Lahiri tells SSIs to work in clusters; 'Budget growth-oriented'

New Delhi, Mar 2 (UNI) The top brass of the Finance Ministry today said the Budget 2006-07 was essentially growth-oriented, the thrust on infrastructure being an important component of this, and advised the small scale sector to work in clusters rather than isolation to facilitate their functioning, "We expect high growth to continue as a result of the supportive policy framework being put in place," Chief Economic Advisor to the Finance Ministry Ashok Lahiri told a CII conference on the Budget, presented in Parliament by Finance Minister P Chidambaram on February 28.

Similar remarks about the Budget were made by Dr Parthasarthi Shome, Advisor to Finance Minister, and an expert in Public Finance, who also participated in the event.

Dr Lahiri said India's experience during the last 50 years shows that increasing expenditure was not the only solution to the problem of underdevelopement as implementation issues were equally crucial.

In this regard, he cited the instance of the roads sector, where adequate investments were available but there was a shortage of competent contractors who could implement the road projects.

Sectoral bias in taxation, like lowering of duty on small cars, was justified more on the basis of social needs rather than just the economic logic.

Allaying the fear of the SMEs regarding their abilities to compete, Dr Lahiri said their main concern was not the cost of credit, but its availability.

In this regard, Dr Lahiri said, the government has liberalised the guarantee requirements so that the small industries do not face the shortage of capital.

Dr Shome said the Budget exercise regarding taxation was more to do with rationalisation rather than raising revenues.

He justified the increase in MAT from 7.5 per cent to 10 per cent, by saying that it would bring about equitable distribution within the corporate tax structure.

He said the hike in services tax rate from 10 per cent to 12 per cent was a step in the direction of synchronisation with GST, to be levied from 2010.

He further justified the increase in services tax on the ground of their high contribution (nearly 50 per cent) to the GDP.

Dr Shome stressed the urgent need for increasing the share of manufacturing in GDP from its current level of 17 per cent.

In this connection he cited some sectors such as food processing, textiles (man-made fibre particularly), leather, automobiles, and aerated drinks, which were promising and could contribute higher growth. He justified excise duty reduction on these grounds.

Dr Shome said computerisation of the tax administration was being undertaken to help both taxpayers and administration.

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