CII President then went on to outline some of the key policy issues that can be addressed in the Budget. In order to encourage FDI, some of the remaining sectors where limits on foreign investment remained can be opened up. FDI in multi-brand retail should be opened up as this is a capital intensive sector and the entry of foreign players will lead to greater competition in this critical sector. Similarly, higher FDI should be allowed in the defense sector.

CII drew the attention of the Finance Minister to some critical reforms required in the agriculture sector to address the issue of supply constraints in the medium to long term. Among other measures, it mentioned the need to introduce common market for agricultural produce across states; rationalize APMC Act and promote PPP investments in agriculture by providing viability gap funding in agri-focused infrastructure and agricultural extension. In addition, investment linked tax incentives need to be made available to cold chains and warehouses across all categories of food products.

In the direction of promoting financial inclusion CII suggested a number of reforms in the financial sector including the expansion of the banking network especially to the un-banked geographies and population by bringing in new players who have access to these sections of society. It also favored early passage of Insurance Bill to raise the FDI limit from 26% to 49% in order to encourage the introduction of more innovative products. Cii further emphasized the importance of developing a deep and liquid corporate bond market where long term funds can be raised at reasonable rates.

CII also raised the issue of difficulty in acquiring land for setting up business and felt that states have an essential role to play in acquiring land and making it available to industry in the interest of both economic development and employment creation. It recommended that a consultative group should be formed that would define conditions for making changes in land use across sectors including mining and make recommendations for compensation of affected persons.

Given that many countries across the globe are still recording slow recovery from the global financial crisis and are continuing to provide various incentives to promote their own exports, CII has asked the government to continue with the existing peak rate of customs duty (10%). Status quo was also recommended for the general rate of 10% excise duty and 10% services tax, since these are at par with the proposed Central GST rate of 10%. Given that GST implementation is getting delayed, CII sought to reduce CST from 2% to NIL, since no credit is available on this tax.

Seeking moderation in direct tax rates in order to maintain competitiveness, CII has proposed a reduction in the corporate tax rate from 30% to 25% together with abolition of surcharge and cess. CII also sought to extend the benefit of no dividend distribution tax to intermediate subsidiaries. In addition, CII has recommended that the tax rate on dividends received from foreign subsidiaries should be the same as the rate applicable for dividend distribution tax.

R&D initiatives were proposed to be stepped up by extending the tax incentives under Section 35 (2AB) of the Income Tax Act to all sectors of manufacturing for the next 10 years. CII also suggested the expenses incurred on skill development be treated at par with R&D and given similar tax incentives.