Ahead of the Budget, Finance Secretary Hasmukh Adhia is seeking industry inputs on ways to deal with the impact of sweeping tax reforms as proposed by the US and other suggestions to rev up economic growth.
The Donald Trump administration has proposed corporate tax rate cut to as low as 20 per cent from 35 per cent with a view to boosting corporate earnings, a move that could hit India's trade and economy.
Adhia, in his meeting with representatives of industry chamber Ficci, also sought its views on steps that could be taken to strengthen the domestic economy in light of the developments in the world's largest economy.
The secretary is likely to hold a similar detailed discussion with other chambers and industry bodies.
"We discussed long-term impact of the proposed tax reforms by the Trump administration. If approved, it is going to have an impact on Indian economy. It will hurt exports of goods and services and discourage foreign direct investment to India," Ficci Secretary General Sanjaya Baru said after the meeting here.
Since American companies will have better opportunity in their home country, they would refrain from making investment in other countries, including India, he reasoned.
He also felt that it will have an impact on overall competitiveness.
The interaction was part of the pre-Budget consultation and Ficci had a detailed discussion with the finance secretary.
"We see this as a major challenge to Indian economy and the government should accordingly shape domestic tax policy both in terms of direct and indirect taxes so as meet this challenge," he said.
Ficci also requested the government to implement the Budget proposal to reduce tax for all companies to 25 per cent.The Union Budget 2015-16 had proposed lowering the basic rate of corporate tax to 25 per cent, from the current 30 per cent over the next four years, accompanied by fewer exemptions.