Reduce taxes on household goods to spur demand: ASSOCHAM

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New Delhi, May 18 (UNI) Concerned at the phenomenal growth in industrial prouction and the prospects of a slow down in economic growth, ASSOCHAM has suggested a slew of measures to step these up, including reducing the tax incidence on household purchases.

ASSOCHAM said the Tax burden on household purchases needs to be brought down to less than 20 per cent from more than 45 per cent to spur up demand. Besides, other constraints need to be removed which are coming in the way of industrial and agricultural production.

The Chamber also sought withdrawal of hurdles on investments relating to power, telecom and other core infrastructure sector by granting necessary clearances within a maximum period of 45 days.

It argued that as half of manufacturing output emantes from the small and medium sectors, including village and tiny units, the government should also trim controls and regulations that currently restrict the growth of these sectors.

The suggestions have been incorporated in an ASSOCHAM Study entiled 'Strategies for Improving the Growth of Indian Manufacturing Sector.' The study says that although the annual income of an average Indian is growing by Rs 1,800 annually, its benefits were not resulting in increased savings and copsumption. This was because the government takes away more than 45 per cent on household purchases by way of indirect taxes alone.

"This certainly helps the government but hurts the people and therefore, the tax incidence on household purchases should be brought down to less than 20 per cent,"ASSOCHAM said.

Importance of achieving 12 per cent growth in manufacturing sector was extremely critical to ensure that India consistently achieves plus eight per cent GDP growth.

It expressed concern that in the month of March 2008 the manufacturing growth has slackened to 2.9 per cent from over 14 per cent in the same month last year and industrial production fell to about three per cent from more than 11 per cent in March 2007.

The Study was of the view that GDP for the fiscal 2007-08 will hover around 8.1 per cent against the earlier projections of close to nine per cent, primarily because industrial production has come down mainly on account of poor manufacturing.

In the industrial production, the weightage of manufacturing is the highest.

The implication of a slow down in industrial growth are slow growth in employment opportunities for both the skilled and semi-skilled workforce.

The study says that though the fiscal situation has steadily been improving, the plight of common man continues to worsen as the growth has not been inclusive.

It said demand emnates from additional employment and income.

The overall economic policy should subserve the cause of employment generation.

At the same time, ASSOCHAM said employment growth should come from productivity growth. "Employment sans productivity growth is not sustainable," it said.

The Chamber said government should facilitate the growth of employment-intensive sectors such as housing and real estate, retail trade, agro processing, consumer durables and the FMCG segment.

The Chamber regretted that development so far has largely mainly been confined to metropolitan areas. Policy needs to be encouraged and development needs to reach smaller towns and villages so that the benefit of growth reaches all.


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