Thursday, January 13 2005 10:21 Hrs (IST) - World Time -

New Delhi: Pitching for radical tax reforms, economists yesterday (Jan 12, 2005) asked the Government to ease FDI (Foreign Direct Investment ) norms and push up investments in infrastructure to attain a higher 7.5 per cent economic growth.

"FDI can play a great role in increasing the GDP growth from 6.5 to 7.5 per cent," ICRIER (Indian Council for Research on International Economic Relations) director Arvind Virmani said after a pre-budget meeting between Finance Minister P Chidambaram and economists.

He said that the Government should allow 100 per cent automatic FDI in most sectors subject to security clearance and target Fortune 500 companies to invest in India.

Institute of Economic Growth Director B B Bhattacharya said, "We suggested to Finance Minister P Chidambaram to reverse the existing bias of fiscal incentives towards FIIs by giving more sops for promoting FDI."

He said that the next budget should be investment-friendly and growth-oriented for both public and private sectors.

Surjit Bhalla, along with Virmani and Bhattacharya, pitched for tax reforms in the next Budget.

Pointing to a trend of flat growth in revenues despite reduction in excise duties, Virmani said that reforms in indirect taxes started in 1980 were yet to be completed and that was preventing the Government from realising the real benefits.

He also pitched for transition to "dual VAT" - Cenvat and Sate level VAT - both of which should finally be merged into a national level VAT for goods and services.

Virmani said that the transition to dual VAT and then to National VAT could be phased over next 5-6 years.

He also called for simplifying the income tax and excise duties to increase tax revenue.