The maximum personal income tax rate in the country should move towards 25 per cent to increase disposable income, thereby boosting demand in the economy, the PHD Chamber of Commerce and Industry (PHDCCI) said Wednesday. The industry body, in a statement, said liquidity infusion, job creation and low cost export finance would be crucial at this juncture to revitalise the economy and accelerate it to a higher growth trajectory.
The maximum personal income tax rate presently stands at 30 per cent. The government must expedite liquidity infusion through a gradual reduction in CRR from the current level of 4 per cent to 2 per cent and in SLR from 19 per cent to 15 per cent, PHDCCI President Talwar said.
Cash Reserve Ratio (CRR) is the portion of the deposits which banks are required to park with the RBI, whereas SLR or Statutory Liquidity Ratio is the portion of funds which banks are required to park in treasury bills and other instruments. We appreciate the recent cut in repo rate by 25 bps and expect that the repo rate would be reduced by 125 bps gradually from the current level of 5.75 per cent to 4.5 per cent in the coming quarters, Talwar said.
The transmission of a policy rate cut by the banking sector in terms of reduced lending rates would be crucial to boost liquidity and induce demand in the country, he added. Besides, he said, the creation of jobs in the economy would require structural reforms in the labour laws.
The low hanging fruit at this juncture is to promote labour-intensive manufacturing by enacting a law for fixed-term employment in all sectors and making the labour laws simpler by converting 44 labour laws into 4 labour codes, Talwar said. In a separate statement, Assocham Deputy Secretary-General Col Saurabh Sanyal said labour and land reforms would go a long way in attracting new investment not only from within the country but also overseas.
"Given a huge political capital at his command, Prime Minister Narendra Modi would be able to bring in these reforms with wide political support as also goodwill from other key stakeholders. "Such reforms would send a very positive message across the world about India unleashing an investor-friendly regime, making the country the best bet among the emerging markets," Sanyal said.
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