Reduce tax, interest rates to boost manufacturing: Assocham

NEW DELHI: Suggesting a 20-point agenda for boosting India's manufacturing sector, which include reduction of interest rate and lowering of corporate tax, the Assocham on Monday said the economy during the current year is likely to grow at the rate of 8 per cent.

"The economy is expected to grow at 8 per cent, against 9 per cent last fiscal, due of factors like soaring oil prices and tight monetary policy," Assocham Former President V N Dhoot said, while releasing the 'Indian manufacturing... aiming to achieve 15 per cent sustainable growth' report here.

In order to boost the manufacturing sector, the report suggested that corporate tax be reduced to 25 per cent from 30 per cent now and interest rates be brought down significantly to enhance the competitiveness of the Indian industry.

Tax exemptions, which are generally available to the services sector, the report said, "should be rationalised and the corporate tax rates should be no more above 25 per cent as the surplus retained profits can be reinvested."

The report added that, "new enterprises need to borrow to start the business and interest rates above 12 per cent are a major burden on them. There is an immediate need to reduce the effective interest rates to the corporate sector."

Emphasising on the infrastructure sector, it said the sector needs reforms at priority basis as lack of basic facilities is seen as bottleneck in development of industrial units.

Liberalise reforms in labour and engineering sector, diversification in existing export structure, emphasis on R&D, and special concession for agriculture products including reliable power supply is also needed, Assocham's study said.

While continuing the focus on labour-intensive sectors like food processing and textiles, India should aim at higher growth target of over 15-18 per cent for high potential sectors such as engineering goods. The target for high growth in engineering sector is particularly more important to promote India as a hub for global manufacturing, it said.