At a time when investment expansion in the economy has been spiralling down, the Confederation of Indian Industry (CII) in its pre-Budget memorandum has emphasized on its earliest revival through necessary policy interventions. "Given that the scope of fiscal and monetary maneuverability is limited owing to widening fiscal deficit and inflation, the revival in investment growth has to essentially come from private sector and the Union Budget for next fiscal can do a lot in this direction," said Mr Chandrajit Banerjee, Director General, CII.

In the wake of deteriorating fiscal health of the union government, CII wants the Union Budget to announce initiatives that can accelerate the pace of private investments. Among various measures, CII has recommended that depreciation rates for plant and machinery be raised from 15% to 30%, at least for a period of two years to encourage more capital investment. "It is a well-known fact that technology is changing very fast and unless we are able to replace our assets accordingly, we cannot match with other countries in terms of productivity," emphasised Mr. Banerjee. Besides, this is a sure shot measure to kick start investments, said the CII release. Besides, CII advocates a higher depreciation rate of 50% in case of retrofitting technologies, which are more energy efficient and environment friendly in order to encourage companies to go green. There is also a strong need for retaining the current rates of excise and service tax to spur investment by industry, argued Mr Banerjee.

CII also recommends that money received from sale of an asset be exempted from capital gains tax if the same is reinvested in setting up new business or expansion of existing unit. Such a move would make available investible resources for use by industry.

Admitting that upward reversal in investment is easier said than done at a time like this, CII has underlined the need for identifying and fast tracking at least 100 mega projects in manufacturing and infrastructure. These could include projects under the Delhi-Mumbai Industrial Corridor or zones created under the National Manufacturing Policy, according to CII.

Government's plan to attract an average annual investment of USD 200 billion over the 12th five-year plan starting next fiscal, according to CII, requires many bold initiatives, specially as 50 per cent of the investment is to come from the private sector. Among various measures to boost investment of this magnitude in infrastructure, CII has favoured reintroduction of Section 10(23G), which allowed exemption of interest and long term capital gains when lent for Infrastructure related initiatives.

This section was deleted from the fiscal 2006-07 on the ground that interest rates had come down substantially. Since the interest rates have now climbed back to high level once again, there is a case for reintroduction of Section 10 (23G), CII stressed.

Similarly, to incentivise companies to go in for R&D, CII favours that a weighted deduction of 200 percent on in-house R&D be extended to all sectors in order to make India an attractive base for R&D.