KOLKATA (ICIS)--India will aim to achieve a sustainable GDP growth of 7-8% over the next three to four years by reviving investments and reducing borrowings, minister of finance, Arun Jaitley said while presenting the federal budget for 2014-15 on Thursday.
“The longest slowdown in economic growth in the last quarter century would be reversed through higher investments, raising ceilings for foreign direct investments (FDI) in various sectors and curbing inflation,” Jaitley said.
India recorded a GDP growth rate of 4.5% during 2012-13 and 4.7$ in 2013-14.
“Tax reforms would be launched to unify tax regimes across 29 Indian provinces to evolve a common market,” he said.
“The tax to GDP ratio would need to be raised as we cannot spend beyond our means,” Jaitley said while presenting the present government maiden budget in Parliament.
He projected a fiscal deficit of 3.6% of GDP during 2015-16 while acknowledging a higher deficit of 4.1% during the current year.
The Bharatiya Janata Party (BJP) led government assumed charge in May 2014, after securing a majority verdict in national elections.
On liberalisation of FDI, the finance minister proposed increasing the cap on such investments in sectors like the defense industry to 49% from an existing 26%.
To boost manufacturing, the finance minister re-iterated government commitments in reviving the concept of Special Economic Zones (SEZs) and making them an effective instrument of industrial production, export promotion and employment generation.
Aiming to use the tax structure to boost manufacturing, Jaitley proposed Infrastructure Investment Trusts and Real Estate Investment Trusts offering tax incentives to attract domestic and foreign investments into these sectors. He however did not elaborate on the nature of the tax incentives.
To spur new investments and capacity addition in the chemical and petrochemical sectors, he said that basic customs (import) duties would be reduced on reformate from 10% to 2.5%, on ethane, propane, ethylene, propylene, butadiene (BD) and orthoxylene (OX) from 5% to 2.5 %, methyl alcohol and denatured ethyl alcohol from 7.5% to 5%; and on crude naphthalene from 10% to 5%.
Jaitley said that to resolve several pending tax disputes, the government would exempt polyster staple fiber (PSF) and polyester filament yarn (PFY) manufactured from plastic waste and scrap, including polyethylene terephthalate (PET) bottles, from excise duty for all such taxes pending for the period 29 June 2010 and 7 May 2012 while a nominal excise levy of 2% would be applicable prospectively.