Budget 2024: What India Inc wants from Finance Minister Nirmala Sitharaman

Come Thursday (1 February) and all eyes will turn to Finance Minister Nirmala Sitharaman as she will present the last Union Budget of the current Narendra Modi-led administration before the country heads to the polls. Earlier, the finance minister had stated that the forthcoming Budget, an interim one, would not have any big-ticket announcements. “No spectacular announcements come in that time (in a vote on account). So, you will have to wait till after the new government comes in and presents the next full Budget in July 2024,” said Sitharaman when asked whether she would announce a ‘supercharged Budget’. “I am not going to play spoilsport, but it is a matter of fact that the 1 February 2024, Budget that will be announced will just be a vote-on-account because we will be in an election mode. So, the Budget that the government presents will just be to meet the expenditure of the government till a new government is sworn in,” she said. However, that hasn’t tempered people’s expectations. People are looking forward to the finance minister and the government, with industry lobby bodies suggesting the government continue spending on infrastructure, expand incentives for manufacturing and tweak import taxes on inputs for certain goods. Investment spending The government should continue to focus spending on infrastructure and increase it by at least 20 per cent to Rs 12 trillion, the Confederation of Indian Industry (CII) lobby group said. The government’s spending on infrastructure has been key to the Indian economy growing at 7.3 per cent for the financial year ending 31 March 2024. The CII said the federal government should continue to extend support to states in the form of interest free 50-year loans, and increase the allocation by 23 per cent to Rs 1.6 trillion rupees in 2024/25. Boost manufacturing Industry is pitching for an extension of the concessional tax regime for setting up of new manufacturing facilities for another five years, the Federation of Indian Chambers of Commerce and Industry (FICCI) lobby group suggested. India’s government had announced a lower 15 per cent corporate tax rate for companies registered after 1 October 2019, that commence manufacturing by 31 March 2024. The Production Linked Incentive (PLI), the Modi government’s flagship industrial incentive scheme, should be expanded to labour intensive sectors, such as apparel, toys, footwear, and chemicals, CII said. The PLI scheme earmarked incentives worth Rs 1.97 trillion for 14 sectors ranging from electronic products to drones, and so far incentives worth Rs 44.15 billion have been paid out to eight sectors.

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Import duties The CII has asked for a review import tariffs to a three-tier duty structure with raw materials and inputs at zero or low duties, final goods at the standard rate of about 7.5 per cent, and rate for intermediates goods in middle. Industry says this will help address concerns across some sectors where inputs are taxed at a higher rate than final goods. Among specific sectors, India’s steel industry has sought a higher import tax on finished steel products as shipments from China have surged, and a zero import duty on coking coal. The gems and jewellery industry has asked for a lowering of import duty on precious metals such as gold bars to four per cent from 15 per cent presently. Import duty on cut and polished gem stones should be lowered to 2.5 per cent from five per cent, it has said. For mobile phone parts, the India Cellular and Electronics Association (ICEA) is seeking import duty cuts on components like camera modules from 2.5 per cent to zero and chargers to 15 per cent from 20 per cent. Tax changes A tax exemption limit for individuals must be increased and linked with inflation, the CII said. This would help boost consumption. The government should also review its capital gains tax structure by bringing consistency in tax rates for different asset classes such as debt, equity and immovable assets, it said. The holding period to determine whether short term or long term capital gains tax is applied also differs for these asset classes. Healthcare and education The Centre and state governments should together increase spending on healthcare to 2.5-3 per cent of GDP and on education to 6 per cent of GDP, the CII said. Currently spending is at 2.1 per cent and 2.9 per cent of GDP on health and education, respectively. With inputs from Reuters