As part of its wish list for the Union Budget 2025-26, the top business chamber has said that reducing excise duty on fuel is crucial as fuel prices significantly increase inflation, which It forms a major part of the gross domestic consumption basket. .
Central excise duty alone is about 21 percent of the retail price of petrol and 18 percent for diesel. From May 2022, these duties have not been adjusted in line with the nearly 40% drop in global crude oil prices. According to the CII statement, reducing excise duty on fuel will help reduce overall inflation and increase disposable income.
It also said that the gap between the highest marginal rate for individuals at 42.74 percent and the general corporate tax rate of 25.17 percent is high. Further, inflation has reduced the purchasing power of low and middle income earners. The Budget may consider reducing the marginal tax rate for personal income up to Rs 20 lakh per annum. This will help trigger a good cycle of consumption, higher growth and higher tax revenue.
The CII has demanded an increase in the daily minimum wage under MGNREGS from Rs 267 to Rs 375 as recommended by the ‘Expert Committee on Fixation of National Minimum Wages’ in 2017. .
The Business Chamber has further suggested that the government should increase the annual payment under the PM Kisan scheme from Rs 6,000 to Rs 8,000. Assuming 10 crore beneficiaries, this would entail an additional expenditure of Rs 20,000 crore.
It has also come out in favor of increasing the unit cost under the PMAY-G and PMAY-U schemes, which have not been revised since the launch of the scheme. The CII has also suggested introducing consumption vouchers, targeting low-income groups, to stimulate demand for specific goods and services over a fixed period.
Vouchers can be designed to be spent on specific items (certain goods and services) and can be valid for a fixed period of time (eg 6-8 months) to ensure the spend. The beneficiary criteria can be defined as Jan Dhan account holders who are not beneficiaries of other welfare schemes.
Highlighting the weakening trend in household savings, CII Director General Chandrajit Banerjee noted that “low returns on bank deposits compared to other avenues such as equity and funds, coupled with a high tax burden on interest income, have led to the decline in bank savings. has made it less attractive”.
Bank deposits as a proportion of household financial assets declined from 56.4 percent in FY20 to 45.2 percent in FY24. To encourage the growth of bank deposits, the CII, in its budget proposals for 2024-25, proposed taxation of interest income from deposits at a lower rate and a lock-in period for fixed deposits with preferential tax treatment. It has proposed to reduce the maturity from the current five to three years, which may help increase bank deposits.
“Domestic consumption has been key to India’s growth story, but inflationary pressures have eroded consumer purchasing power somewhat. Government interventions have increased disposable income and spending to maintain economic momentum. can focus on motivation,” added Banerjee.