With the economic downturn beginning to hurt India Inc., pulling down exports and industry output, expectations are high from the interim budget to be presented in parliament Monday by Minister for External Affairs Pranab Mukherjee.
Although the measures to be announced by Mukherjee will be interim in nature, as the regular budget for the next fiscal will be tabled after inauguration of a new government following national elections, industry said exceptional circumstances called for special steps.
Industry chambers have accordingly given their wish list and top of that is tax break for both the corporate sector and individuals, as it would have a direct impact on the finances of industries and households alike and help lift demand.
"Tax rate reduction is desirable in the current context," said Suresh Tendulkar, who chairs Prime Minister Manmohan Singh's Economic Advisory Council. "This will essentially generate more purchasing power," he said ahead of the budget.
Industry feels it is unlikely that Mukherjee, who has additional charge of the finance, as Manmohan Singh, who holds the portfolio, is convalescing following a heart surgery, would ignore the suggestion from such a high-powered panel.
The United Progressive Alliance (UPA) government having announced two stimulus packages since December, industry feels this will also be the last chance for the government to comprehensively address the economic slowdown before the ensuing elections.
"A major demand of India Inc. for many years has been for reduction in corporate tax, which remains unattended to," said the Associated Chambers of Commerce and Industry of India (Assocham) in its pre-budget memorandum.
"India Inc. therefore anticipates that Mr. Mukherjee would revisit corporate tax rates in India and not only remove surcharge on it but bring it down to global average of around 26-27 percent, especially at times of meltdown."
Sharing this view, the Federation of Indian Chambers of Commerce and Industry (FICCI) also wanted tax holidays for housing to be extended by five years and the reintroduction of investment allowance, among other measures.
On a larger canvas, what is expected to weigh heavily in Mukherjee's mind is the drop in industrial production in October for the first time in 15 years that was attributed to demand slowdown. Industrial output fell again in December.
Exports have fared no better and logged a decline for three straight months since October, with commerce secretary G.K. Pillai predicting yet another fall in January.
As for Mukherjee, who has presented three budgets in the past as regular finance minister between January 1982 and December 1984, he is clear about what areas need urgent attention of policymakers and spelt that out three days ago at an industry seminar.
"There is a need to sustain our foreign trade, revive foreign investment and generate domestic demand to maintain our growth rates, which are essential for the uplift of the multitudes below the poverty line," Mukherjee said.