India's industry chambers, the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) differ in their views on the need of yet another stimulus, reported the Business Standard.
FICCI suggested reducing the tax structure, while the CII says that the space for fiscal incentives is limited. However, both the chambers are unanimous on the need for the implementation of quick measures to raise investments and productivity, enhance focus on urban infrastructure and ease government blockages.
Chandrajit Banerjee, director general of CII said that further fiscal stimulus is not needed now as space for fiscal incentives is limited and the fiscal deficit is high. Banerjee favors a 0.5% interest rate reduction by the RBI instead. FICCI secretary general Amit Mitra has called on the new government to downsize the tax structure by raising income tax exemption limit thereby providing fiscal stimulus to the economy. Mitra also noted that the tax collections would not be hit as the tax collected incurs huge administrative cost. He further suggested trimming of corporate tax and elimination of exemptions except for investment purposes.
As the global liquidity crunch impacted private consumption and investment demand, the Indian government came out with three fiscal stimulus packages since December last year to encourage domestic demand resulting in significant rise in fiscal deficit to 6% of GDP compared to its earlier estimate of 2.5% in 2008-09.
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