Jaitley assures India Inc of capital spending push

The government would expand public spending in the next financial year but India Inc should also boost capital expenditure, especially in the infrastructure space, Finance Minister Arun Jaitley told representatives of industry bodies at a pre-Budget meeting.

Jaitley said the next Budget might provide for higher capital spending "despite the major financial implications of the recommendations of the 14th Finance Commission... and its forthcoming financial obligations due to implementation of One Rank One Pension (OROP) and 7th Pay Commission recommendations in the coming financial year."

Representatives from various industry bodies such as Ficci, Confederation of Indian Industry (CII), Assocham and Federation of Indian Export Organisations met Jaitley and his team of senior policymakers including finance secretary Ratan Watal, economic affairs secretary Shaktikanta Das, revenue secretary Hasmukh Adhia, financial services secretary Anjuly Chib Duggal, Department of Industrial Policy and Promotion secretary Amitabh Kant, and chief economic advisor Arvind Subramanian.

For 2015-16, the government had promised to increase public spending on infrastructure. The move was planned with a view to boosting demand at a time of stressed private sector balance sheets.

Capital spending for April-November was Rs 1.59 lakh crore - 31 per cent over the same period last year.

Jaitley's announcement on public spending in the next financial year comes at a time when the government has cut its own gross domestic product growth estimates for the year to 7-7.5 per cent from 8.1-8.5 per cent and might take a re-look the medium-term fiscal consolidation roadmap.

The additional burden due to the Seventh Pay Commission recommendations is expected to be Rs 74,000 crore. While official defence ministry estimates say the additional spending impact due to OROP is expected to be Rs 8,000 crore, finance ministry officials have said in private that it could be as much as Rs 15,000 crore.

Among other issues, India Inc representatives sought a clear roadmap for reduction in corporate tax rate from 30 per cent to 25 per cent in the Budget.

"We have asked for a clear roadmap on the 25 per cent (corporate tax)... We are totally in support of removal of incentives and allowances," CII president Sumit Mazumder said after meeting.

Sharing similar views, Ficci president Harshavardhan Neotia said the chamber had suggested phasing out the minimum alternate tax (MAT) "once all the incentives and allowances are reduced". On goods and services tax (GST), he said the industry bodies "stand by the government and support the government for its implementation".

Nasscom, too, suggested certain tax-related matters for start-ups. According to Nasscom president R Chandrashekhar, domestic investors are taxed at a higher rate than non-resident investors and this is an anomaly which has to be addressed in the Budget. Assocham president Sunil Kanoria said he had suggested that the tax regime be improved along with ease of doing business. "We recommended measures such as easy access to capital for small and medium enterprises, and creation of start-up hubs. We hope GST is introduced soon."

FIEO recommended removing the inverted duty structure anomalies in the Budget as it not affects exports as well as the manufacturing sector. "We have demanded that for the exporting community, service tax should be exempted for exports," said S C Ralhan, president, FIEO.