The Congress-led United Progressive Alliance Government is all set to announce its interim Budget on February 16. In the run up to the budget, the textile industry has sought indirect tax cuts.
The Congress-led United Progressive Alliance is all set to announce its interim Budget on February 16. In the run up to the budget, the textile industry has sought indirect tax cuts.
The textiles industry expects that the Government's interim budget is likely to contain some tax breaks for industry and sector-specific measures to stimulate a slowing economy. The Budget could address cut in indirect taxes more than direct taxes or change in major policies.
The PHD Chamber of Commerce and Industry or CCI was lobbying for a corporate tax rate cut to 20 per cent from 30 per cent. It hopes fringe benefit tax, dividend distribution tax and minimum alternate tax to be scrapped and the central sales tax abolished by 2010, instead of introducing uniform goods and Services Tax.
The members of CCI hope that the interim budget will focus on labour intensive and export oriented sectors, because demand for exports has gone down, so sectors like gems and jewellery, textiles etc., need to be revived with priority on protecting jobs.
The export lobby groups anticipate job losses of 10 million by March-end. Exports, which account for nearly 20 per cent of India's gross domestic product, are expected to plummet by more than a fifth in January.
Textiles are the second largest exporter after IT and over 50 per cent of the total textile production in the country is exported to the United States and the European Union.
Commenting on the same, Head-Policy Initiatives at Arvind Mills, Naishad Parikh, said the textile industry profitability has gone down 75 per cent in last two years and credit rating downgrades are seen in textile industry due to profitability erosion. “Thus, we expect rollback of duty drawback in interim budget and some policy changes in interest rates levied on exporters.”
Parikh said government must enable provisions for cotton price parity with international prices.
Meanwhile, the CCI believes though it is an interim Budget, there is no bar on the government to make policy announcements in the context of the elections not having been announced. Rather, there are speculations about the government announcing the third stimulus package in the budget to further reduce the impact of the global economic slowdown.
However, the Reserve Bank of India would probably wait for the vote-on-account or interim budget to gauge the fiscal situation and will then decide on interest rates.
Meanwhile, Crisil Principal Economist, D K Joshi said indirect taxes may be slashed in the interim budget, but he does not expect any cut in the direct tax. However, construction, automobiles and export oriented sectors might get some benefit from the budget, Joshi said.
Meanwhile, Home Minister P Chidambaram remained non-committal on the announcement of a stimulus package in the interim budget to be unveiled on February 16. Nonetheless, Commerce and Trade Minister Kamal Nath said the Government is committed to taking more stimulus measures to prevent job losses.
Minister of State for Industry Ashwani Kumar said a calibrated policy prescription is in the process of being formulated.
President of the ICCI Mahendra Ramdass believes that the survival of the textile industry is dependent upon support from banks and a two-year moratorium on repayment of term loans. Ideal measures for the textile revival would include removal of cotton yarn from the purview of the Essential Commodities Act.
Ramdass feels minimum support price (MSP) for cotton to be reduced and cotton yarn exempted from levies. Meanwhile, Apex industry body FICCI
FICCI hopes that the interest subsidy provided to exporters until March 2009 to be extended up to March 2010.
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