From seeking a higher capex to hiking the healthcare budget to an independent dispute resolution body, industry body FICCI has submitted a slew of recommendations.
Firstly, FICCI has sought capex to be hiked by 15% for the next fiscal. FICCI feels that the government’s pursuit of investment is crucial to keeping the growth momentum intact.
Budget consultations this time have also seen an increased call for tax simplification. FICCI has suggested that the multiple TDS and TCS rates be rationalised by converging them into a simple two or three-tier rate structure.
Similarly, the industry body has also emphasised a greater focus on sustainability while asking for a coordinated approach to achieve India’s net zero target for 2070.
Healthcare is another top ask. FICCI has recommended raising the healthcare expenditure to 2.5% of GDP, which aligns with the target of the National Health Policy.
To discuss India Inc’s Budget wish list, CNBC-TV18 spoke to Harsha Vardhan Agarwal, President of FICCI and Vice Chairman & MD of Emami; Anant Goenka, Senior VP of FICCI and Vice Chairman of RPG Group; Vijay Sankar, Vice President of FICCI and Chairman of Sanmar Group; and Sangita Reddy, Former President of FICCI and Joint MD of Apollo Hospitals.
Edited Excerpt:
Q: Let me begin by asking you about the kind of messaging you’re looking for. And the reason why I’m asking this is because this will be the first full-fledged budget from the Narendra Modi government in its third term. It’s taking place amid great geopolitical headwinds. The global environment is uncertain. The Trump administration is going to take office on the 20th of January. So, a lot of uncertainties on the table. So what kind of clarity and messaging are you looking for from the Finance Minister?
Agarwal: I think from a business perspective, the government has been very consistent in the past regarding its budget and policies. At FICCI, we want consistency, the continuity factor, there.
We would like to see that the government is serious about the capex, which they have been increasing year on year, which has increased by four times in the last eight years. As FICCI, we have already recommended a hike of 15% for next year. So, we want the government to continue focusing on infrastructure, ease of doing business, simplifying tax structure, and how we increase consumption. How do we give more money to the consumers so that the discretionary spend increases?
Q: When we speak about next-generation reforms, which FICCI has also asked, what would you really like or more than reforms, would you hope that the current policies are better implemented? So better implementation of present policies versus new reforms. What would you be looking for?
Reddy: In a country with such complex needs and a situation where the opportunity is so significant, we have to look at the fact that India remains and continues to remain one of the brightest spots in the global economy. So, we need to maintain the thrust on investment, which was one of the main reasons India surged ahead. However, we must also implement reforms for the next generation. So, whether it’s the creation of interstate institutional platforms, look at the continuation of simplification of the tax regime. We must announce the new independent dispute resolution forum for effective and time-bound resolution, and we must continue promoting sustainability.
So, on some, it’s to keep the thrust and go faster. And on some, it’s created something new and dynamic so that India continues to message the world that we are an increasingly efficient, effective, and attractive destination for FDI and future business.
I think the focus on GCCs must continue. Is there some way we can further attract international offices to be opened up in India? Again, we must look at inflation, the external sector, and the fiscal deficit. All these are significant for our continued growth. And regarding the policy response, there are a slew of things that FICCI has recommended. I want to call out the healthcare requirements specifically.
I think year upon year, we’re looking at this continued need for additional spending in the healthcare sector. In a country as large as ours, where we’re getting healthy balance sheets, we also need healthy individuals.
I also want to draw attention to one very important policy recommendation and request that we had is that the income tax exemption on money spent on preventive health care, which is currently at a ₹5,000 deduction, we are recommending that this should go up to ₹20,000 because it hasn’t been revised in over a decade.
Besides this, I think there are many other policies which can make healthcare not only a more attractive investment proposition but also significantly the growth in healthcare will lead to enabled access with a special focus on tier-II and tier-III cities.
Q: In the short term, how important is it for certain interventions by the government to boost consumption? Some experts have been toying with the idea that while the government is committed to maintaining a fiscal glide path, some concessions may not be bad and may help boost consumption. What do you feel? And what could be that mantra or policy intervention by the government which could increase consumption in the economy?
Goenka: I think spurring consumption is important at this point in time. And a few suggestions from FICCI are more towards simplifying the direct and indirect tax structure which will put some more money in the hands of the consumer.
One or two other ideas that we came out with was looking at consumption vouchers for the lower income with some kind of an expiry date because if the SOPs would lead to a certain longer-term view, this would result in spurring immediate consumption.
Third, it also looks at food inflation in some way, which can be directly taken up under the PMO itself. This will have short-term and long-term implications for solving supply-side issues on food. So, these are the key few reasons we found consumption has been lower. But I think if some of these actions are taken, we will undoubtedly see manufacturing utilisation also going up and more private capex coming in.
Q: As far as taxation, specifically GST, is concerned, what kind of intent would you like to hear in the Union Budget speech? Because simplification of GST, rate rationalisation has been a longstanding ask of the industry. These are issues which foreign investors also ask. So, when it comes to GST and the tax structure, what are some of the basic asks that you would have on the table, something that could actually encourage you to make more investments and encourage foreign investments as well?
Sankar: Regarding indirect taxes, I think the industry’s demand is for rationalisation and simplification. But I guess many of those fall under the ambit of the GST Council. And FICCI has made a bunch of recommendations as far as indirect taxation goes. But we also made a slew of direct tax simplification suggestions. And if I could draw your attention to one or two specific ones that we felt would have a significant short-term implication, which would ease the compliance. One specific suggestion we had was the rationalisation of the provision of Section 50CA and Section 56 (2)(x). I do not want to get too technical, but this comes in the way of many transactions and increases the cost of compliance for many companies. What happens today is that, as far as Section 56 (2)(x) goes, it was initially introduced as an anti-abuse measure, but it has probably gone beyond its scope. There is an unintended consequence of tax being imposed on even income that is not realised between two non-related parties. So, this is something that we’ve raised with the finance ministry, and we hope that this gets the due hearing that it should receive.
So, a basic focus on simplifying the tax regime, especially on direct taxes, is something that FICCI has raised with the ministry.
Watch the accompanying video for the entire discussion.
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