New Delhi [India], December 29 (ANI): 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, urging that the focus should be on boosting consumption, upping the daily minimum wage, and raising the annual payout 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, forming a substantial portion of the overall household consumption basket.
The central excise duty alone accounts for approximately 21 per cent of the retail price for petrol and 18 per cent for diesel.
The industry body added that since May 2022, these duties have not been adjusted in line with the approximately 40 per cent decrease in global crude prices. Lowering excise duty on fuel would help reduce overall inflation and increase disposable incomes, it added.
“Domestic consumption has been critical to India’s growth story, but inflationary pressures have somewhat eroded the purchasing power of consumers. Government interventions could focus on enhancing disposable incomes and stimulating spending to sustain economic momentum”, said Chandrajit Banerjee, Director General, CII.
“Persistent food inflationary pressures particularly impinge upon low-income rural households who allocate a larger share to food in their consumption basket,” added Banerjee.
“While recent quarters have shown promising signs of recovery in rural consumption, targeted government interventions, such as increasing per-unit benefits under its key schemes like MGNREGS, PM-KISAN and PMAY, and providing consumption vouchers to low-income households, can further enhance the rural recovery,” remarked Banerjee.
It recommended that the gap between the highest marginal rate for individuals at 42.74 per cent and the normal corporate tax rate at 25.17 per cent is high. Further, inflation has reduced the buying power of lower- and middle-income earners. The budget could consider reducing marginal tax rates for personal income up to Rs 20 lakh per annum. This would help trigger the virtuous cycle of consumption, higher growth and higher tax revenue, 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 estimations show that this will entail an additional expenditure of Rs 42,000 crore.
To boost consumption in rural areas, it is recommended to raise the annual payout under the PM-KISAN scheme from Rs 6,000 to Rs 8,000.
The CII stated that increasing the unit costs under the PMAY-G and PMAY-U schemes should be considered, which have not been revised since the scheme’s inception.
CII suggested introducing consumption vouchers, targeted at low-income groups, which will stimulate demand for specified goods and services over a designated period.
The vouchers could be designed to be spent on designated items (specific goods and services) and could be valid for a designated time (like 6-8 months) to ensure spending.
The beneficiary criteria can be defined as Jan-Dhan account holders who are not beneficiaries of other welfare schemes, CII added.
To encourage bank deposit growth, CII, in its budget proposals for 2024-25, has suggested taxing interest income from deposits at a lower rate and reducing 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 proportion of households’ financial assets have declined from 56.4 percent in FY20 to 45.2 per cent in FY24. (ANI)
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