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FICCI to review fiscal & monetary policy to look at gaps

08
Dec '08

Arising from the basic premise and comprehensive action agenda of November 3, 2008, FICCI's expectations from different sectors including fiscal policy, monetary policy, financial sector related policies and specific sectoral expectations in the immediate and medium term are given below:

Once the fiscal package is announced along with the monetary policy, which was announced today, FICCI will do an exercise to look at the gaps on our expectations and those which have been announced. Wherever there is any shortfall, FICCI will take them up constantly in future.

URGENT MEASURES:

Fiscal policy related:
1.Fine-tune the customs duty – Rates that were earlier lowered to check inflation should be restored. This is particularly important as we face a serious threat of dumping of goods in the Indian market by the Chinese manufacturers
2.Reduce excise duty rates from 14 percent to 12 percent. In sectors facing considerable slowdown – automobiles, commercial vehicles, consumer durables etc excise should be brought down to 8 percent.
3.Abolish Central Sales Tax (CST) that presently stands at 2 percent.
4.Announce incentives for investment – enhance depreciation levels and introduce investment allowance
5.Fiscal support for exporters.
a.Assist exporters (and business in general) in terms of their 'Working Capital' and 'Cash Flow' through prompt disbursement of dues on Drawback, CENVAT credit, DEPB claims, Terminal Excise Duty, Service Tax etc.
b.Interest rates subvention scheme on export credit should continue at least up to 31 March 2209.
c.Restore 'duty drawback rates' for employment–intensive sectors such as textiles/garments, leather & footwear, handicrafts, carpets etc, to the level existing before 1st September 2008.
d.Refunds from excise department to be made in 7 days instead of current 90 days.
e.Enhance the corpus under Market Development Assistance (MDA) scheme the Market Assistance Initiative (MAI) scheme to help exporters diversify their markets
f.Widen and diversify the markets and products covered under the Focus Market and Focus Product scheme.

Monetary policy related:
1.Bring down CRR from 5.5 percent to 4.5 percent - the same level as was seen in the year 2004
2.Cut repo rate from the present 6.5 percent and bring it down to 5 percent in the near term
3.Reverse repo rate should be cut by another 100 basis points as this would act as a disincentive for banks to park excess liquidity with the RBI
4.Cut the bank rate by 100 basis points
5.Bring down SLR from the present 24 percent to 22 percent

Financial sector related:
1.Set up sectoral stabilization funds for sectors where risk aversion has suddenly shot up and liquidity is not forthcoming
2.Banks must completely deliver on all sanctioned loan limits to corporates
3.Crowding out of private sector from credit markets should not happen withliquidity being used for fertilizer and petroleum subsidies

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