Objective:
- To boost domestic consumption, spending and savings within the nation
- To boost infrastructure growth paving way for lowering of logistics cost enabling manufacturing and ex-im growth
- To enable India becoming $ 5 trillion economy
Recommendations:
1. Rationalisation & lowering of personal income tax rates
- As on date personal income tax, coupled with indirect taxes, leaves very little with public for saving and investments. Rationalisation of personal income tax rates is essential to ensure there is surplus funds available in the household for both saving and spending.
- The personal income tax rates should capped at 25 per cent in line with corporate tax rates
- The same would pave way for GDP growth in the country and
2. Access to low cost financing & setting up infrastructure debt funds/sovereign wealth fund:
- Infrastructure projects are highly capital-intensive with long gestation period.
- Government has unveiled its plan for Rs 100 lakh crore investment in the infrastructure sector going forward. Funding of same should be addressed in the Budget through creation of infrastructure debt funds/sovereign wealth fund. This will enable low cost and long term borrowing requirement for the infrastructure projects as has been the case worldwide.
- More banks like IIFCL should be created with the mandate to take lead and fund capital-intensive long gestation infrastructure projects. This will bring much desired liquidity in the system and enable private sector participation.
3. Extension of corporate tax benefits to infrastructure companies/SPVs setting up new projects like that in manufacturing sector
- Recently in September 2019, the corporate tax for new manufacturing companies was reduced from 25 per cent to 15 per cent to boost manufacturing in the country.
To enable similar boost in investments in the infrastructure sector (which has recently seen dearth of new investments) similar benefit should be extended; wherein new projects/companies/SPVs will have reduced corporate tax rate of 15 per cent. This will enable more liquidity in the system and ensuring sustainable investments over long term for expansion and modernisation.
