Measures like reducing personal income tax, taxing interest on bank savings at a lower rate, cutting excise duty on petrol and diesel, as well as increasing allotment to schemes that help rural Indians should be the focus of the upcoming budget, says India Inc.
In a statement on Monday morning, business body CII pointed out how high inflation, particularly affecting food prices, has ‘impinged’ on those earning in the lower and middle income level.
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It also called for introduction of consumption vouchers, targeted at low-income groups, to stimulate demand for specified goods and services over a designated period.
“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.
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“While recent quarters have shown promising signs of recovery in rural consumption, 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,” he added.
One of CII’s most significant suggestion is to cut marginally personal income tax up to 20 lakh per annum to “trigger the virtuous cycle of consumption” which will in itself provide “higher growth and higher tax revenue.” The business chamber pointed out how high marginal rate for individuals for personal income tax is at a high 42.74 per cent, while the normal corporate tax rate is only 25.17 per cent. Inflation has meant it further reduced the buying power of lower and middle income earners, hence the call for a cut.
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CII pointed out how excise duty on fuels alone account for 21 per cent of the retail price for petrol and 18 per cent for diesel, and has remain unchanged since 2022. Lowering excise duty on fuel would help reduce overall inflation and increase disposable incomes, the business body said in its statement.
It has called on an increase in the daily minimum wage under MGNREGA from 267 rupees per day to 375, as suggested by an expert committee a few years ago, as well as increasing the annual payout under PM-Kisan from Rs 6,000 to Rs 8,000.
Weakening rate of household savings was another worrying trend flagged by the corporates, calling on the budget proposals to include lower taxes on interest income from deposits, as well as reducing the lock-in period for fixed deposits with preferential tax treatment from current five to three years, to help boost bank deposits.
