Hinting at tax reforms during the next fiscal year, Prime Minister Manmohan Singh on Saturday assured the industry of better tax administration as he unveiled plans for Rs 60,000 crore (Rs 600 billion) investment in the port sector and Rs 40,000 crore (Rs 400 billion) for modernisation of airports in the country.

Responding to demands of the Federation of Indian Chambers of Commerce and Industry president Onkar S Kanwar, to address the high direct tax burden on corporate India and the need for raising the level of 30 per cent income tax to incomes of above Rs 500,000, the prime minister said, "I promise to address these concerns over the next year."

On labour reforms

Singh who was speaking on the 78th annual general meeting of FICCI, said he would work towards generating a consensus on labour reforms.

The prime minister said the government was committed to 'unleash a new surge of investments' by encouraging enterprise and creativity through reforming the public sector and enabling private and public partnerships.

"If it requires modifications to our labour policies to provide greater flexibility, which in turn will generate more jobs, we will work with all stake holders to generate a consensus on it," he said.

Singh said there was also a need to pay attention to social safety nets because it was incumbent on the state to take care of the weak and vulnerable for those who cannot bear the shocks of market economy.

"Social welfare legislation must go hand in hand with labour market flexibility. This will help increase employment opportunities while taking care of employees' concerns," he said.

On taxation

On concerns about the Indian tax laws and tax system, the Prime Minister said over the last two years the economy had moved towards lower tariffs, uniform tax rates and easier procedures.

He told the industrialists that the government would work towards improving the tax administration in the country so that "your interface with the tax system is pleasant, smooth, problem-free and conducive to easy tax compliance."

On power situation

On demands for improving the power situation in the country, Singh mooted setting up of Empowered Committee of Chief Ministers.

He said it would be desirable to initiate speedier process in the case of power sector policy reforms as compared to the VAT process, which though worked well, took time to arrive at a consensus.

"The VAT process, where reform was steered by Empowered Committee of State Finance Ministers, has worked well even though it took some time to arrive at a consensus," the prime minister said.

"I hope we can initiate a speedier process in case of power sector policy reform through the mechanism of an Empowered Committee of Chief Ministers. I am going to propose to our chief ministers to forge a similar all-party consensus in the power sector," he said.

On VAT

On the implementation of VAT, Singh said he was happy that many states, which initially kept out of VAT, have opted to join the system. He said revenues have been buoyant, setting at rest worries about its feasibility.

"Based on this experience we need to move towards greater rationaliation of VAT and Cenvat rates, and most importantly, towards a common goods and service tax," he said.

"This would enable India in to becoming a genuine common market, a dream of our founding fathers. I hope to see this happen in next three to four years, an event, which will be a landmark in our economic development," Singh said.

On investment in Railways

About the investment in the Railway system, he said the feasibility studies for dedicated freight corridors on Delhi-Mumbai and Delhi-Kolkata are nearing completion.

"We will be shortly setting up a new firm to implement these corridors in addition to allowing private container trains on these routes," he said.

The prime minister said the basic institutional framework for a surge in infrastructure investment was now in place with a special purpose vehicle for the sector, viability gap funding programme, a separate approval procedure for public-private partnership projects and model concession agreements.

He said transparent competitive systems were in place and were paying off. Singh said the government was expanding the highways programme with an investment plan of Rs 175,000 crore (Rs 1,750 billion).

On roads

He said entire Golden Quadrilateral is being made six-laned and against a target Built-Operate-Transfer projects this year, the contracts have been awarded for 31 projects.

"Compared to a high of 3,500 km golden quadrilateral road contract given in 2001-02, the level has gone up to 6,000 km this year, Singh said.

The prime minister said the United Progressive Alliance government had inherited golden quadrilateral being built with old contracting approach, which has now undergone changes.

On manufacturing

He also warned that the manufacturing sector should not be ignored as it created large employment opportunities. Inadequate growth in manufacturing has had its adverse impact on employment generation.

"The current mismatch between distribution of workforce and value added in agriculture was one of the main reasons for large number of poor. This needs urgent correction," the prime minister said.

"Manufacturing has to be like a sponge, which absorbs people who need to move out of agriculture in pursuit of higher incomes," he said.

"I do not accept the proposition that India can skip the manufacturing stage of development and go from being an agrarian society directly to become a services and knowledge based society," he said adding: "This is a mistaken view."

He said a substantial manufacturing base is essential to absorb the work force and ensure sustainable growth of the economy.

"India can target to process over 25 per cent of its agriculture produce in next five years as compared to a lowly 2.0% today. This will generate jobs, reduce wastage and enhance rural incomes," Singh said.

On textile exports

On enhancing textile exports, he said the end of Multi Fibre Agreement regime in textile must translate in to greater output and far more jobs in textiles and garments.

Stating that there were reports of mixed results in textile this year, Singh said: "We cannot miss the opportunities, which we once did in 1960s. I urge industry to have faith and take the plunge. Few will regret."

The prime minister foresaw greater competitiveness in small and medium enterprises sector in the coming years.

He said large-scale industries must think global even as they act local.

On forging international cooperation, he said: "I have a vision of Asia in which India has to play a key role -- a vision of a resurgent Asia; an Asia of inclusive societies and open markets."

The prime minister said he felt the emergence of a virtual Asian economic community.

On the economy

On the buoyancy in the economy, the prime minister said the state of business confidence and expectations is 'very positive.'

He said during his recent interactions with business representatives, he had been encouraged by the new sense of confidence that many now exude.

"It is therefore, heartening to see the faith being reposed in the prospects for the Indian economy -- not only within India but outside," he added.

Singh said the decade ahead must be a decade of investment that should convert India into a 'first rate agricultural, industrial and service economy.'

He desired that the share of manufacturing in national income should rise in the range of 25-35 per cent for which the sector should grow at the level of 12-14 per cent in the next decade.

The prime minister assured that the government would be mindful of the interests of domestic industry even as "we enable our economy to integrate itself with the global economy."

He said the industry should not only look at the threat of competition from imports but also the opportunity of accessing new markets through exports.

"If we look at new opportunities, the old threats become less daunting. I urge Indian industry to adopt a forward-looking approach in preparing for a brave new world of competition."

In his address, FICCI President Onkar S Kanwar lauded prime minister's initiatives and said the proposed Integrated Food Law would go a long way in preventing wastage of fruits and vegetables besides generating employment.

He said FICCI struggled for years for an Integrated Food Law, which would bring together nine ministries, and eliminate the complex web of 23 regulations per ministry.

"You have done it, Mr Prime Minister," Kanwar said on the proposed Integrated Food law, adding as against processing of only 2 per cent of its fruits and vegetables, this is targeted to reach 30 per cent within the next five years, generating as much as 10 million jobs for the rural poor.

He said all states must be asked to amend the Agriculture Produce Marketing Control Acts, to take advantage of the new legislation.

The FICCI President, however, expressed disappointment at the slippage in meeting the power generation capacity during the 10th Plan.

He said as against the target of 41,000 MWs, the country might end up with only 29,000 MWS, a shortfall of 12,000 MW power generation capacity.