CII Calls for Strategic Measures to Boost Consumption in Union Budget 2025
New Delhi, December 29, 2024: As India prepares for the Union Budget 2025-26, which is set to be presented on February 1, the Confederation of Indian Industry (CII) has put forth a comprehensive set of recommendations to the Finance Ministry. The industry’s primary focus is on boosting domestic consumption, particularly among lower-income groups, to sustain the country’s growth trajectory.
Chandrajit Banerjee, Director General of CII, emphasized that while India’s growth story has been largely driven by domestic consumption, inflationary pressures have impacted the purchasing power of consumers, especially in rural areas. In response, CII has urged the government to adopt strategic measures to enhance disposable incomes and stimulate consumer spending.
One of the key suggestions from CII is the reduction of excise duties on fuel. The industry body pointed out that the central excise duty, which constitutes a significant portion of retail fuel prices, has remained largely unchanged since May 2022, despite a nearly 40% drop in global crude oil prices. CII believes that lowering excise duties on fuel would not only ease inflation but also put more money in consumers’ pockets, particularly in low-income households where fuel costs represent a substantial part of the budget.
In addition to the fuel excise reduction, CII has called for an increase in the daily minimum wage under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), from Rs 267 to Rs 375, based on recommendations from the 2017 Expert Committee on Fixing the National Minimum Wage. This adjustment would require an estimated additional expenditure of Rs 42,000 crore, but CII argues that it is a necessary step to boost rural incomes and, by extension, rural consumption.
To further support rural consumption, the CII also proposes raising the annual payout under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme from Rs 6,000 to Rs 8,000. The additional funds, CII believes, would help alleviate the financial strain on rural families and fuel consumer spending in these areas.
CII has also recommended a series of measures to address the tax burden on individuals and corporations. The body has suggested reducing the highest marginal tax rate of 42.74% for individuals and aligning it more closely with the corporate tax rate of 25.17%. This move, CII contends, would encourage consumer spending and stimulate economic activity.
In a bid to drive demand in the economy, CII has proposed the introduction of “consumption vouchers” targeted at low-income groups. These vouchers, which would be redeemable for specific goods and services, would be valid for a set period, encouraging spending during a critical time. The vouchers would be designed for Jan-Dhan account holders who do not benefit from other welfare schemes, ensuring that the most vulnerable groups are reached.
Additionally, CII has recommended revising the unit costs under key housing schemes like the Pradhan Mantri Awas Yojana (PMAY), which have not been updated since the schemes’ inception. An increase in the funding for these programs would ensure the continuation of affordable housing construction, an essential need for rural and urban low-income families.
Lastly, in a move to encourage savings, CII has suggested revising tax policies on bank deposits. It proposed reducing the lock-in period for fixed deposits with preferential tax treatment from five years to three years and taxing interest income at a lower rate. This could stimulate the growth of bank deposits, which have been declining as a share of household financial assets.
In summary, the Confederation of Indian Industry’s budget proposals focus on enhancing the purchasing power of consumers, particularly in low-income rural households, while also encouraging savings and investment. These measures, CII argues, are crucial for sustaining India’s economic momentum and ensuring that growth reaches all segments of society.
