Industry demands fiscal stimulus in Budget to spur economic growth

Industry bodies demanded fiscal stimulus to spur the sagging economic growth in their pre-Budget meetings with finance ministry officials on Monday. They told the officials that the creation of jobs in labour-intensive sectors and providing a stimulus to consumption, particularly in rural areas that have fallen dangerously low, should be the new government’s focus.

“The upcoming Union Budget 2019-20 is an opportunity for the government to boost consumption and investments through appropriate fiscal stimulus and policies,” Ficci said during the meetings, including one with revenue secretary A B Pandey.

Business chambers called for a reduction in taxes, both on personal income and corporate, as well as the expansion of farmer income support scheme, to boost demand, kickstart the investment cycle and revive foreign direct investment inflows. GDP growth had slowed down to 6.6 per cent in the October-December quarter of FY19, largely due to falling levels of consumption. 

They suggested the Rs 6,000 annual support to small and marginal farmers be expanded both in quantum and coverage in the upcoming Budget that is expected around July 10. The BJP in its manifesto had promised to expand the scheme to all farmers.

Also, Ficci batted for income tax slabs for individuals be revised with the highest tax rate of 30 per cent applicable to incomes above Rs 20 lakh as opposed to Rs 10 lakh, currently. “At the same time, the investment limits under Section 80C and Section 80D, and deduction for interest paid on housing loan under Section 24, etc, should be enhanced,” Ficci told the government, arguing for more disposable income for households.

To this end, the Confederation of Indian Industry (CII) also called for a roadmap for tax policy over the next five years to ensure consistency, while leveraging GST data to further widen the direct tax base. “With fiscal deficit a major concern, a good measure of fiscal health would be to consider revenue and capital expenditure quality, revenue receipts quality, and revenue and fiscal deficits to GDP through a composite fiscal deficit index,” said Chandrajit Banerjee, director general of the CII.

Both chambers have suggested that the current rule exempting individuals with an annual income of up to Rs 5 lakh from any income tax be continued. They have also demanded lower levels of all the taxes levied on corporates. 

More jobs needed

Fewer jobs were among top concerns for India Inc, with Ficci noting that the prolonged slowdown in private investments has affected employment generation significantly.

“Jobs needs a strategic boost. The sectors to be propelled for more job generation include tourism, textiles, agriculture and food processing,” said Vikram Kirloskar, president of the CII. 

To raise job levels, firing up exports have been suggested through special tax concessions for export-oriented manufacturing and export manufacturing zones. Measures are also needed for massive campaigns in foreign markets for building a brand and promoting Make-in-India, Ficci said.

It also raised issues such as lack of access to credit and market for the MSME sector. It said the government should review the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme to make it relatively effective and practical.

However, banks pointed to their weak health for falling disbursal numbers. For revitalising the financial sector, the CII recommended that the government’s stake in public sector banks should be reduced from 70 per cent to 51 per cent to enable capital infusion. The government's plans of PSB consolidation also received a thumbs up from the chamber.

Industry bodies also called for subsidies to be pruned, and direct benefit transfers to be extended to all types of subsidies.