New Delhi: India is on the move like never before. The reform process started with the liberalisation of the economy in the 1991 is bearing fruit today. And the most significant consequence has been the emergence of a new face of entrepreneurship. At CNN-IBN, we call this the birth of a Young India.
Sixteen days before the Union Finance Minister rise to present the Union Budget 2007, things have never looked better. The economy is growing in about 9 per cent, the industry is scorching at a growth rate of about 11 per cent, and in the second week of February, corporate India has sealed up deals in excess of $25 billion.
In that context, CNN-IBN's Shirin Bhan spoke to a large group of representatives from the Corporate India's GenNext on CNN-IBN’s Special Show Rising India: Corporate India's Generation Next to find out where they see the economic blueprint of India in the next the couple of years. It was the largest congregation of corporate leaders in Indian television history.
The Finance Minister has gone on record saying that the tax exemptions that have outlived their utility need to go. So, should tax exemptions be phased out?
"You can always supply a rationale for an exemption. In fact, an exemption is justified for some reason supporting it. But, I think, the reasons must be closely analysed and as far as possible, exemptions must be phased out over a period of time and introducing new exemptions must be very carefully weighed." This is how Finance Minister P Chidambaram outlines his roadmap ahead.
Rajiv Memani of E&Y, India, doesn't think the industry and the private sector have asked for it.
"Those are political benefits that have been given. Secondly, they are more in the nature of social benefits where exemptions have been given. Actually, even there are very few tax exemptions that are still surviving. Even with regard to SEZs, 10A and 10B have been phased out. There is little bit that has been left in the infrastructure front, most of which have sunset clauses, which industry is hoping will be extended beyond 2009. But if they have outlived their utility, and we have to very closely look at them, I am certainly in favour of gradually phasing down exemptions and also along with it the caveat is the tax rates have to go down. For a normal corporate citizen here, the tax rate is approximately 40 per cent if you add corporate tax, surcharge, dividend distribution tax, FBT etc," Memani points out.
"We are willing to let the exemptions go as long as the corporate tax is reduced," he says.
A instant poll conducted at the congregation, however, showed that only 43 per cent of the participants were in favour of withdrawal of exemptions, while 50 per cent said a firm 'no' to the proposal. The rest 7 per cent voted 'can't say'.
"I personally think that they should actually phase out exemptions," says Sanjay Kapoor, MD of Genesis Colors. "First of all, when you do have tax exemptions, you are actually finding caveats out to make industry successful with a benefit and competitive. Actually it's not really a level-playing field. We are trying to find out which state is giving exemptions, so you move out there. Like now, Uttaranchal is the hotspot everybody is talking about. Is there really a competitive edge in being out there? And what about those people who don't want these competitive edges. I think you are actually adding a crutch out here and distorting the market by doing that," Sanjay points out.
Farzana Haque, Global Decision Manager of TCS, supports the exemptions as an inceptive to growing to certain industries. "If you are looking at small car, you can give a tax exemption for that because we are looking at India as a manufacturing hub for small cars. We are looking at semi-conductors. There are some industries which need that incentive," she reasons.
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