The Confederation of Indian Industry (CII) has urged the government to announce some specific policies in the upcoming Union Budget, which are aimed at boosting consumption in the economy.
According to CII’s Director General Chandrajit Banerjee, the government should reduce excise duty on fuel products, cut personal income tax rates for individuals earning up to Rs 20 lakh per annum, and increase daily wages under Mahatma Gandhi National Rural Employment Scheme (MGNREGS), to augment consumption.
“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 Banerjee.
“…targeted government interventions, such as increasing per unit benefit under its key schemes like MGNREGS, PM-KISAN and PMAY, and providing consumption vouchers to low-income households, can further enhance the rural recovery”, added Banerjee.
The central excise duty alone accounts for approximately 21% of the retail price for petrol and 18% for diesel. Since May 2022, these duties have not been adjusted in line with the approximately 40% decrease in global crude prices. “Lowering excise duty on fuel would help reduce overall inflation and increase disposable incomes,” said Banerjee.
Additionally, increase 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, he added. According to CII, this will entail an additional expenditure of Rs 42,000 crore.
Moreover, raise the annual payout under the PM-KISAN scheme from Rs 6,000 to Rs 8,000, and increase the unit costs under the PMAY-G and PMAY-U schemes, which have not been revised since scheme’s inception, said Banerjee
Meanwhile, CII has suggested measures to boost bank deposits. In its Budget proposal, the organisation 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 current five to three years. Bank deposits as a proportion of a household’s financial assets have declined from 56.4% in FY20 to 45.2% in FY24.