The Union Budget 2016 is poised to be a game changer in reviving investment, economic growth and job creation, enabled by the next generation reforms to fast-track India’s economic resurgence. The following are ASSOCHAM’s recommendations in this regard:
- Use the Infrastructure Finance Companies like IIFCL to rebuild the capacity of the private infrastructure sector by making it easier for them to raise funds. Since IFCs have the necessary expertise, they should also be used as ARCs for the infrastructure sector, helping revive stranded projects. NIIFIs a good first step but more needs to be done. Recommend that a taskforce on infrastructure finance under JS, Infra be setup to take this forward. Pension and insurance funds should be allowed to invest in any investment grade paper, not just AA.
- Bank guarantees can be costly for companies and for bankers. These could be replaced by bid bonds or surety bonds, which are issued by insurance companies to contractors when they bid for government projects. Request IRDA to research and then create standards for these new type of bonds that companies can issue.
- Service tax should be paid by contractors to government, only when the receive the payment from the government (this could be deducted from the government’s payment). Today, contractors don’t have the margin to deposit service tax every month yet receive their payments after many months. If there’s a default receiving payment, then the service tax on that default should be credited back into the account of the payee.
- Eliminate all surcharges on corporation tax, service tax, etc. This does not promote ease of doing business, when everyone has to calculate taxes to two decimal places. Adjust tax rates where necessary.
- NBFCs account for close to 15 percent of all advances the financial sector. Yet, they are treated differently than banks on the issue of TDS on interest. The act of deducting and depositing monthly TDS (and then sending out the TDS certificates) to thousands of borrowers increases the complexity of doing business. Banks don’t have to do so. Therefore, NBFCs should also be treated on par with banks.
- To promote mechanization in agriculture using advanced machinery like combine harvesters, suggest the creation of an Agricultural Equipment Bank, through PPP in each district.
- To promote entrepreneurship in smaller towns, especially that which is not around IT, suggest that the government gives tax breaks similar to IT Parks, for “Startup Hubs” in each city. These startup hubs are like incubators, but for all kinds of businesses, especially service and professional businesses.
- Conduct a full cadastral and GIS survey of all the land parcels of the entire country, including boundaries. Match that survey with land records. And then put the final “land registry” online. This will dramatically ease litigation.