The Confederation of Indian Industry (CII) has put forth a series of recommendations aimed at enhancing economic growth in India for the 2025-26 budget. These suggestions focus on reducing excise duties on fuel, lowering personal income tax rates, and increasing social welfare benefits. The CII argues that these measures will stimulate consumption, particularly among lower-income households, and help combat inflation. As inflation continues to erode purchasing power, the CII emphasizes the need for government intervention to bolster domestic consumption and support economic recovery.

Lowering Excise Duty on Fuel

One of the key recommendations from the CII is to lower the excise duty on fuel. The organization points out that fuel prices play a significant role in driving inflation. Currently, the central excise duty accounts for about 21% of the retail price of petrol and 18% for diesel. Since May 2022, these duties have not been adjusted, despite a 40% decrease in global crude oil prices. By reducing excise duties, the CII believes that overall inflation could be lowered, leading to increased disposable incomes for consumers.

Chandrajit Banerjee, the Director General of CII, highlighted that inflation has particularly impacted lower and middle-income earners. He stated that government interventions should focus on enhancing disposable incomes and stimulating spending. This is crucial for sustaining economic momentum. The CII’s proposal aims to alleviate the financial burden on households, especially those in rural areas who spend a larger portion of their income on food. By lowering fuel prices, the government can help restore purchasing power and encourage consumer spending.

Tax Reforms for Higher Consumption

In addition to reducing excise duties, the CII has recommended lowering marginal tax rates for personal income up to Rs 20 lakh per annum. The organization argues that the current gap between the highest marginal tax rate of 42.74% and the corporate tax rate of 25.17% is excessively high. This disparity discourages consumption and investment among individuals. By lowering personal income tax rates, the CII believes that consumers will have more disposable income, which can trigger a virtuous cycle of consumption, economic growth, and increased tax revenue.

The CII’s proposals aim to create a more equitable tax structure that encourages spending. By making it easier for individuals to retain more of their earnings, the government can stimulate demand for goods and services. This, in turn, can lead to higher economic growth and improved tax revenues. The CII emphasizes that these reforms are essential for addressing the challenges posed by inflation and ensuring that all segments of society can participate in the economic recovery.

Enhancing Social Welfare Programs

The CII has also called for significant enhancements to social welfare programs to support low-income households. One of the key proposals is to increase the daily minimum wage under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) from Rs 267 to Rs 375. This adjustment aligns with recommendations made by an expert committee in 2017 and is expected to incur an additional expenditure of Rs 42,000 crore.

Furthermore, the CII suggests raising the annual payout under the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme from Rs 6,000 to Rs 8,000. This increase would require an additional expenditure of Rs 20,000 crore, assuming there are 10 crore beneficiaries. The CII believes that these enhancements will provide much-needed financial support to rural households, helping them cope with rising costs and stimulating local economies.

Additionally, the CII has proposed the introduction of consumption vouchers targeted at low-income groups. These vouchers would encourage spending on specific goods and services over a designated period. By ensuring that these vouchers are used within a limited timeframe, the government can effectively stimulate demand and support economic recovery.

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