Economists on Saturday urged Finance Minister P Chidambaram to give a "big push" to the economy by stepping up investment in agriculture and infrastructure besides rationalising taxes, introducing value added tax and widening service tax net to increase revenue and cut fiscal deficit.
TUs pitch for 12% PF rate; cut in fuel prices
The main thrust of the Budget 2004-05 should be to generate high growth with employment generation, for which the government needs to take a lead in stepping up investment, they said after a pre-Budget meeting.
Some economists pitched for labour market reforms on a broader sense without actually carrying out radical changes in Industrial Disputes Act, which covers only 2.4 per cent of the total workforce.
A section of them also asked Chidambaram to redefine "profit-making PSUs" and favoured divestment of state-owned enterprises that are vulnerable to global competition.
A majority of economists were not in favour of a drastic reduction in provident fund rates, but said the interest rates on deposits should be increased to prop up savings rate in the economy and cleanse the financial sector especially after the muddle over United Trust of India, IFCI and stock markets.
"What we require is a big push for growth with employment, starting with the agriculture sector. The government should take the lead. Private sector would then follow," Institute of Economic Growth director B B Bhattacharya said.
Investment in agriculture has virtually come down 50 per cent in the past several years. So, the government must initially invest more money to achieve a growth of 3.5 per cent in farm sector from the current average of 2.0 per cent, he said.
Bhattacharya said private companies should be provided fiscal incentives to invest in agri infrastructure.
He also asked the finance minister to rationalize subsidies and encourage higher education to promote IT, biotech and other forex earning sectors.
Bibek Debroy of Rajiv Gandhi Institute pitched for higher investment in power, water and road sectors, which can ensure employment generation and spur economic growth.
To carry forward the reforms, he said the Centre has to take responsibility to rehabilitate the states, most of which are virtually bankrupt.
In this context, he said early introduction of value added tax was necessary.
National Institute of Public Finance and Policy director Govind Rao said widening the scope of service tax was vital to prop up revenue.
He said the excise duties should be rationalised by phasing out exemptions and customs duties brought down to 5.0 per cent.
On divestment, he said the notion of "profit making PSUs" is a loose concept as the country may still have monopolies that hinder growth and employment.
Consumer Unity and Trust Society secretary general P S Mehta said, "You have to define what is profit-making PSUs and whether it is making the right profit or not."
He said public expenditure should not be "downsized" but "right sized."
