December 31, 2019
Rebound in economy seen in 2020: PHD Chamber
Growth is expected to be at around 6.5% in the next financial year
Dr D K Aggarwal, President, PHD Chamber of Commerce and Industry has appreciated the reforms intent of the government to help the economy to rejuvenate and is looking forward to a rebound in economic growth in 2020, in a press statement issued here today.
The year 2019 was a year of great economic reforms where in the government announced string of reforms for each and every socio-economic segment of the country, said Dr Aggarwal.
The breakthrough in economic reforms was amazing as the government reduced the corporate tax significantly from more than 30% to an effective rate of 25.17% and 17.01% for the new manufacturing units, said Dr D K Aggarwal.
Going ahead, the year 2020 will be a year of economic rebound wherein the expectation is that the economy will regain its dynamic growth trajectory once again and take its position to become a US$5 trillion economy by 2024, said Dr D K Aggarwal.
Inflation conditions in 2020 will remain benign except few fluctuations because of weather disruptions, said Dr Aggarwal.
At this juncture, the focus of the government must be to refuel the consumption demand with a significant reduction in the direct taxes. Thus reforms in direct taxation are need of the hour with remarkable rationalization of tax rates in the forthcoming budget, said Dr D K Aggarwal.
We suggest no personal income tax applicable upto the income of Rs 5 lakhs for the individuals and income tax slabs should be rationalised to 10% for people earning upto Rs 10 lakhs per year, 20% for those with incomes of over Rs 10 lakhs and upto Rs 20 lakhs, 30% for income over Rs 20 lakhs and upto Rs 2 crore and 35% for individuals earning more than Rs 2 crore, said Dr Aggarwal.
The increase in the personal disposable income will propel savings and investments in the economy thereby refuelling demand in the coming times, said Dr Aggarwal.
Reduction in Tax on MSME firms working as Proprietorship/Partnerships is suggested as vast majority of MSMEs are either sole proprietorship or partnerships. Hence, a 5 percentage point cut in maximum tax rate of MSMEs is suggested, going forward, said Dr D K Aggarwal.
Further, the MSME exporters must be fully exempted from tax on their export earnings. This will enhance the exporters’ motivation and strengthen their competitiveness in the global markets, said Dr Aggarwal.
On the GST front, there is a need to reduce the GST rates for the automobiles from the current rates of 18% for small and mid-sized cars and 28% for luxury cars to 12% and 18% respectively, said Dr D K Aggarwal.
The GST on electric vehicles should be further reduced to 5% from 12%, he added.
This would give a significant fillip to the automobiles sector which is much needed for this promising sector of the economy, said Dr Aggarwal.
The GST rate on cement should also be reduced from 28% to 18% to boost the cement industry and to kick-start the infrastructure and housing projects, said Dr Aggarwal.
All the Petroleum products should also come under the ambit of GST to reduce the cascading impact of indirect taxation. There is a need to stimulate the civil aviation sector, Aviation Turbine Fuel (ATF) needs to be brought under the ambit of GST at the earliest, said Dr D K Aggarwal.
While appreciating the cut in lending rates by the State Bank of India, Dr Aggarwal said that we are hopeful that the entire banking sector would be supportive of rejuvenating the economic growth and transmit the cut in the policy rates to the consumers.
The easy availability of money with lower interest rates will enhance the sentiments of businesses in terms of expanded production possibility frontiers with creation of new employment opportunities for the growing young population, he added.
Above all, economic reforms undertaken by the government needs to create synchronisation and complementarities in the businesses and manufacturing processes, said Dr D K Aggarwal.
The reforms in labour market including the codification of fixed term employment are encouraging and must be supported with reforms in land acquisition and reduced cost of capital for the businesses, said Dr Aggarwal.
We believe that speedy implementation and synchronization of various reforms will refuel our economic growth trajectory very soon, said Dr Aggarwal.
PHD Chamber of Commerce and Industry