In a pre-Budget chat on industry expectations, Kanwar Onkar Singh, President of the Federation of the Indian Chambers of Commerce and Industry and chairman of the Rs 3500 crore Apollo group said he was in favour of income tax rationalisation.
In an exclusive interview with associate editor Onkar Singh in New Delhi, Kanwar said income up to Rs 500,000 (per annum) should be exempted from income tax. 'Mr Chidambaram presented a Dream Budget last year and I hope he does the same this time around as well', he said.
What are your expectations from the Union Budget?
I hope that a brilliant economist like P Chidambaram would come out with an investment friendly Budget. It should be tax friendly too, so that more investment could come in the manufacturing sector. Investment in manufacturing sector would help in employment generation. I strongly feel that the government of India should widen its tax net.
Today we have about 3.5 crore people paying income tax. It must go up to 15 crore otherwise we would not get anywhere. We in FICCI have suggested that the tax structure should be remodelled likewise. Up to Rs 10 lakh (Rs 1 million) the slab should be 20 per cent and after that it should go up to 30 per cent. Barring essential services all other sectors should be brought under the tax net. We have also suggested that there should be 15 per cent tax on agricultural income exceeding Rs 500,000.
Are you suggesting that every individual should pay income tax?
No. That is not what I am saying. Minimal tax at the lower level may be ten
per cent. But that should start at Rs 500,000 and there should be no tax between Rs 100,000 and Rs 500,000. Then it could be gradually increased by ten per cent for different earnings. Just to give you a case there is no tax in Russia up to an income of Rs 40 lakhs.
Which sectors were neglected in the previous Budget?
I would say the manufacturing sector. This is an area where the government has to give lot of impetus so that more investment comes into this sector. Infrastructure is the other sector, which has been neglected. Government needs to make huge investment in this particular sphere -- whether it is construction of roads, bridges, airports or ports.
Aren't you happy that the airports have already been handed over to the private sector?
Barring Bangalore I have not heard of any airport being handed over to the private sector. Even here there are hiccups. The intentions are there. But how we convert them to reality needs to be seen.
Ever since the new government has come the stock exchange has been soaring without any scam. Your comment please?
The stock exchange has responded to the team at the Centre. The UPA government headed by Dr Manmohan Singh boosts the confidence among investors. We could not have asked for a better team. Dr Singh who started the process of reforms in India as finance minister under Narasimha Rao in 1991 is now the Prime Minister himself and he is ably supported by another brilliant economist P Chidambaram as Finance Minister. Then we have Montek Singh Ahluwalia as Deputy Chairman of the Planning Commission. We have Kamal Nath, Minister of Commerce and Industry. It is the team that inspires confidence. They can give the right kind of direction to the country.
Your reaction to the Economic Survey...
We found the Economic Survey encouraging. It shows an over all growth of 7 per cent of GDP. The government has opened up FDI in the retail sector, which is a very welcome step because it is a major area for creating employment. They have also opened up FDI in the coal-mining area, which would help in bringing down the price of coal, which till now has been imported for our power plants. We badly needed technical upgradation in the mining sector. I am glad it has come about.
Likewise the FDI in insurance sector would go up from 26 per cent to 49 per cent. Insurance is capital-intensive business and it was essential that more direct foreign investment was permitted in this sector as well.
In the infrastructure sector the government proposes to set up a regulatory authority on the lines of TRAI and it would allow public/private participation.
There are indications that the government may withdraw some tax incentives. Your comments please.
We have no objection in simplifying or rationalising the tax structure. But the maximum tax should not exceed more then 30 per cent.
Government is cutting excise duty, which makes imported goods cheaper. Isn't that making Indian goods costlier?
It definitely does. We expect the government to streamline the tax structure in such a manner that we are able to compete with foreign goods that are being imported.
