Indian industry urges Finance Minister to continue stimulus

New Delhi, Jan 6 (ANI): Indian industry on Tuesday urged the government to continue with the fiscal stimulus at least for six months, as withdrawing them could choke faster recovery of the economy.

"All industries felt that the fiscal stimulus should continue for a while because the recovery was fragile and it needs to be more robust specially for export-led industries for which global recovery is slower," said Swati Piramal, President of the Associated Chambers of Commerce and Industry (ASSOCHAM), after holding a meeting with Finance Minister Pranab Mukherjee ahead of the annual budget.

Indian industry also demanded that the customs duty remain same and the government bring some innovative schemes to encourage investment.

"Customs duties should remain the same. The peak rate should not be brought down from 10 percent. The logic for that (is) we have a difficult time therefore that should remain... to support industry over here. The second issue, which was common, was in terms of investment plans. Not enough investment is actually happening on the ground, so therefore industry needs to be encouraged and a suggestion was made that we should bring back the investment allowance for example," said Harsh Pati Singhania, President of the Federation of Indian Chambers of Commerce and Industry (FICCI).

The industry representatives also demanded tax reforms through introduction of a Goods and Services Tax and reduction of the fiscal deficit.

"I must say that GST (Goods and Services Tax) is the most important reform. We don't have any single common market; transaction costs are high, roads have barriers in every state and therefore GST is the most important reform," said Venu Srinivasan, President of the Confederation of Indian Industry (CII).

The Reserve Bank has already turned hawkish after food inflation neared 20 percent by end of December, and analysts expect it end the ultra-easy stance this year by first raising the cash reserve ratio of banks in January and then increase policy interest rates.

The government is under pressure to reduce its fiscal deficit estimated at 6.8 percent of gross domestic product for 2009/10 (April-March), as it has increased its borrowing to a record 4.51 trillion rupees. (ANI)