What Indian industry wants from Modi's budget after poll setback

New Delhi: Prime Minister Narendra Modi's government is likely to present the budget in mid-July after a shock election outcome in which Modi failed to win a majority and has returned to power with the help of allies.

The budget, Modi's first major policy announcement in his third term, is expected to lay out possible changes to India's economic priorities for the next five years, the tenure of the coalition government.

Finance Minister Nirmala Sitharaman is considering lowering personal tax rates for certain categories of individuals while sticking to the nation's fiscal deficit target for the year, government sources have said.

Here are some key demands by various industry bodies for the budget.

CONSUMPTION BOOST

The government should consider tax cuts in India's lower income brackets to leave more money in the hands of people, the Confederation of Indian Industry (CII) lobby group said, to support consumption.

While the Indian economy grew at a world-beating 8.2 per cent in 2023-24, consumption has grown at half that pace. CII said the government should offer a higher wage in its only rural job guarantee scheme and increase cash handouts to farmers.

FARM EXPORT RESTRICTIONS

India should lift its restrictions on exports of farm products such as rice, wheat, sugar and onions to support farmers' incomes, agricultural economist Ashok Gulati and several farm bodies said after a pre-budget consultation meeting with Sitharaman.

To hold down consumer prices, Modi's administration started clamping down on export of such staples in 2022, and also lowered tariffs on pulse and vegetable oils to allow cheaper imports.

The move has hurt rural wages, that have stagnated over Modi's decade-long rule, with more than 45 per cent of India's 1.4 billion people making a living from agriculture.

MORE JOBS

The CII has also suggested the government introduce an incentive payout scheme linked to generation of jobs by private firms in labour-intensive sectors such as textiles and tourism.

A post election survey showed Indian voters were primarily worried about unemployment, decreasing incomes, and inflation, causing disenchantment that led to Modi's weak showing in the national election.

The Indian government should immediately fill up its job vacancies and restore pension benefits from a now-scrapped scheme, according to a joint statement by 10 labour unions who were part of Sitharaman's pre-budget consultations.

TAX REFORMS

At least two industry bodies have suggested introduction of measures to simplify India's various tax regimes.

India's capital gains tax regime should be simplified into two or three broad buckets, the Federation of Indian Chambers of Commerce and Industry (FICCI) said in a statement.

The government should also initiate reforms to the nation's indirect tax regime, the Goods and Services Tax, with fewer tax slabs and inclusion of sectors so far kept outside its ambit, FICCI added in its statement.