Industry: Adopt an Expansionary Fiscal Policy



The Confederation of Indian Industry (CII) has shared Pre-Budget Memorandum recommendations focusing on providing impetus to Consumption and Investment with Ajay Bhushan Pandey, Finance Ministry’s Revenue Secretary.

CII Pre-Budget Memorandum recommendations are mainly along the pillars of creating fiscal space for investment in infrastructure, enhancing rural demand, boosting private investments, augmenting Government revenue and bridging the trust deficit – improving business sentiment.

CII recommended adoption of an expansionary fiscal policy to allow fiscal deficit to increase by say 0.5% to 0.75% of GDP beyond the FRBM targets, which will give government additional fiscal space of about Rs.1.1 lakh crore to Rs.1.6 lakh crore. This additional fiscal space should be used for investing in capex, particularly in infrastructure. While getting back to the FRBM targets, there should be a glidepath to return to the FRBM target over a period of 2 to 3 years, CII added.

CII recommended that in order to enhance rural demand, the Government may release two instalments of PM-Kisan Scheme together totalling Rs.4,000 per farmer to add disposable incomes in the hands of rural consumers. The Government may also consider increasing public spend on rural infrastructure, especially rural roads and productivity enhancing agri infrastructure such as irrigation and specialized agri–market infrastructure. CII suggested that higher Disinvestment target for next year and continuing monetization of assets such as ports, roads, airports and government land, would help in augmenting Government revenue. The proceeds should be used for building new infrastructure.

“In order to boost consumption demand, it is important to enhance disposable income of people especially at the bottom of the pyramid. Hence, the Government should reduce personal income tax rates to enhance disposable income. This will increase household demand as well as enhance sagging household savings. Further, CBDT can constitute an Expert Panel of mediators comprising retired senior tax officials and experienced professionals who can mediate and try to resolve tax disputes at the assessment stage itself in a time-bound manner. This would boost sentiments and augment revenue”, said CII.

“CII strongly welcomes the Government’s bold move to reduce corporate tax rates to 22% for companies not availing of any tax exemptions or incentives. Further, manufacturing facilities that start production before 31 March 2023 and are incorporated on or after 1st October 2019 would be taxed at only 15%. CII has suggested that in the interest of simplification and uniformity, converge all these tax rates to 15%, with no exemptions and incentives over a period of three years, to be applicable from 1 April 2023. A signaling to this effect in the budget could help further boost investor sentiment and encourage investments”, suggested CII.

CII also recommended the Government to continue with 10% peak rate of customs duty for the year 2020-21.


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