Upgraded infrastructure to need $320 bn in 5 yrs

New Delhi, Dec 26: India needs an investment of about 0 billion in next five years to upgrade infrastructure to put itself on 9 per cent GDP growth trajectory during the 11th plan period, industry body Assocham said today.

A large investment is required to expand manufacturing capacity in thrust areas and rapidly growing export production, it added.

In its pre-budget proposal to the government, Assocham President Anil K Agarwal said, ''India needs to increase the rate of investment from the current level of 33-34 per cent of GDP to 39-40 per cent for accelerated economic growth.'' A large portion of this has to be invested on key infrastructure sectors like power, ports, roads, airports, mining and high quality infrastructure for services, he added.

Further, augmenting productive investment, promoting India as international headquarter of entrepreneurs and encouraging repatriation of profits from overseas, creating common market for growth and competitiveness and integrate multiple indirect taxes under goods and service tax (GST) will enable India to sustain the nine per cent GDP growth.

Mr Agarwal said that the chamber has also proposed that the Finance Minister P Chidambaram should modernise excise duty regime in a manner that reduce industrial cost and give relief to consumers for which appropriate announcements be made when the minister presents the budget proposals for 2007-08.

The chamber strongly recommended that where the Indian shareholding in an overseas company is more that 40 per cent, the dividend remittance to the Indian company should be exempted from income tax here.

Alternatively the tax paid in the overseas country on the underlying profit from which dividend is declared, should be given credit.

Such tax policy will not only increase the remittance of foreign exchange earnings but also encourage companies to choose India as their international headquarter along with their key decision makers.

According to Assocham, since central sales tax (CST) is not VAT-able, it encourages fragmentation of manufacturing with small state-specific units and multiple depots to avoid CST. It, therefore, has significant adverse impact on growth and competitiveness of Indian industry and trade.

Assocham suggested that CST must be phased out without any further delay. ''Any perceived revenue loss will be more than made up by high growth of trade and industry. It is recommended that CST should be reduced to two per cent from April 1, 2007.'' As a first step, government should set up an empowered committee consisting of state and central government representatives at the earliest to finalise the structure of GST and road map for its implementation.

According to the chamber, replacement of multiple taxes by GST will increase the tax-GDP ratio by two per cent. Apart from providing the revenue buoyancy, GST will simplify the tax structure, reduce tax administration cost and reduce compliance cost.

''GST will also improve the competitiveness of Indian Industry by eliminating the cascading effect of taxes on production cost.'' The government should also integrate excise and service tax into 'Central VAT' to facilitate introduction of GST at a later date.

This integration will also reduce cost of compliance and tax administration, Assocham said.

UNI