Strongly recommends measures for reversing India's economic growth back to high trajectory of at least seven-eight per cent
ASSOCHAM's high level National Economic Affairs Council has chalked out a Turnaround Plan for reversing India's economic growth back to high trajectory of at least seven-eight per cent strongly recommending measures for replacing imports with domestic production, boosting exports and reviving investment in key infrastructure sectors like power, roads and ports by extending them tax breaks.The ASSOCHAM National Economic Council (ASSOCHAM- NEC), under the chairmanship of well-known industry leader and educationist Mrs Sushma Berlia, in its recent meeting expressed concern over the Indian economy not being able to come out of the decade low growth level of around five per cent.
It made a detailed plan listing immediate steps for reviving the investment-led growth, which will not only revive economic expansion but also lead to enhanced supply of goods and services, taming the high inflation- the bane of the Indian economy. These steps should be implemented before the end of the current fiscal.
The strategy aims at drastic cuts in avoidable imports, finding alternatives in steel, coal and even hydro-carbons while making exports free from procedural delays and incentivizing them. Sustaining imports of about USD 500 billion without commensurate exports cannot be sustainable for long.
For faster clearance of the projects at different levels, the ASSOCHAM -NEC has made out a strong case for setting up a body at the state levels, similar to the Cabinet Committee on Investment (CCI) at the Centre. The CCI initiative at the Centre has largely benefitted by unclogging close to 100 mega projects. Similar institutional set-up should be tried at the state level as well, the strategy paper said.
It said while it is true that India needs to depend on imports of crude oil and other hydro-carbons to the extent of 80 per cent of its requirements, the strategy should be to reduce the import dependence by increasing the domestic exploration and commercial exploitation of the discoveries.
Of the 117 discoveries as of April 2012 under the New Exploration Licensing Policy, development plan has been approved only for a fraction of discoveries. Of these, again a fraction of them are under production. the paper lamented.
India's crude oil imports in the fiscal 2012-13 were to the tune of USD 144 billion. This level is exerting a huge pressure on the current account deficit, which in turn adds to the problems of the macro economy.
The Indian steel demand is being met by imports under the umbrella of free trade agreement. Such imports registered massive 15 per cent growth in year 2012-13. This has happened when capacity utilization of Indian steel industry has touched all time low at 82 per cent due to severe shortage of iron ore and cheap imports of steel from Japan and Korea- with which India has FTAs.
On top of it, drop in iron ore production has added to the woes, especially in Odisha where the ore production has come down drastically due to closure of mines on account of these compliance and regulatory issues. Similarly, there are issues in Karnataka .
The plan chalked out by ASSOCHAM - NEC which is being sent to the government, also suggested allowing accelerated depreciation rate on plant and machinery from the present level of 15 per cent to 25 per cent for the next 3 to 5 years period. The intent is to incentivise industry to make fresh investments.
The other measure to cut CAD and check imports of gold would be to set up a Gold Bank or Gold Deposit Accounts in the banks.
Policy effort must be towards incentivising residents to defer the procurement of physical gold, which in turn, would defer gold imports to an extent possible. A gold deposit account, offered by scheduled commercial banks, would represent notional units of gold and provides gold price return in weight terms. The gold liability created with the GDA will have to be netted off at the economy wide level with a body holding gold in the form of asset. The GoI/RBI can set up the Gold Bank which can procure and retain gold abroad through offshore foreign currency borrowings say, linked to Libor rate.
For encouraging investment in the beleaguered power sector, the paper has recommended exemption from levy of MAT on the profits earned by infra projects, which was exempted till Assessment Year 2000-01.
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