Budget 2011: Rightly focuses on agriculture and infrastructure, says Ramu S Deora-1 Mar, 2011

1 Mar, 2011, 02.17PM IST,

Budget 2011: Rightly focuses on agriculture and infrastructure, says Ramu S Deora,



Ramu S Deora, President of FIEO gives his take on union Budget 2011 .

The budget reflects the vision of the government and rightly focuses on agriculture and infrastructure to provide inclusive growth and competitiveness of all segment of economy. If Indian economy is clocking 9% growth, contribution of agriculture is crucial not only in terms of its contribution to GDP but more importantly the income it put into the hands of 65% of population who drives demand to spur the growth in manufacturing and services.

Budget has given boost to infrastructure in big way particularly for infrastructure relevant for exports; ports, roads, railways, power which are vital for attempting US $500 billion exports by 2014-15 requiring CARG of 25%. The extension of sunset clause of Income Tax for power sector by one more year is equally welcome. The gaps already exist in these segments and will accentuate if adequate flows are not made. Its not only outlay issue but more importantly implementation problem and requires serious thinking at all levels. We should invest 15% of our GDP on infrastructure so that internationally benchmarked infrastructure is developed in the country.

Another factor attributing to competitiveness is reduction of transaction cost for exports. I am happy that the good work done by Commerce Ministry is being carried forward by Finance. Self certification for imports and exports has been long overdue. If self removal procedure in excise is working well, I am sure it will do wonders in customs administration. It reiterates Government commitment of trust the trade. For exporters saving will be of cost and time. India is ranked at 93rd place in trading across segment of “Doing Business 2010”, this measure will help in improving our position as well.

While government do provide zero debating of exports, at least for central taxes, but refund mechanism is beset with delays particularly when the same is for intangible like services. Refund of service tax for 17 services used by exporters remained on papers as majority of exporters either don't get it or get if after enormous time lag . An average service tax rate on lines of all industry drawback would be a step forward and would relieve small and medium exporters.

The exemption from service tax to FIEO, Export promotion councils and other association on their membership fee from 2005 to 2008 would save litigation between government and associations beside doing justice to their request as none has charged service tax under the belief that they were entitled to exemption serving national cause.

Sector specific initiatives like Mega cluster for Leather and Handicraft, reduction of customs duty on key inputs for textiles, reduction of customs and excise duty on gems & jewellery machineries and textile machineries respectively, increase in the list of duty free entitlement for leather and handicraft sectors will add to overall competitiveness of these highly labour intensive sectors.

However, the budget is silent on credit availability and competitive credit for export sector. I personally feel that Finance Minister has left it to RBI to address it. The cost of credit in India has always been above international benchmarks. Deregulation of export credit consequent to adoption of the base rate has further compounded the problem. First, banks have put export credit at 125 to 200 basis points above the base rate.