The India Union Budget 2008-09 needs to initiate a range of programmes for SMEs in diverse areas like financing, technology, innovation, market information, technical training and developmental assistance.

I feel the cost of doing business in India was too high. Improving this state of affairs for SMEs means upgrading infrastructure and improving the PPP model. Core infrastructure development remains a major deterrent and requires manifold reforms to make the SME sector more competitive.

Mr P Chidambaram can think of offering differential interest rate structure for infrastructure companies and also provide tax exemptions in areas such as shipping and transport.

Policy changes to make credit available at a cheaper rate and cutting down import duties and frame policies to encourage more and more foreign participation should definitely figure in this year's Budget.

Abolition of 10 percent surcharge on corporate tax is inevitable. The Finance Ministry should consider fixing the slab at 30 percent with surcharge waiver. Now with this surcharge the corporate tax element exceeds even 35 percent. I think this will help boost the SME manufacturing sector to a huge extent.

There is also a need to lower excise duty rates on manufacturing goods to sustain high economic growth.

Despite the fact that the Fringe Benefit Tax, introduced by Mr PC in the 2005-06 Budget, is a highly successful revenue earner, I feel the government needs to justify this levy. I'm all for the removal of this tax.

The only logic (if Mr Chidambarm continues with FBT this year) will solely be its contribution to the government coffers. However, if the same is not possible, the levy should not cover genuine business expenditure or expenses which have no connection with employees.

The biggest challenge faced by SME is access to capital. I want the government to work in the lines of a separate exchange for the SME sector which can help them, raise resources.

The textile industry is hit by several factors including the rising rupee, unavailability of finance, increase cost in production, etc. To counter these hurdles I expect the Finance Minister to take certain steps to reduce cost and attract fresh investment in the industry including tax holidays for investors, reforms in procedural and bureaucratic process, reducing customs duty on import of textile machinery and equipment, removal of excise duty on domestic production, etc.

I also expect the Finance Minister to take a look at all schemes in various sub-segments of the textile industry and bring them under a single umbrella. Having said that , he should also take steps to scrap non-performing schemes, and on the other hand make adequate budgetary provisions for those that are doing well.

However with just 16 months to go for elections, my fears are that Mr P Chidambaram might succumb to the pressures of the party in unveiling an election year Budget. A couple of days from now, the suspense will come to an end.

Mr. Bikky Khosla

(Tradeindia Expert)

Tradeindia.com

CEO, Tradeindia.com
New Delhi, India