The upcoming Union Budget 2023 should prioritise job creation and taxation measures which will help in increasing broad-based consumption, representatives from various industry bodies recommended to Finance Minister Nirmala Sitharaman and her team during their pre-budget consultations on Monday.
The industry bodies said that there should be more focus on financing of green energy and sustainable infrastructure initiatives. They however admitted that because of the global macro-economic situation, the private sector may still not see a complete revival of capital expenditure, and hence urged the Centre to continue increasing capex in order to support infrastructure investment.
“The external scenario is likely to continue to be unfavourable for some time. Hence, we must broad base our domestic economy by creating new sectors of growth and driving employment generation to boost domestic demand, inclusion, and growth,” said Sanjiv Bajaj, President of Confederation of Indian Industries, during his interaction with the FM and her top policymakers.
Sitharaman had two interactions with representatives from India Inc, infrastructure sector and climate change initiatives on Monday.
“To enhance the employment creation in economy, we suggest further reforms in the agri and food-processing sector with a great infusion of public investments in agriculture infrastructure,” said Saket Dalmia, president of PHD Chamber of Commerce and Industry.
The industry bodies sought an income tax cut for salaried classes in order to boost demand and consumption in the economy.
“To further boost domestic demand and increase the disposable income in the hands of people, the personal income tax should be reduced at all levels,” said Sumant Sinha, president of industry body Assocham. Sinha called for the budget to be a “Green Budget” given the backdrop of the recently concluded COP-27 as well as in light of India’s Chairmanship of G-20, where financing of sustainable infra will be one of the main agenda items.
CII’s Bajaj said that the budget should address the sluggish recovery in demand at the lower end of the consumption strata by rationalising personal income tax slabs and rates at the lower end. This will boost disposable incomes and also provide targeted relief from inflation.
Some of the specific suggestions given by industry bodies for job creation included Employment Linked Incentive Scheme for employment intensive services sectors, implementation of the plan to create coastal economic zones, and pilot programs for an urban employment guarantee scheme.
Sinha said that rationalisation of taxes on green energy products will help the country’s transition towards a green economy, while Bajaj said there could be a development finance institution set up specifically to fund energy transition and climate change mitigation, and that MSMEs should be allowed greater access to green finance.
There were also calls for the government to do more on inflation pressures. “Food inflation in India triggered by supply side bottlenecks has been worrisome too. There is a need for a comprehensive roadmap and coordinated action at multiple levels – centre and states, multiple departments/agencies etc – to manage the price situation,” industry body FICCI said in its presentation to the budget team.
“Global uncertainty may impact the incipient revival in private capex and hence public capex is critical to support demand and growth. The Budget should increase allocation to capital expenditure by 35 percent, like last year, taking the total public capex to about Rs 10 trillion,” said Bajaj
PHD’s Dalmia suggested that infrastructure investment in the economy must not be less than 10 percent of the GDP to achieve state of art infrastructure and to become a developed economy by 2047.
Among other suggestions, there were calls for lower tax rate for new manufacturing entities, removal of conditions on restructuring of business, amnesty scheme in customs to end various litigations, and clarification and rationalization on capital gains taxes.