Interim Budget: Come Feb 1, industry bodies stand behind capex boost

Earlier, the Finance Act 2021 had extended the sunset date under the concessional tax regime of Section 115 BAB by only one year to 31 March 2024

The Centre should continue to put a major thrust on public capex (on physical, social and digital infrastructure) in the forthcoming Budget and take initiatives to boost manufacturing, industry bodies have said in their proposals submitted to the finance ministry.

Finance Minister Nirmala Sitharaman will present the interim Budget 2024 on February 1. This will be her sixth Budget. As general elections are scheduled to take place in India later this year, this Budget will be a “vote-on-account”. A full-fledged Budget will be presented after the polls.

The Confederation of Indian Industries (CII) has asked for an increase in capex by at least 20 per cent to Rs 12 trillion from last year's allocation of Rs 10 trillion. “Although lower than the growth rates in the last three years, this is higher than the pre-pandemic 12 per cent annual growth between FY16 & FY20,” it said.

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Echoing similar views, the Federation of Indian Chambers of Commerce & Industry (Ficci) in its Budget proposals said the government should focus on investments despite the growth being robust so far with gross fixed capital formation to gross domestic product ratio estimated to have risen to a decadal high at 34.9 per cent in FY24.

“India is at an important inflexion point and given the current global developments and associated headwinds, the government should continue to lay major thrust on public capex (on physical, social and digital infrastructure) in the forthcoming Budget,” said Ficci.

CII urged the government to expand the central support to state capex in the form of interest-free 50-year loans by about Rs 30,000 crore to Rs 1.6 trillion.

“Some of the support could be linked to undertaking reforms by states,” it added.

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Ficci asked the government to consider extending the concessional tax regime for manufacturing operations by at least five years, asserting that many global investors were considering investments in India.

“Also, the benefit of concessional rate of tax of 10 per cent of income by way of royalty in respect of a patent developed and registered in India be also extended to the sale of patented products manufactured in India. This will indirectly encourage ‘Make in India’ and align with the government’s policy of making India an attractive destination for manufacturing,” Ficci said.

It also recommended that the 90-day limit for classifying overdue Micro, Small and Medium-sized Enterprises (MSMEs) should be increased to 180 days so that they are not constrained to divert their working capital towards servicing their loan-instalments and clearing their overdue at the cost of normal business operations.

In its proposal, CII said the government should launch a National Mission for Advanced Manufacturing to enhance quality and productivity in manufacturing. It said the move would help in building a technologically advanced manufacturing industry and accelerate the adoption of transformative technologies in the sector.

“Expand Production Linked Incentives (PLIs) to labour-intensive sectors, such as apparel, toys, footwear for boosting employment generation, and to sectors with large imports but domestic capability, like capital goods, chemicals, to reduce import dependence. To encourage a larger segment of MSMEs to benefit from the PLIs, the scheme should be modified in terms of lower capital investment thresholds and production targets to include MSMEs,” CII added in its proposal.