increased |
Examine if the source rule of tax policy still is relevant
Level playing field for SEZ supplies and imported goods
Disinvestment of non-strategic PSUs
Extend the lower withholding tax benefit to capital intensive sectors like steel, refineries etc. as in the case of infrastructure
Monetary and fiscal policies must work in tandem
Reworking on DTC from scratch |
Govt. Budget should primarily aim at growth and not on revenue generation to the exchequer
The FRBM Act must be revisited
|
| Urban Development & Real Estate | Land Acquisition Act must be reviewed
Industry status to Real Estate Sector
The new urban centers must be identified keeping the socio-economic objectives of the nation.
The limit of deduction of interest paid on home loan needs to be revised to Rs. 5 lac |
Reduce the stamp duties paid on housing properties
City Plans consisting of both planning and modifications needed must be drafted and executed in a time bound fashion. |
Harmonizing stamp duties across states.
Computerization of land records
|
| Governance | Accountability at every step in bureaucracy and judiciary
Clarity in the case of disputes like tax deduction on foreign incomes, reverse services charge mechanism
A structured system of constant interaction with the Government needs to be set up
Rationalization of business regulations to reduce compliance cost
|
Emphasis on delivery, implementation and accountability
Thorough review of the rules, regulations and procedures governing each of the Ministries and Depts.
Introduce e-governance and e-clearance wherever possible and enable online tracking of applications for various government approvals |
Improving grass-root governance by wider use of internet in local language
Eliminate extortion by local crime syndicates and higher document cost/bid preparation cost that act as deterrents for the private sector.
|
| Foreign Trade | Finance CAD with FDI
Incentives to exporters must be revised keeping their objectives in view
Customs cargo operations must be made 24×7 in all airports
|
Provide full and timely refund of all direct taxes and levies paid by exporters
Free Trade Agreements (FTA’s) must cover Non-Tariff Barriers (NTB) including Technical Barriers to Trade (TBT) that partner countries may likely use
FTA’s to elaborate upon the procedural issues as well.
Trade facilitation under FTAs must be linked to investment flows |
Ensure complete passing through of international commodity prices
The existing Free Trade Agreements must be reviewed while the ones in the pipeline must be re-looked. |
| Education, IT/ITES | Restoring income tax benefit to Software Technology Parks (STPs) and widen the scope of STP policy to cover semi-urban and rural areas
Education loans and repayments to be treated on par with housing loans
Education loans must be made available to vocational and skill development, except coaching classes |
Fast-track the development of IT/ITeS hubs in Tier 2 and 3 cities as Tier 1 locations are nearing peak capacities in terms of infrastructure support
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