Tax amendments will hit investment, says CII

The Confederation of Indian Industry (CII) has taken up the issue of retrospective amendments to the Income Tax Act and the General Anti-Avoidance Rule (GAAR) negatively impacting investment sentiments with the prime minister and the finance ministry, the chamber’s new president, Adi Godrej, said on Thursday.

Even as the Reserve Bank of India (RBI) has hinted the scope of future rate cuts might be limited, Godrej, who succeeded B Muthuraman as the president, called for additional reductions of 100 basis points in the repo rate and the cash reserve ratio this year to spur investment.

“We are very clear the retrospective amendments have created very strong negative sentiments on investments in India both internationally and domestically,” Godrej said. He added these sentiments at such critical times were best avoided, and CII has suggested the proposals, including some provisions in the GAAR, should be amended.

“We have expressed our views to the finance ministry, as well as at our meeting with the prime minister yesterday,” he said.

The chamber had also told the prime minister the perception about brand India should be improved by carrying out further economic and governance reforms.

Even as retail price inflation rose to double digits in urban areas in March, CII said it wanted RBI to cut the repo rate and the cash reserve ratio further and manage inflation by augmenting supply.

CII expects the economy to grow 7.4-7.8 per cent this financial year, against the government’s projection of 7.6 per cent. It also expects industry to grow 6.5-7.0 per cent, against the estimated 3.9 per cent in the previous financial year. However, it estimates services sector growth to slow to 9-9.2 per cent, from 9.4 per cent in 2011-12.

CII’s new president designate and Infosys co-chairman S Gopalakrishnan said European economies and, to some extent the US economy, would see muted growth in next three-five years, and this would hit growth in services exports from India.

Infosys’ earnings were hit by slow growth in Europe and the US. Gopalakrishnan, however, refused to entertain any query on Infosys.