On December 30, 2024, representatives from various industry bodies convened for their annual pre-Budget meeting with the Finance Minister to discuss key economic measures in anticipation of the Union Budget for the fiscal year 2025-26, scheduled for presentation on February 1, 2025. This customary interaction between industry leaders and government officials offered a platform to present pressing issues and propose solutions aimed at sustaining economic growth, enhancing employment, and improving living standards. The discussions focused on a range of critical areas, including calls for personal income tax reductions, excise duty cuts on fuel, and strategies to support employment-intensive sectors.
Key Proposals from Industry Bodies
1. Income Tax Relief
A major point of contention during the meeting was the high tax burden on middle-class earners, with a strong push for a reduction in personal income tax rates. The Confederation of Indian Industry (CII) specifically recommended lowering taxes for individuals earning up to Rs 20 lakh annually. CII President Sanjiv Puri argued that such a reduction would substantially increase disposable income for the middle class, who are the backbone of domestic consumption. The logic behind this proposal is that with more disposable income, consumers are likely to spend more, thereby stimulating economic growth and driving up demand across sectors. Increased consumer spending, in turn, could generate higher tax revenues through greater consumption, creating a positive feedback loop.
2. Excise Duty on Fuel
Another significant issue raised during the meeting was the high excise duty on fuel. Industry representatives highlighted that, despite a nearly 40% drop in global crude oil prices since May 2022, excise duties on petrol and diesel have remained largely unchanged. The excise duty currently stands at about 21% on petrol and 18% on diesel, contributing substantially to the retail price of these essential commodities. Reducing these duties, industry bodies argue, would help alleviate inflationary pressures that affect the cost of living and production across various sectors. Moreover, lower fuel prices would reduce transportation and logistics costs, benefiting businesses, especially in the manufacturing and export sectors. This move is seen as crucial to improving household purchasing power and combating the broader economic challenges posed by inflation.
3. Support for Employment-Intensive Sectors
The meeting also emphasized the need to bolster sectors that have high employment potential. Industries such as garments, footwear, tourism, and furniture were highlighted as key areas for job creation. Sanjiv Puri noted that promoting these industries could not only generate substantial employment opportunities but also strengthen India’s integration into global value chains. These sectors, which traditionally absorb a large number of low- to mid-skill workers, could play a pivotal role in tackling unemployment and poverty, especially in rural and semi-urban areas. There were also calls for the government to extend greater support to Micro, Small, and Medium Enterprises (MSMEs), which remain the backbone of the Indian economy and are vital for job creation and innovation.
Global Economic Challenges
A significant part of the discussions also centered around the impact of global economic conditions, especially the challenges arising from “global dumping.” Industry leaders raised concerns about the influx of cheap goods, particularly from China, into Indian markets. This “dumping” of excess stock not only threatens local manufacturers but also exacerbates inflation and hampers the growth of domestic industries. FICCI Vice President Vijay Sankar noted that participants were in agreement that this phenomenon was contributing to a temporary slowdown in India’s economic momentum. He emphasized the need for robust policy measures to safeguard India’s market from such external pressures and ensure that local businesses are not unduly affected by unfair trade practices.
Additional Recommendations
Beyond the major issues of tax and fuel duties, industry representatives proposed several additional measures to improve the business climate and boost economic growth. There were calls for simplifying the Goods and Services Tax (GST) framework to reduce compliance burdens on businesses, particularly small enterprises. The Confederation of Indian Industry also suggested an increase in the minimum wage under government programs like MGNREGS, advocating for a rise from Rs 267 to Rs 375 per day. This, they argued, would support low-income households and stimulate demand in rural areas. Furthermore, the introduction of consumption vouchers for low-income households was proposed as a mechanism to directly boost domestic demand.
Assocham President Sanjay Nayar highlighted the challenges faced by MSMEs, particularly in accessing credit and dealing with complex bureaucratic procedures. He called for streamlining processes and rationalizing tax systems like Tax Deducted at Source (TDS) to ease the burden on smaller businesses.
Conclusion
The pre-Budget meeting of December 30, 2024, was an important exercise in aligning the government’s fiscal policies with the priorities of India’s industries. The discussions underscored the need for targeted measures to enhance disposable income, stimulate consumer spending, and support sectors with significant employment potential. With global economic pressures continuing to weigh on local markets, the recommendations put forth by industry leaders reflect a desire to maintain economic momentum while addressing structural challenges. As the Union Budget for 2025-26 approaches, these proposals highlight the urgency of creating policies that can foster long-term economic resilience and growth, while safeguarding India’s domestic industries against external shocks.
