The Confederation of Indian Industry (CII) has urged the Union government to increase capital expenditure by 25% in FY26 while adhering to the fiscal glide path. Speaking to a popular news portal on Wednesday, CII President Puri warned that curtailing public capex could suppress consumer demand and emphasized the need for targeted interventions to spur growth and boost exports in labour-intensive sectors.
Key Recommendations by CII for Budget 2025-26
- Increase Public Capex: CII proposed a 25% hike in public capital expenditure for FY26 to sustain economic momentum and encourage private sector investment. Puri noted, "Public capex has started to crowd in private capex. Compressing it further could suppress demand." The government aims to bring the fiscal deficit below 4.5% by FY26, as per the fiscal consolidation plan announced in 2021.
- Boost Middle-Class Consumption: To directly enhance consumption, CII suggested reducing excise duty on petroleum products and lowering personal income tax for individuals earning below Rs 20 lakh. Additionally, increasing MNREGA wages in line with expert recommendations could help improve rural demand.
- Enhance Exports and Global Integration: Labour-intensive sectors such as footwear, apparel, and tourism require targeted support to boost exports. Puri emphasized the importance of finalizing Free Trade Agreements (FTAs) with the UK and Europe, enabling domestic companies to integrate into global value chains.
- Promote Private Sector R&D: To address India Inc.'s low R&D spending, CII called for operationalizing the government's ₹1 lakh crore innovation corpus for private sector research and development. Broadening R&D efforts across emerging sectors is critical to enhancing India's global competitiveness.
- Skilling and Employment: The PM Internship Scheme was hailed as a "game changer" for skilling, with ongoing efforts to resolve initial operational challenges. CII also emphasized reforms in the apparel sector and granting infrastructure status to the hospitality sector to attract investments.
- Combat Food Inflation: To tackle inflation in fruits and vegetables, CII recommended building climate-controlled infrastructure near urban clusters and leasing it to small farmers at nominal rates to boost production and reduce price volatility.
Economic Outlook
Despite global headwinds, CII described India's estimated GDP growth of 6.4% for FY25 as "decent," given challenges such as subdued merchandise exports, food inflation, and global supply chain disruptions. Puri highlighted the opportunity for India to capitalize on global realignments by positioning itself as a resilient alternative in supply chains.
The recommendations aim to balance growth with fiscal prudence while addressing critical areas like consumption, exports, skilling, and private sector innovation. All eyes are now on the Union Budget 2025-26 to see how the government incorporates these suggestions.
CAclubindia
