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Federation Of Indian Chambers Of Commerce & Industry
 

Federation Of Indian Chambers Of Commerce & Industry

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    Federation Of Indian Chambers Of Commerce & Industry Federation Of Indian Chambers Of Commerce & Industry Presentation Transcript

    • Interactive Session with Shri P Chidambaram Honourable Union Minister of Finance 5th July 2006 – New Delhi
      • Presentation by
      • Saroj Kumar Poddar
      • President
        • Federation of Indian Chambers of Commerce & Industry
      • on
      • Achieving 12% Manufacturing Growth
    • OBJECTIVES
      • Create 5 million new jobs per year in manufacturing
        • Increase employment elasticity of manufacturing from the present .33 to 1
        • Accelerate manufacturing growth to 12%
      • Increase share of manufacturing in GDP from the present 17% to 30% by 2020
    • OBJECTIVES …. contd.
      • Share of manufacturing in GDP for different countries
    • AFFIRMATIVE ACTION BY INDUSTRY Create more jobs for SCs, STs
      • Promote Special Manufacturing clusters in Districts with high population (over 40%) of SCs/STs
      • Provide fiscal concessions to promotors of these Special Manufacturing clusters – similar to those available to SEZ
      • Provide 150% weighted deduction to corporates investing in Government promoted ITIs in these special clusters
      • FICCI has identified 27 districts along with potential industries for such special clusters
    • FISCAL REFORMS ….. 1
      • Fiscal Reforms
        • Reduce revenue deficit to increase public investment in infrastructure and social sectors – stimulate demand
      • Direct Tax Reforms
        • Accelerate investment in manufacturing either through reduction in corporate tax rate / or through investment allowance and free depreciation
        • Bring stability in tax laws, long-term fiscal Policy for 5 years
    • FISCAL REFORMS ….. 2
      • Direct Tax Reforms …. Contd.
        • Encourage R & D
          • Provide grant up to 35% on R & D OR
          • Weighted deduction of 150% should be extended to all sectors on long-term basis, to be reviewed every 10 years
        • Tax incentives for infrastructure sector
          • Current policy of tax exemptions for infrastructure and viability gap funding should continue
    • FISCAL REFORMS ….. 3
      • Direct Tax Reforms …. Contd.
        • To accelerate rural development and growth of Agro & Agro processing industry provide tax incentives
          • Allow 100% depreciation for private investment in cold storage, warehouses, refrigerated/ insulated transport facilities
    • FISCAL REFORMS ….. 4
      • Indirect Tax Reforms
        • Incidence of indirect taxes ranges from 30% to 44% in India whereas in China incidence is only 15%
      • Indirect Tax Reforms …. Contd.
        • Fix incidence of National VAT/GST at 20%
          • Reduce CENVAT from 16% to 12%
          • Cap State level VAT at 8%
        • State VAT taxes should be harmonised across sectors
        • CST should be phased out at the earliest
        • All local taxes such as octroi, entry tax etc should be made Vatable
        • Clear road-map for National VAT/GST required
        • Simplify and rationalise all tax laws to reduce cost of compliance to developed countries’ level
    • FISCAL REFORMS ….. 5
      • Indirect Tax Reforms ….. Contd.
        • All inverted duty structures to be replaced by 3 or 4 Tier duties in both custom & excise
          • Some examples of inverted duties
          • Rubber good industry, tyre – custom duty on tyre is 12.5% whereas on natural rubber duty is 20%
          • Custom duty on catalysts and chemical consumables for fibre manufacture is 12.5% while on fibres it is 10%
          • Inverted duty structure on synthetic fibres and yarn needs to be corrected by lowering PTA/MEG excise duty to 8%
    • FISCAL REFORMS ….. 6
      • Indirect tax reforms …. Contd.
          • Levies & taxes constitute substantial part of ex-factory price of cement – reduce these levies
          • Rationalise duty structure on capital goods
    • FOREIGN TRADE POLICY
      • FTAs should not create unfair competition for Indian manufacturing
      • FTAs should not encourage movement of investment to other countries
      • Drawback rates to neutralise the incidence of all central, state and local levies (currently only Central duties are neutralised)
      • New scheme replacing DEPB should be comprehensive duty neutralisation scheme
    • INFRASTRUCTURE AND ENERGY ….. 1
      • Accelerate creation of world class infrastructure
        • Power, Ports, Railways, Roads
      • Create world class infrastructure for industrial clusters
      • Promote public-private partnership to build infrastructure
      • Government should offer readymade large infrastructure projects - post-all approvals & with pre-feasibility studies done – to competitive bidding
      • Reform land laws for faster acquisition, usage and transfer
      • Eliminate state barriers for free movement of goods – one Indian market
      • Cross subsidies in rail-transport be phased-out
    • INFRASTRUCTURE AND ENERGY ….. 2
      • Accelerate power sector reforms, implement Electricity Act
      • Eliminate power and petroleum cross-subsidization, so that energy is available to manufacturing at globally competitive rates
      • Liberalise captive power generation and coal mines – remove restrictions and levies on captive power generation by State Government
    • INFRASTRUCTURE AND ENERGY ….. 3
      • Abolish electricity duty on captive power generation
      • Allow private investment in nuclear power
      • Give infrastructure status to renewable energy projects of wind, solar, biomass etc
    • LABOUR LAWS –1
      • Extend Government’s policy of National Rural Employment Guarantee Programme to manufacturing
        • Private sector willing to partner with Government to guarantee 100 days of employment in a year on contractual basis in labour intensive manufacturing sectors such as apparel, leather goods, etc – where there is seasonality of orders
      • Reform labour laws – introduce labour flexibility as in ASEAN countries
    • LABOUR LAWS – 2
      • Amendments in Contract Labour (Regulation & Abolition) Act 1970 –
        • Allow loss-making unit to close after reasonable compensation to workers
      • Relax norms of Industrial Disputes Act - keep units employing up to 500 people (presently 100) out of its purview
      • Amend Industrial Employment Act to facilitate intra-enterprise or inter-enterprise job transfers
      • Special focus on SEZs while introducing flexible labour reforms
    • REGULATORY REFORMS TO REDUCE TRANSACTION COSTS
      • Benchmark entry and exit time for investors vis-à-vis global levels
      • 89 days to start a business in India, vis-à-vis 41 days in China - 2005 World Bank Report
      • Closing a business – time and cost required is very high, delays reduce the recovery rate
      • Provide freedom to close loss-making units
      • Speedy legal enforcement of contracts through special court or some fast track mechanism
      • Set up a VAT like Empowered Group to review and implement time-bound rationalization and simplification of all acts and legislation regulating manufacturing in States.
      • Set up another Empowered Group to ensure time-bound, single window clearance for investments in States.
      • State Government should replace inspections by filing of self-certification compliance returns by manufacturing units.
      • Structured approach for joint clearance by Central and State Governments for large projects
      • Greater need for coordinating the policy work of various Ministries/Departments related to industrial sector
      REGULATORY REFORMS TO REDUCE TRANSACTION COSTS
    • FINANCE AND BANKING
      • Accelerate financial sector reforms - reduce cost of capital to global levels
      • Government must sustain investor confidence in capital market
      • Create mechanism to ensure availability of long-term finance
      • Ensure better flow of credit to SMEs at lower cost
        • SMEs pay interest rates as high as 11-12% - a clear spread of 4-5% between lending rates of large enterprises and SMEs
      • RBI directives for Collateral free loans may be implemented
      • Address
        • Delay in appraisal
        • Delay in sanction of proposals
        • Delay in disbursements
        • Rigid complex procedures and documentation
        • Insistence on higher margin money
    • SMALL AND MEDIUM INDUSTRY
      • Eliminate all product reservations
      • Incentivise technology development in SMEs
      • Create Common Testing, Design & Quality Control Centres for SMEs
      • Government should set up a large venture capital fund to assist innovation and technology development in SMEs
      • Launch state-funded technology upgradation programs for SMEs
      • Technology Upgradation Fund of SIDBI should be strengthened
      • Refer to Hernando De Soto
    • MINERALS AND MINING POLICY
      • Lack of availability of minerals at competitive price is emerging as a key constraint to the growth of manufacturing
      • Reform mining laws - make them investor-friendly, encourage private investment
      • Ensure faster clearance of investment proposals
      • Reform coal sector to increase investment and production
      • As recommended by Dang Committee - captive mining of iron ore at least to major Steel plants should be given priority
      • No reservation of minerals for state exploitation
      • Grant/acquisition of surface rights, forest clearance be made easy & expeditious
      • A regulatory body to monitor availability, import & export of natural resources
    • MANPOWER & TRAINING
      • Serious gap between the needs of the industry and availability of skilled manpower
      • Large investment required for modernization and expansion of vocational & technical training facilities
      • Give fiscal concession to private sector interested in managing and investing Government-run ITIs – allow 150% weighted deduction (as in case of R&D) on long term basis.
      • Encourage private sector to set up vocational training institutes.
      • Improve quality of technical education - introduce standards for facilities and academic proficiency
      • Reform the education sector to facilitate investment for rapid expansion of higher education
    • GLOBAL KNOWLEDGE LEADERSHIP THROUGH TECHNOLOGY AND PRODUCT DEVELOPMENT
      • Create a National Fund for promoting development of advanced technologies through public-private partnership. This fund should enable Indian companies to acquire hi-tech manufacturing companies abroad.
      • Establish technology parks in partnership with IITs and reputed engineering institutions.
      • Create Public-Private Partnership in Defence, Nuclear Power & Aerospace Applications having high potential both for domestic market and exports
      • User friendly access for private sector to technologies developed in all Government research establishments/ laboratories – for direct or joint use
      • Government research establishments/laboratories should actively promote/market their capabilities to industry
      • Facilitate private sector participation in joint technology development at Government research establishments
      • THANK YOU