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78th Annual
General Meeting
December 24, 2005, New Delhi
Presidential
Address By Mr Onkar S Kanwar, President, FICCI
Respected Pradhan Mantri ji,
Shri Saroj Kumar Poddar, President-Elect
Shri Habil Khorakiwala, Vice President
Dr Amit Mitra
Your Excellencies, Delegates
Ladies and Gentlemen,
It is a great honour for FICCI, and for me personally,
to have the august presence of the Hon'ble Prime Minister,
to inaugurate the 78th Annual General Meeting. Pradhan
Mantri ji, we venerate your global stature, and your
undaunted spirit. We are also proud to be led by a Prime
Minister, whose impeccable integrity is legendary.
India, albeit, Asia, stands at a cross road of history.
It was the renaissance in Europe, followed by the growth
of science, technology, and markets, that snatched the
global leadership from Asia. And then came the emergence
of America, Japan, and the Asian tigers. The wheel is
now turning a full circle.
In the 18th century, 56.4% of the world's GDP was produced
by Asia, without counting Japan. This number fell radically.
We have climbed back to 25% of global GDP. By 2050,
the GDP of India, and China alone, will be 33% higher
than those of the entire G-6 countries - France, Germany,
Italy, Japan, UK and USA. Asia would have bounced back
to where it was 300 years ago.
But, the big question is : will we too, follow the
beaten track of capital accumulation, and labour accumulation,
as the engines of growth? Or, would India blaze a new
trail, by growing through the enrichment of total factor
productivity, albeit, heightened efficiency through
innovation, knowledge spurts, and revolution in management.
This, is the challenge before Indian industry, trade
and services. FICCI's effort is to push TFP, focus on
knowledge as a driver, and promote cutting edge experiments,
in Henry Ford like management changes.
Pradhan Mantri ji, you have already pushed hard, and
pushed wide, for steady, and calibrated integration
of Asia. History started with Free Trade Agreement in
2002 with ASEAN+China. This was broadened to include
Japan and Korea. Now we have ASEAN+4, including India,
called JACIK - Japan, ASEAN, China, India and Korea.
Your dream of an Asian common market, looms large before
us today.
Of course, your simultaneous Look West initiative,
and particularly, your historic breakthrough, with United
States, finds our fullest support. This, is the first
time, that the democracy dividend of India, has been
leveraged by a statesman, to synergize between the largest
and the oldest democracies of the world.
Today, the flavour of the world is India. Wherever
we go, it is India and China that are spoken of, with
equal optimism. The time has come for us, Indian entrepreneurs,
to make a big push, as your Government puts, its best
foot, forward.
For example, FICCI struggled for years for an Integrated
Food Law, which would bring together nine Ministries,
and eliminate the complex web, of 23 regulations per
Ministry. You have done it, Mr Prime Minister. For a
nation that processes only 2% of its fruits and vegetables,
FICCI targets to reach 30% within the next five years,
generating as much as 10 million jobs, for the rural
poor. May we urge you to lean on the States, to amend
the Agriculture Produce Marketing Control Acts, to take
this historic move to its fruition.
We congratulate you for the run away success of the
Multi Commodity Exchange of India. The MCX turn over
on the 12th of December, was higher than the cash market
turn over of the National Stock Exchange. The innovative
and market creating policy steps, make us proud.
Your Bharat Nirman project, destined to irrigate 10
million hectors of un-irrigated land is a milestone,
indeed. We are expectantly, awaiting a time-bound implementation
plan.
We are equally proud, to see the institutional credit
flow to agriculture increased from Rs. 71,000 crores
in 2002-03 to 1,15,000 crores by 2004-05. However, we
need to increase the actual disbursement, Pradhan Mantriji,
which stands at 59%. FICCI would be happy to work with
your Government, through our network of Chambers, across
the country, to push forward this frontier.
Your bold step in the aviation sector, has brought
a revolution in air travel among the common folks of
India, with private sector responding stunningly. But,
the shortfall in air infrastructure, has begun to choke
the full throttle. While Hyderabad and Bangalore airports,
are under construction, and Chennai and Kolkata await
commencement, we support you strongly for the initiation
of Delhi and Mumbai airports. The people of India are
with you, irrespective of the few detractors.
On highways, 92% of the Golden Quadrilateral, will
be completed by the end of this month, under your leadership.
However, we are hearing from industry, that parts of
the quadrilateral are suffering from disrepair, post
monsoons. We urge you, to take a quality check, on this
vital national artery. Now we are looking forward to
the implementation of phase one, to three and clear
plans for phase four to seven.
May I turn for a moment to the vital area of the power
sector? We are disappointed to learn, that there would
be a slippage of 12,000 MWs of new generation capacity,
during the 10th Five Year Plan. Your target, Sir, was
41,000 MWs and we may end up with only 29,000 MWs at
best. Pradhan Mantriji, may we humbly urge you, to put
your personal weight to correct this dangerous slippage.
Sir, we are disappointed on the area
of distribution, where the Accelerated Power Development
Reform Programme, was initiated with great gusto. But,
we believe it is in limbo today. Of course, most disappointing
is the reintroduction of free power in States. FICCI
has repeatedly urged that offer free power to the extremely
needy, but do so, through a transparent income transfer
mechanism from the State budget. This has gone un-heeded
by the States. Power metering too, is behind in its
deadline of 100% metering, within the next two years.
We urge your kind attention.
May I turn for a moment to the Taxation front. The good
news is that corporate India has posted a massive 28.45%
growth, in tax offerings, to your Government, in the
first half of the financial year. Personal Income Tax
collection too has grown by 8%. However, may I bring
to your attention the unusual growth in the proportion
of tax burden on Indian corporates, dampening the growth
of much needed investments.
Corporate India today pays 30% Corporate Tax on its
profits. Another 3 to 4% points, as dividend distribution
tax, and another 3 to 4% points on Fringe Benefit Tax,
raises the burden. We strongly feel, that FBT must be
abolished. In addition, Corporate India pays another
3% points as surcharge and educational cess, and finally,
the lowered depreciation rates, thrust an additional
tax of 1 to 2% points. Sir, Corporate India's direct
tax burden stands today at over 40%. We appeal to you
to intervene on this matter.
We also appeal to you, to bring in line fiscal incentives
for R&D, with those of other knowledge driven economies.
May I turn to the Indirect Tax scenario for Indian
corporates. First, let me congratulate you warmly on
your persistence, to introduce State level VAT, which
has yielded buoyant revenues already. You may consider
a national road map for VAT, with an incidence of 20%,
CENVAT of 12% and State VAT of 8%, to provide Indian
entrepreneurs, the competitive edge in the global matrix.
However, the current scenario in the indirect tax regime,
is a source of great concern. FICCI studies are shocked
to find that the indirect tax burden amounts to a whooping
40 to 44%, inclusive of central and state levies. May
I now request you to appeal to States to abolish all
other levies in any form, be they octroi, entry tax,
mandi tax, and stamp duties. May I appeal to you, also
to abolish Central Sales Tax at the earliest.
On the individual tax front, may I appeal to you that
the 30% tax bracket be applied to above Rs. 5 lacs income,
with a target to go to Rs. 10 lacs threshold. Sir, in
China, the 30% tax rate applies to those, whose incomes
exceed Rs. 40 lacs per year. Simultaneously, you may
want to widen the tax base, by bringing the rural rich
into the tax net and charging tax on all services, barring
the essential.
May I congratulate you for the passing of the Special
Economic Zone Bill. Corporate Income Tax exemption extended
to 15 years, and other fiscal incentives, have made
the SEZ proposal very attractive. We only urge you,
to consider flexible labour laws within SEZs, to wet
the appetite of those who hire industrial labour. This
will result in a China type, up-scaled, export directed,
large investments in the future.
May I turn to an area of policy, that has become an
obstacle for the growth momentum of manufacturing. The
complicated and almost draconian environmental clearance
laws, have become an achilles heel. I propose that the
Government introduces self-certification of environmental
clearances, and punish punitively any violations that
are discovered on a random check.
A deep challenge to the nation, is its code of governance.
You have taken a giant step forward, by introducing
The Right to Information Act, for the common men and
women of India. The right to inspect works, documents,
and records of the government, is a revolutionary step
indeed. This will eliminate corruption over time, and
bring transparency in governance, so critically desired
at this juncture.
On the other hand, corporate governance
is very much on the radar screen of FICCI. You would
be happy to know, that we have just launched an independent
directors.com, a customized website, to facilitate companies,
to select quality independent directors for their boards.
Similarly, FICCI is launching its arbitration.com, to
settle corporate disputes expeditiously, without clogging
up the court system.
In our quest, to raise growth through factor productivity
increases, we have tied up with the American Quality
Council, to offer the highest level of quality 'Six-Sigma
Black Belt'. In other words, FICCI is humbly, attempting
to complement the policy drive of your government, by
directly empowering corporate India.
May I conclude by submitting that the demographic dividend
of India, with 547 million people below the age of 25
today, must be leveraged now, or never. Even by the
year 2025, 68% of our population would be in the workforce,
while other nations would have aged deeply, including
China. Pradhan Mantri ji, FICCI would do its humble
bit sincerely, to complement the progressive steps you
have taken already, and those you wish to take in the
future. We join you in chanting the mantra of implementation,
implementation and implementation.
Thank you.
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