CII Recommends Three Pronged Strategy For Budget 2021

Confederation of Indian Industry (CII) has recommended a three pronged strategy for Budget 2021 centring on the key themes of growth, fiscal consolidation and strengthening of the financial sector that would help overcome the impact of COVID on the economy. CII wants the government to look at deficit management from a 3-year perspective given that the complete economic recovery is expected only in FY 22.

Achieving the vision of India being a USD 5 trillion economy is contingent on having a strong financial sector. To achieve the same the CII is recommending to bring down government stake in PSBs to below 50% through the market route, over the next 12 months, except for 3-4 large PSBs. An expeditious and efficient resolution process is critical for the health of the financial sector. The current resolution process is too time consuming, IBC needs enhanced judicial capacity.

COVID impact is expected to exacerbate the NPA problem, affecting the credit cycle. To address this issue, CII recommends to facilitate multiple bad banks, by allowing Alternate Investment Funds (AIFs) to buy bad loans. Create a single specialized agency, manned with relevant expertise to investigate financial sector frauds. Alternatively improve coordination between the existing multiple agencies and strengthen their expertise.

CII suggests to increase the Healthcare -expenditure to 3% of GDP over 3 years. Infrastructure for both rural and urban areas as infrastructure spend has one of the highest multiplier effects on the economy

There are early signs of private investments returning. To sustain this, the government needs to ensure stability of long term interest rates, at current levels. There are concerns that rising inflation could adversely impact long term bond yields and these need to be addressed.

On Direct Tax Recommendations, CII's recommendations do not include any significant deductions/ exemptions, but focus on greater clarity in law, simplification of procedures and reduction of litigation. For Indirect Tax Recommendations, it is suggesting a move towards competitive import tariffs over 3 years, with lowest or nil slab on inputs or raw materials (say 0-2.5%), standard slab for final products (say 5.00-7.5%) and intermediates at intermediary level (say 2.5-5%).

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