A Pragmatic Budget with a reform blueprint to power growth with jobs: CII
“The Union Budget 2025-26 provides a strong and convincing template for boosting growth and generating jobs, the twin imperatives for our economy today, with targeted interventions towards facilitating inclusive development. The policy choices made to facilitate powerful engines such as agriculture, MSME, investment and exports by way of reforms in six domains, in collaboration with states, is welcome and has been CII’s long-standing advocacy”, said Mr Sanjiv Puri, President, CII while reacting to the Union Budget 2025-26, presented today.
Navigating the complex economic milieu, the Budget outlines a comprehensive reform blueprint to build an India, which is prosperous, inclusive, equitable, climate conscious, innovation friendly and future ready, bringing it closer to the ambition of Viksit Bharat dream, added Mr Sanjiv Puri.
The Budget has systematically addressed the issue of uplifting both consumption and investment. The momentous announcement on personal income tax such that there is no tax liability on income of upto Rs 12 lakh, from the earlier Rs 7 lakh, would provide a much needed boost to consumption demand due to extra cash in the hands of the consumer.
Similarly, the boost to public capex would infuse growth momentum in the economy through its spillover effect. Some of the measures such as the launch of second monetisation plan, encouraging PPP and state investment in infrastructure are commendable. The launch of the Rs 1 lakh crore urban challenge fund help build urban infrastructure, promote demand, employment, and crowd in private investment.
A proposed outlay of Rs. 1.5 lakh crore for the 50-year interest free loans to states for capital expenditure and incentives for reforms would boost capex at the state level. Moreover, power sector reforms by allowing states borrowing of 0.5 per cent of GSDP would help in making the power sector more competitive, which in turn will boost the competitiveness of Indian industry.
According to Mr Puri, the Budget seems to have played just the right strokes to stimulate investment and physical and social infrastructure and the focus on augmenting capital expenditure is in line with the CII’s recommendations.
The impetus provided to agriculture through policies such as mission for oilseeds and pulses and high yielding seeds, extending the credit limit of kisan credit cards, comprehensive programme for fruit, vegetable etc would make agriculture more productive, competitive, climate resilient and remunerative to farmers, according to Mr Puri. The support sought from the states in taking agriculture forward is also well conceived and true to the spirit of cooperative federalism.
The Prime Minister Dhan-Dhaanya Krishi Yojana’ for 100 Aspirational Agri districts targeted low productivity, moderate crop intensity and below-average credit parameters is Welcome, he stated.
A strategic policy framework for employment intensive sectors such as leather and footwear, toys, food processing and others which combine strong export potential with significant job creation capabilities is welcome. The increase in Credit guarantee cover from 5 crores to 10 Crores is a commendable move. This has been CII recommendation for enhancing credit guarantee for MSME loans.
The government has also taken commendable steps to facilitate ease of doing business and reducing regulatory cholesterol, further decriminalisation through Jan Vishwas Bill 2.0. The proposal to develop a ‘light touch regulatory’ framework and to set up a high level committee on regulatory reforms, progresses the agenda of ease of doing business hugely.
The Budget 2025-26 has brought into focus the need to create high quality employment opportunities. The focus on skilling, boosting to tourism and labour intensive manufacturing sectors, and performance linked incentives to state would raise the employment intensity of India’s economic growth. Social Security to gig workers is a welcome move covering 1 crore gig workers, this has been a CII advocacy. This would trigger virtuous cycle of consumption and growth.
The finance minister has rightly focused on fiscal consolidation, tax simplification and reform in mining, regulatory and financial sector reforms, deep tech, clean energy, sustainability and innovation, engaging private sector in nuclear energy, etc as this will lay a strong foundation for sustained economic development.
On direct taxes, the announcement to introduce a new Income Tax Bill in the next few days is a welcome move, and industry is hopeful of having a simpler and a time bound faster legal framework. Similarly, a slew of proposals for rationalisation of TDS and TCS, extension of time-limit to file updated returns, expanding the period of incorporation of startups for availing benefits by 5 years, encouraging voluntary compliance, among others are all steps to effect tax simplification and efficiency in the taxation system to promote investment and growth.
On indirect taxes, in line with CII suggestions, Government has continued rationalization of Customs Duty rates and simplification of compliance, removal of duty inversion and reduction of disputes which would boost domestic manufacturing and making India a global hub. Moreover, the government has reduced the import tariff slabs as a part of tariff simplification exercise. Extending exemption to the goods required for manufacturing of battery for EV and mobile phones will significantly aid the development of these industries, ensuring a stronger domestic manufacturing base for both sectors.
Overall, the focus of the tax proposals has been broadly towards rationalisation and simplification, while reducing compliance burden and litigation, reiterating the Government’s focus on ‘Trust First, Scrutiny Later’. The direction of the budget tax proposals has been to promote ease of doing business, employment, investments and trust, innovation, and enhancing domestic production in the economy. The government has taken proactive steps to align with industry recommendations to foster innovation, ease of doing business, and promote economic growth.
New Delhi
1 February 2025