CII Proposals for the Vote on Account Focus on Balanced, Inclusive & Sustainable Growth
CII while presenting its proposals on the forthcoming Vote on Account which will be followed by the Union Budget post the general elections, to the Ministry of Finance, kept in mind the geopolitical uncertainties and outlined an agenda focused on balanced, sustainable and broad-based growth to keep India on track to becoming a developed nation by 2047.
“As clouds of uncertainty loom over the global economic horizon, maintaining the balance between economic growth and fiscal consolidation is critical”, stated Mr Chandrajit Banerjee, Director General, CII. “The government must stick to this year’s fiscal target of 5.9 percent and aim for consolidating this to around 5.4 percent for FY25. Achieving this, while creating space for growth, requires specific measures to augment revenue and rationalize expenditures”.
For revenue augmentation, simplification and rationalisation of taxes should continue; the next set of GST reforms should be signalled giving it a three-rate structure and subsuming petroleum, electricity and real estate. This should be accompanied by an aggressive focus on meeting the disinvestment targets by bringing in an element of demand side considerations and creating a three-year schedule for disinvestment.
On simplification of taxes, a key suggestion is to lay down a roadmap for simplifying the TDS rates by having only two or three categories of payments and a small negative list of payments which will not be liable to TDS, elaborated Mr Banerjee. Currently, there are 31 sections dealing with different types of payments to residents where the TDS rates vary from 0.1 percent to 30 percent leading to complex provisions.
On the expenditure front, the food and fertiliser subsidies which constitute the bulk of the subsidies, should be rationalised without impacting the deserving beneficiaries, by better targeting and efficient utilisation. Currently the food subsidy program is based on data available from the 'Household Consumer Expenditure Survey 2011-12’. With economic growth and declining poverty, it is important to use more current data for better targeting. On the fertiliser subsidy, CII has recommended moving towards dispensing fertilizer subsidy directly as cash transfer to farmers.
These measures if implemented could open up space for government to support sustainable growth by increasing the capex by 20 percent to Rs 12 lakh crores. While this will be a moderation from growth in the last two years, it compares well with 12 percent growth in the pre-pandemic period (2015-16 to 2019-20).
As consumption demand continues to remain the largest contributor to India’s GDP, at around 60 percent, linking exemption limit and rebate on personal income tax with inflation could boost disposable incomes.
On the investment side, CII has suggested setting up of a full-fledged Ministry of Investment that would become the single point of contact for facilitating the opportunities for investment in India as well as opportunities for Indian investors to invest abroad. This should be accompanied by promotion of low-cost and affordable housing through continued focus on Pradhan Mantri Awas Yojna - Grameen (PMAY - G) and Pradhan Mantri Awas Yojna – Urban (PMAY-U).
“Agriculture and rural should be a key priority to drive inclusive growth”, stated Mr Banerjee. In addition to PMAY-G, allocation should also be increased for rural schemes like Pradhan Mantri Gram Sadak Yojana (PMGSY). In case of Mahatama Gandhi National Rural Employment Guarantee Scheme (MGNREGS), the wage payments must be expedited to reduce the delays. In agriculture, warehousing must be promoted to reduce wastage. Coverage of electronic Negotiable Warehouse Receipts (eNWRs) must be increased, and we have recommended allowing them to be used to access finance, trading, and settlement of trade.
Employment generation is also crucial for India’s inclusive growth. Government should start a pilot for Urban Employment Guarantee Program with focus on high unemployment areas. Further to boost Female Labor Force Participation in India, Budget could announce measures to build the child day care industry.
India has an excellent opportunity to leverage its demographics and enable its working age population to be productively engaged in the global labour market for which an International Mobility Authority could be set up under the Ministry of External Affairs.
With the shifting global value chains, India must leverage the manufacturing opportunity that comes with it. For this, there should be a continued focus on improving ease of doing business by encouraging states to provide all regulatory approvals through NSWS (National Single Window System), further decriminalizing business facing laws and integrating all compliances related to environment, forest, biodiversity, air and water into one. These accompanied by a phase out of cross-subsidization of railway and power by industry can improve competitiveness of Indian manufacturing. Further, the sunset date of concessional rate of 15 per cent tax for eligible manufacturing units, under Section 115BAB should be extended to 31 March 2025.
On the trade front, CII suggested rationalizing import tariffs on raw materials and intermediate goods and setting up of a dedicated Trade Promotion Body with overseas offices. The body should work on branding and promotion, trade facilitation, capacity building and awareness generation amongst exporters, especially MSMEs which make up 46 percent of India’s exports.
Technology and R&D will be key drivers for growth, going forward. R&D partnerships between public institutions, academic institutions and industry should be strengthened. Further, Artificial Intelligence (AI) is the future and CII has recommended announcing a National AI policy in this regard.
In the area of sustainability, India has committed itself to an ambitious goal of achieving net zero by 2070, which requires massive funding. Budget could announce creation of a Green Transition Fund of India, to finance green projects especially of the private sector including MSMEs. The fund could be set up by Government of India, in partnership with private sector and a multilateral institution like the World Bank. Further, embracing green hydrogen can be crucial for reducing India’s rising energy import bill. For this, green hydrogen / green ammonia should be covered under the definition of infrastructure sector.
India today has a young population and to fully leverage its potential, public expenditure on health and education must increase. CII has recommended that private sector engagement through PPPs in healthcare and education should be emphasised. National Bank for Financing Infrastructure and Development (NaBFID) could design appropriate models as part of its development mandate.
Importantly, as business, trade and investment gain greater strategic dimensions, CII has suggested the government to establish a National Economic Security Board under the National Security Council that could work on various issues impacting India’s economic security, added Mr Banerjee.
24 January 2024
New Delhi