CII's FY26 Indian budget suggestions include lower excise duty on fuel

Reducing excise duty on fuel is crucial as fuel prices significantly drive inflation, CII noted. The central excise duty alone accounts for approximately 21 per cent of the retail price for petrol and 18 per cent for diesel. Since May 2022, these duties have not been adjusted in line with the approximately 40 per cent decrease in global crude prices.

As the gap between the highest marginal rate for individuals at 42.74 per cent and the normal corporate tax rate at 25.17 per cent is high, inflation has reduced the buying power of lower- and middle-income earners, the next budget may consider reducing marginal tax rates for personal income up to ₹20 lakh per annum. This would help trigger the virtuous cycle of consumption, higher growth and higher tax revenue, CII noted.

CII urged the government to raise the daily minimum wage under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) from ₹267 to ₹375 as suggested by the Expert Committee on Fixing National Minimum Wage in 2017. This will entail an additional expenditure of ₹42,000 crore.

It also called for raising the annual payout under the PM-KISAN scheme from ₹6,000 to ₹8,000. This will entail an additional expenditure of ₹20,000 crore.

Consumption vouchers targeted at low-income groups should be introduced to stimulate demand for specified goods and services over a designated period. The vouchers could be designed to be spent on designated items and could be valid for a designated time to ensure spending. The beneficiary criteria can be defined as Jan-Dhan account holders who are not beneficiaries of other welfare schemes.

Bank deposits as a proportion of household’s financial assets have declined from 56.4 per cent in FY20 to 45.2 per cent in FY24. To encourage bank deposit growth, CII suggested taxing interest income from deposits at a lower rate and reducing the lock-in period for fixed deposits with preferential tax treatment from current five to three years.

The proposed integrated national employment policy could include all employment generating schemes of various central ministries and states, CII noted. It could also build on the single integrated employment portal—National Career Service (NCS)—wherein all the data can flow into this from various ministries and state portals.

Construction of dormitories using corporate social responsibility funds, formalisation of sectors like care economy and setting up government-backed creches in industrial clusters could raise female labour force participation, CII proposed.

Rolling out labour codes while ensuring social security coverage to gig and platform workers would further strengthen the employment landscape, it observed.

An international mobility authority could be set up under the ministry of external affairs to help Indian youth tap overseas employment opportunities. The authority could also work with the ministry of skill development and entrepreneurship to help develop skill development programmes aligned with global opportunities.

The government may consider launching an internship programme in government offices in rural areas for college-educated youth, CII said. This would create short-term employment opportunities in government offices, while bridging the gap between education and professional skills, and would also help augment the available manpower resources for effective implementation of various rural programmes and government initiatives.

"Coupled with higher employment, India also needs to ensure that productivity goes up. India's incremental capital output ratio (ICOR) needs to trend down from its present level of 4.1. We need to establish metrics of measuring this. In fact, the union budget could set up an expert committee to study this in greater detail and recommend measures on way forward," CII director general Chandrajit Banerjee said.

ALCHEMPro News Desk (DS)