Finance Minister P Chidambaram will begin his two-day pre-budget consultations in New Delhi on Tuesday to get some valuable inputs for the United Progressive Allaince government's economic agenda, particularly on tax reforms and pushing investment in infrastructure and farm sectors.
Chidambaram will start his brainstorming sessions with agriculturists and industrialistson Tuesday followed by two separate sessions the day after with trade union leaders and economists.
The trade and industry has already submitted its memoranda giving details of its wishlist that included reduction in corporate tax rates from the present 35 per cent to 30 per cent, abolition of minimum alternate tax on zero tax paying companies and continuation of investment-oriented exemptions.
Both Prime Minister Manmohan Singh and Chidambaram have made it clear that the Budget for 2005-06 would undertake comprehensive tax reforms.
The finance minister has given enough indications that the bulk of the taxes would have to come from corporates and not the salaried class and expressed government's commitment to widen the tax net to take the tax-GDP ratio from the present nine per cent to 11-12 per cent.
The government has also stressed the need to push up investment in agriculture to achieve a sustained four per cent growth annually in the farm sector, necessary for higher 7-8 per cent GDP growth.
While the industrialists are expected to pitch for long awaited labour reforms, the trade unions are likely to speak against them, particularly when employment opportunities are shrinking in the organised sector.
The government is expected to take a balanced view on this contentious issue, with the Left parties being a part of the coalition. It is expected to fulfill the promise made in the Common Minimum Programme of adopting a caliberated approach towards this end.
The industrialists would also want a rise in foreign direct investment caps in some of the sectors. Government has already raised the FDI cap in civil aviation from 40 to 49 per cent and promised to raise it in the telecom sector from 49 per cent to 74 per cent.
Chidambaram has also said the government would introduce a bill to raise FDI cap in insurance sector from 26 per cent to 49 per cent in the Budget session of Parliament.
The agriculturists would pitch for increased investment in irrigation, water harvesting facilities and continuation of minimum support price.
Chidambaram has also emphasised the need to push savings rate by 2-3 per cent from the present 24 per cent of GDP to mobilise additional resources for pushing up investment.
