The Hindu Business Line : FICCI seeks excise duty cut on five items

Steel, cement, petroleum products, automobiles, and auto components are the five items that top the list of corporate India for excise duty cut to boost demand generation and investments.

The impact of a fiscal trigger on these five commodities is being seen as crucial to stimulate investment, with the sheer force of the multiplier effect working itself out through the economy resulting in a boost to GDP growth, a survey by the Economic Research Division of FICCI said.

Releasing the findings of the survey, the FICCI President, Mr Onkar S. Kanwar said: "The feedback and interaction with our constituents in different parts of the country and member companies show that steel tops the list of products on which excise duty needs to be reduced for giving a boost to fresh investments in the economy. This is followed by cement, petroleum products, automobiles, and auto components."

The survey said that tax breaks trigger investments through the multiplier effect.

In India, the value of the multiplier stands at four, i.e., with every rupee of investment, Rs 4 worth of GDP is generated.

Excise reduction on these five critical items would generate additional demand, stimulate production, and increase capacity utilisation. This, in turn, leads companies to draw up fresh investment plans.

The feedback from a range of companies reveals that a third of them (31 per cent) would want an excise duty cut on steel, followed by cement 25 per cent, petroleum products 24 per cent, and automobiles and automotive components 21 per cent each.

Investment figures for India show that in 2003-04, the investment rate picked up by 1.5 percentage points to 26.3 per cent of the GDP.

This increase in investments was not restricted to a few sectors but was well spread out across the economy.

Real investment levels went up by 12.5 per cent in agriculture-related activities, 19.9 per cent in industry and 21.8 per cent in services.

The surge in investments seen in the last year has continued in the current year.

Trends over the last three decades show that there have been only two cycles when the investment boom has lasted more than two years - a four-year period in the second half of the 70s and another four-year period starting in the late 80s.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page