With a few days left for the next Union Budget, some senior economists suggested a higher income-tax rate for those earning Rs 15 lakh and above a year and an increase in service and excise duty, to help the government stick to its fiscal consolidation path.
The priority for the Central government is to cut fiscal deficit to 4.8 per cent of gross domestic product in the next financial year from 5.3 per cent pegged for 2012-13, economist Shankar Acharya said at a recent conference here.
He suggested raising the personal income tax rate for those who earn Rs 15 lakh annually and above. Acharya also prescribed raising the excise and service tax from the current 12 per cent and moving various concessional rates in excise towards a higher central value-added tax rate.
Finance Minister P Chidambaram will present the Budget for the next financial year in Parliament on Thursday.
Planning Commission member Saumitra Chaudhuri said the challenge was to create conditions to tackle the falling investment rate, increase supply to contain inflation and augment the savings rate. The government should facilitate higher private investment in the crucial infrastructure sector as well, he added.
Chaudhuri exuded optimism about returning to an eight per cent annual growth rate in the absence of external shocks and if slippages in infrastructure investment were tackled. Indian economy is forecast to grow at five per cent, lowest in 10 years, in the current financial year.
The finance minister has already come out with a five-year road map for fiscal consolidation. According to it, the fiscal deficit would be reined in at 5.3 per cent in 2012-13 against after the 5.1 per cent estimated in the Budget. Every year it would be lowered by 0.5-0.6 percentage points. It would then come down to 4.8 per cent in the next financial year and ultimately to three per cent by 2016-17, the terminal year of the 12th Five-year Plan.
- Higher income-tax rate for earning Rs 15 lakh and above
- Centre should try to cut fiscal deficit to 4.8% of GDP
- Raise excise and service tax from the current 12%
- Create conditions to tackle the falling investment rate