The first advance GDP estimates project a growth rate of 6.4%, a figure that falls short of expectations and highlights the pressing need for the Modi government to address key economic concerns, particularly in the manufacturing sector, which has been among the hardest hit.
India Inc has submitted a set of recommendations, emphasising the need for simplified taxation, increased capital expenditure, and labour-intensive initiatives to stimulate growth.
Meanwhile, the Rashtriya Swayamsevak Sangh (RSS), the ideological backbone of the BJP, has called for measures such as increasing the MNREGA workdays to 200, raising the income tax exemption limit, and introducing a new manufacturing policy.
On the other hand, the Congress party, the principal opposition, has urged the government to provide income support for the poor and raise wages under MNREGA to alleviate economic distress.
To explore these diverse demands and expectations, CNBC-TV18 spoke with Salman Soz, Congress spokesperson; Vishwas Pathak, BJP spokesperson; Ashwani Mahajan, National Co-Convenor of Swadeshi Jagran Manch; and Dinesh Kanabar, CEO of Dhruva Advisors.
Below are the excerpts of the discussion.
Q: The Congress today carried out at least 12 or 13 press conferences across the country on the GST, urging for its simplification. You’ve also said that radical measures are needed to reverse the slowdown in economic growth and the slump in consumption as well. What would be your recommendation or the Congress’s wishlist when it comes to the union budget?
Soz: Our budget wishlist is not going to be very different from the wishlist of ordinary Indians. Most Indians would agree, and I think panelists out here would also agree, that our tax system should not be complicated. And the GST has been classified as the most complex indirect tax system in the world. And this is not me saying, this is the World Bank saying. So, we’ve made a mess of GST.
Any modern tax system, should be progressive. Unfortunately, what has happened is that in India, indirect taxes are now pretty much the biggest chunk of overall taxes. And the trend of increasing indirect taxes is very regressive. It hurts the poor and the middle-income families. In fact, 65% of GST collections are from Indians who are in the bottom 50%. So, I think this is a very cruel system, and we should try and get away from it. Then it’s also very complex, and that is what is hurting businesses. And which businesses are getting hurt the most? It is the small and medium businesses, which actually are the ones we need to create jobs. So, everybody seems to be tired of this.
Q: In every union budget, we hear from the industry about the need to give tax relief to the middle class, increasing the threshold limit when it comes to exemptions. What can we expect? And if this can’t be done, what can be the next best alternative?
Kanabar: This budget is being presented in the light of two critical background scenarios. First is that in the last budget, the finance minister mentioned that she is taking significant steps to simplify the tax laws, and towards that end, several representations were called for. There was a press release to say that almost 2,000 representations have been received; the chambers of commerce, professional bodies, professional firms—everybody has made representations, so it will be interesting to see what it is that the government is going to pick up from all of this and what changes we are expecting.
The second thing is, there has been a fall in consumption. The GDP expectations have gone down, and the question is, what can the government do in this budget to give a fillip to it? GST is the domain of the GST Council and is not something that is for the review of this particular budget. But a couple of things can happen here. The first situation is where every year there is a clamour that what is the amount of tax-free income that the budget should look at? And the question is, rather than having this clamour year on year, can we make it linked to an index? So, can we say that there is an inflation index, and every year, based on that inflation index, your tax-free income goes up? So, it doesn’t become a recurring thing. The same rupee meant something else last year, meant something else this year, so how can we do something like that? And the second thing which is coming in is that the government has increasingly wanted individuals, particularly, to move from the old tax regime, where they were entitled to deductions and exemptions, to move to the new tax regime, where the rate of tax is lower. While those provisions have worked for corporates very significantly, that hasn’t happened in the context of individuals. And that’s, again, where one is hoping that a lot of changes will happen. One will see the slab rates getting reduced. One will see the distinction between the new and the old regime, and a push to individuals to move towards the new tax regime.
Q: Today the BJP and the union government is fighting a battle of perception. One is a complicated GST structure. The industry has also been asking for simplification of GST, the number of compliances all across the country, something that Salman Soz also spoke about. Now, it’s well known that GST Council works with consensus. This is a GST matter. But then, there is the perception of a very high tax rate in the country, very high prohibitive tax structure. How will you dispel this notion? What has been the recommendation from the union budget to dispel this notion of high taxation and tax terrorism that the opposition has been speaking about, what roadmap would the BJP have to offer?
Pathak: I must tell Salman Soz that the BJP is not going to deal with GST; GST has a mechanism to deal with. Rather, I would tell you, post GST implementation, indirect taxes rates have been stabilised. Pre-GST era, there used to be 150 plus odd different kind of taxes, and the average tax rate was in excess of 23%. Post GST, it is below 18%, and it is now well established. Look at any other comparable country in the world, who could really establish and implement GST for this kind of volume of the country. So, India is doing well, and the collection of GST is now reaching to the extent of ₹2 lakh per month.
As far as direct taxes are concerned, post-2014, tell me when direct tax rates have been enhanced. On the contrary, corporate rate tax was reduced, and the slabs for deduction and all that thing are also enhanced. Despite of that, our collection of direct taxes has also gone up manifold.
Q: For the last 4 to 5 years, ever since the COVID pandemic broke out, we had Atma Nirbhar Bharat movement in the country. And several nations, several companies were saying that India has a China+1 opportunity. But we’ve not been able to win or leverage that to our advantage till now. What do you think we need to do? And what is the urgent need of the hour when it comes to manufacturing?
Mahajan: I won’t say that nothing has happened. But yes, more can be done. If we see the dependence on China continues to be there. And that is a real issue before us. And therefore, what we see that all the countries of the world, and especially the developed ones, they are talking about the manufacturing policy in their country. They’re talking about the protection to their domestic industry. And there is no harm if we also start doing so.
Protection is not just by raising tariffs. That is one possibility. Then there are other measures as well. For instance, if we have excess capacity in some of our industries, and just by raising a few percentage points of tariff, we can stop Chinese imports, and influx of Chinese imports, and can help our domestic industry produce more and contribute more, which will save our foreign exchange.
Several industries have been identified under the PLI scheme. And in those industries, more investment is coming. But the investors want to be more sure and they want that at least when they establish their capacity, then there should not be a kind of dumping by China, and the government must come forward to save them. So, for that, we need a very comprehensive manufacturing policy in the country, which talks about the tariffs, which talk about sudden spurt in imports, and then what can be done. It must talk about the kind of other measures which can be adopted to help domestic industry.
For instance, we have a very high rate of interest today. And therefore, this is coming in our way to establish new capacities. And therefore, some sort of help in terms of the interest subsidy can be given. Because other countries where we are competing, have a very low rate of interest, and we can’t compete. Therefore, a comprehensive manufacturing policy, which talks about interest rates, which talks about incentives, which talks about tariffs, non-tariff tariff measures and others, must be there.
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