Industry Expects Social Sector To Get Priority In Budget

Indian industry is keeping its fingers crossed ahead of the 1997 Union budget, hoping that finance minister P Chidambaram will continue, if not accelerate, the reform process.

Several industrialists believe that the finance minister will dole out a large amount on social infrastructure, specially primary health and education, keeping in mind the need to satisfy all the constituents of the United Front government.

The industrialists also feel that the minister will try to revive the moribund capital markets. In this context, they expect a reduction in corporate tax and abolition of double taxation on dividends.

A number of industrialists also suggested a review of the Companies Act, permission to buy back shares, and relaxation of inter-corporate investment limits.

If these steps are taken, then they can only positively affect the capital market, remarked the chairman of a Calcutta-based group involved in engineering and financial services.

The industrialists also supported the abolition of the minimum alternate tax (MAT), although they were doubtful whether such a step would be taken. According to Rajive Kaul, chairman and managing director of Nicco Corporation and the former president of the Confederation of Indian Industry: I personally dont feel MAT will be withdrawn and even if it is, it will be replaced by an alignment of depreciation rates in the Income Tax and Companies Act, which will have an even worse effect than MAT.

Kaul added: If MAT is not withdrawn, then the best option would be for the government to treat it as an advanced tax which could be adjusted in subsequent years. This would meet the twin objectives of generating revenue for the government, while giving companies who pay the tax the benefit of a tax credit for an equivalent amount in the future.

Titagarh Industries chairman J P Chowdhary strongly advocated the scrapping of MAT and also urged a reduction in the interest rate.

Ideally, the interest rate should be a single digit figure. If it is not possible to bring it down suddenly, the government should make provisions to do so gradually, he said.

Some industrialists said they expected the opening up of the insurance sector, particularly to the private sector, and continuation in the reduction of both the customs and excise duties. They also felt that the value-added tax system would probably be replaced by the modified value-added tax system.