Debating India

Invest in rural infrastructure

Amit Mitra

Sunday 27 June 2004, by MITRA*Amit

Budget 2004-05 must focus on three areas which mutually strengthen each other:

- Stimulate investment and employment in the manufacturing sector;

- Restructure both corporate and private tax rates, and implement the roadmap for VAT;

- Remove barriers to the growth of agriculture and invest heavily in rural infrastructure.

These can be implemented only if reform of government and governance takes place simultaneously.

For stimulating investment and employment in manufacturing, the FM should reduce corporate tax rates to 30%, in line with the rates prevailing in ASEAN countries, re-introduce investment allowance while accelerating depreciation.

Similarly, personal taxes should be remodelled with maximum rate of 30% made applicable on income over Rs 10 lakh.

The exemption limit must be raised to Rs 1 lakh and for widening the tax base, agricultural income beyond Rs 5 lakh should be taxed at a flat rate of, say, 15%.

Service Tax base should be widened and exemptions confined only to public services, essential public utilities and strictly defined merit goods. All taxable services should be eligible for VAT/CENVAT credit.

Investment and employment growth will also require a modification of labour laws, of course, not hire and fire.

At least allow 5% replacement of non-performing workers with willing workers awaiting at the door, to increase efficiency; allow contract labour in the export arena where orders are cyclical.

See online : The Times of India

P.S.

in The Times of India, Sunday, June 27, 2004.

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