CHENNAI: Confederation of Indian Industry president Muthuraman said the Budget had many growth-oriented measures and has also made efforts towards fiscal consolidation.“In particular, the timely focus on the infrastructure sector is welcome. An area of concern for industry is the increase in excise duty and service tax from 10 to 12 per cent. At a time when the industry is already facing a huge increase in input costs, this will further add to the burden. It is possible that this may not yield the revenue that the Minister is looking for and instead result in further slowdown in growth, adding to inflationary pressure,” he said.CII welcomes the attempt at reversing the fiscal slippage of the current year by introducing amendments to the Fiscal Responsibility and Budget Management (FRBM) Act.Successful fiscal consolidation will be contingent upon widening of the tax base and better targeting of subsidies. The commitments to contain subsidy at 1.75 per cent of GDP and eliminate the effective revenue deficit in three years are critical targets introduced in this Budget.CII is hopeful that the government will be able to achieve these milestones.The revenue and expenditure targets set for 2012-13 seem realistic and the fiscal deficit of 5.1 per cent of GDP is achievable.However, according to the CII President, the borrowing level required to finance this deficit is still high and will keep up the pressure on interest rates.Measures to encourage infrastructure included doubling the tax-free bonds for infrastructure to `60,000 crores, expanding the list of sectors eligible for viability gap funding (VGF) and raising external commercial borrowings (ECB) limit for key infrastructure sectors. Further, special provisions for specific infrastructure sectors such as roads and highways, power, and civil aviation will help bridge the infrastructure gap. Reduction in the withholding tax on ECB for specific infrastructure sectors will also help in lowering the cost of funds.Sectors such as cold chain, warehouses, hospitals, fertilisers and affordable housing have been allowed investmentlinked deduction of capital expenditure at an enhanced rate. For the power sector, the waiver of customs duty on coal is a positive development and will help meet the demand for fuel in a country where 70 per cent of power is still generated from it, he added.The reduction in customs duty on equipment catering to sectors likely to witness investment, namely power projects, fertilizer, mining and road construction, would encourage investments, though the measure is a dampener for the domestic capital goods industry.
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