Date:01/03/2006 URL: http://www.thehindubusinessline.com/2006/03/01/stories/2006030102060200.htm

Back Boost to investment activity — Govt totally committed to fiscal prudence and continued reforms: Chidambaram

Our Bureau

Mr Chidambaran said he did not understand the industry's worry over the tax being a cumbersome one since the first returns on FBT was due only by October 2006.

New Delhi , Feb. 28

The Finance Minister, Mr P. Chidambaram, today said that the Union Budget would spur investment activity by sending out clear signal that the Government would strive to remain on the path of fiscal prudence and continued reforms.

"The signal to investors is that the Government is totally committed to fiscal prudence, liberalisation and reform. An open economy has higher chances of recording higher growth than closed economies. We are moving to a higher level of growth," Mr Chidambaram said at a post-budget press conference here today.

He said that the signals to investors are through taxation measure such as cut in excise duty on small cars. "Our policies would crowd-in more investment, both Indian and foreign. The tax rates have been fine-tuned to spur investments. For example the excise cut for the automobile sector can make us the world's largest maker of small cars," Mr Chidambaram said. He said that similar step-up in investments can be hoped in areas such as man-made fibres, man-made filaments, man-made textiles, leather and food processing. Mr Chidambaram said that `the big idea' behind the budget was to raise growth rates. He pointed out that while industry and the services sectors could move ahead on their own momentum, the agriculture sector could follow suit with a slight handholding by the Government.

In this connection, he pointed out that the budget has proposed a 200 basis points cut in short-term crop loans to 7 per cent. He said that though it was difficult to provide credit at rates lower than this, attempts could be made for a softer rates should there be enough liquidity and better NPA management by banks along with low inflation. The Finance Minister said that Government's efforts would be to keep inflation below 5 per cent.

Mr Chidambaram felt that industry should be happy with the relief given on fringe benefit tax such as those on superannuation contribution and travel and tour. He said that he did not understand the industry's worry over the tax being a cumbersome one since the first returns on FBT was due only by October 2006.

On the move to scrap the one-by-six criteria (under which it was mandatory for assesses who undertook certain specified activity such as air travel to file returns), Mr Chidambaram said that the criteria had outlived its purpose.