New Delhi:
With the Union Budget 2025-26 slated for February 1, the Confederation of Indian Industry (CII) has demanded a slew of measures from the Finance Ministry, insisting that the focus should be on boosting consumption, increasing of the daily minimum wage and increasing the annual payment under the PM-KISAN scheme, among others.
CII demanded that to boost consumption, especially at the lower income level, reducing excise duty on fuel is crucial as fuel prices significantly drive inflation and constitute a substantial part of the total household consumption basket.
The central excise duty alone accounts for about 21 percent of the retail price for petrol and 18 percent for diesel.
The industry body added that these duties have not been adjusted since May 2022 in line with the approximately 40 percent decline in global crude oil prices. Cutting fuel taxes would help reduce overall inflation and increase disposable income, it added.
“Domestic consumption has been critical to India's growth story, but inflationary pressures have eroded consumer purchasing power to some extent. Government interventions could focus on increasing disposable incomes and boosting spending to maintain economic momentum ,” said Chandrajit Banerjee, Director General of CII.
“Ongoing food inflationary pressures mainly impact low-income rural households, which spend a larger share on food in their consumption basket,” Banerjee said.
“While recent quarters have shown promising signs of recovery in rural consumption, targeted government interventions such as increasing unit benefits under key programs such as MGNREGS, PM-KISAN and PMAY, and providing consumption vouchers to households with low incomes, further promote growth. strengthen rural recovery,” Banerjee noted.
It advised that the gap between the top marginal rate for individuals of 42.74 percent and the standard corporate tax rate of 25.17 percent is large. Moreover, inflation has reduced the purchasing power of lower and middle income earners. The Budget could consider reducing marginal tax rates on personal income to Rs 20 lakh per year. This would help kick-start the virtuous cycle of consumption, higher growth and higher tax revenues, the CII added.
The industry body recommended an increase in the daily minimum wage under the MGNREGS from Rs 267 to Rs 375 as suggested by the 'Expert Committee on Fixing National Minimum Wage' in 2017.
CII Research estimates show that this will entail an additional expenditure of Rs 42,000 crore.
To boost consumption in rural areas, it is recommended to increase the annual disbursement under the PM-KISAN scheme from Rs 6,000 to Rs 8,000.
The CII stated that an increase in unit costs under the PMAY-G and PMAY-U schemes should be considered, which have not been revised since the inception of the scheme.
CII proposed introducing consumption vouchers, targeted at low-income groups, which will boost demand for specific goods and services over a period of time.
The vouchers can be designed to be spent on certain items (specific goods and services) and can be valid for a certain period of time (such as 6-8 months) to guarantee the spend.
The beneficiary criteria can be defined as Jan-Dhan account holders who are not beneficiaries of other social security schemes, CII added.
To boost bank deposit growth, CII in its 2024-2025 budget proposals has proposed to tax interest income from deposits at a lower rate and shorten the lock-in period for fixed deposits with preferential tax treatment from the current five to three years. which can help boost bank deposits.
Bank deposits as a percentage of household financial assets fell from 56.4 percent in FY20 to 45.2 percent in FY24.
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