The Union Finance Minister Mr Pranab Mukherjee may not cut direct tax rates because of revenue implications, but is likely to retain the stimulus in the forthcoming Budget as the economy is still not out of woods, industry leaders said after their customary pre-Budget meeting on Tuesday.

The Finance Minister was worried about high food prices and sought industry help to reduce them, industry captains said after their meeting with Mr Mukherjee here.

“The Finance Minister was worried about food inflation touching 18.32 per cent. He asked for industry help. But he may not reduce taxes (rates) since fiscal deficit is also high,” said Mr Venugopal Dhoot, former Assocham President.

“... It appears that the Finance Minister at least agreed for continuing the stimulus (in 2011-12 Budget),” he added.

To help the lower strata of society combat high food inflation, industry also asked the Finance Minister to increase income tax exemption limit from Rs 1.6 lakh to Rs 2 lakh, if he is not able to reduce the income tax rates.

“The government should continue with the stimulus measures as the global economy is not out of the woods,” said Mr Rajan Mittal, President, Ficci. Mr Mittal said that the industry has asked the minister to reduce corporate tax rate from 30 per cent to 25 per cent, abolish surcharge, education cess and retain peak customs duty at 10 per cent and reduction of CST rate to 1 per cent.

With the economy recording a growth rate of 8.9 per cent in the first half of the current fiscal, Mr Mukherjee is expected to further withdraw the stimulus with a view to reduce the fiscal deficit, which is expected to be about 5.5 per cent of the GDP in 2010-11.

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