Union Budget 2025: The Confederation of Indian Industry (CII), in its recommendations for the Budget 2025-26, has proposed reducing excise duty on fuel to encourage consumption, particularly among lower-income groups. CII highlighted that high fuel prices significantly contribute to inflation.
The industry body also suggested lowering marginal tax rates for individuals earning up to Rs 20 lakh per annum, emphasising that this measure could initiate a virtuous cycle of increased consumption, higher growth, and improved tax revenues.
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CII noted the stark gap between the highest marginal tax rate for individuals, at 42.74%, and the standard corporate tax rate, at 25.17%. It argued that inflation has eroded the purchasing power of middle- and lower-income groups.
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“The central excise duty alone accounts for approximately 21% of the retail price of petrol and 18% for diesel. Since May 2022, these duties have not been adjusted despite a nearly 40% drop in global crude prices. Lowering excise duty on fuel would help reduce overall inflation and increase disposable incomes,” the organisation stated.
Focus on Enhancing Disposable Incomes
CII Director General Chandrajit Banerjee highlighted the importance of domestic consumption to India’s growth story, noting that inflationary pressures have diminished consumer purchasing power.
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“Government interventions could focus on enhancing disposable incomes and stimulating spending to sustain economic momentum. Persistent food inflationary pressures particularly impact low-income rural households, who allocate a larger share of their consumption to food,” Banerjee added.
Targeted Rural Interventions to Boost Demand
While rural consumption has shown signs of recovery in recent quarters, Banerjee suggested targeted government interventions such as increasing per-unit benefits under key schemes like MGNREGS, PM-KISAN, and PMAY, along with introducing consumption vouchers, to strengthen rural demand.
- Increasing daily wages under MGNREGS: Raising the minimum wage from Rs 267 to Rs 375, as recommended by the ‘Expert Committee on Fixing National Minimum Wage’ in 2017. CII estimated this would require an additional expenditure of Rs 42,000 crore.
- Enhancing payouts under PM-KISAN: Raising the annual payout under PM-KISAN from Rs 6,000 to Rs 8,000, which would involve an additional expenditure of Rs 20,000 crore for 10 crore beneficiaries.
- Revising costs under PMAY-G and PMAY-U: Advocating for an update to unit costs under these housing schemes, which have remained unchanged since their inception.
Introduction of Consumption Vouchers
CII proposed the introduction of consumption vouchers targeted at low-income households to stimulate demand for specific goods and services within a set timeframe (e.g., 6–8 months). The vouchers could be restricted to designated items and made available to Jan-Dhan account holders who are not beneficiaries of other welfare schemes.
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PM Modi Meets Economists
Prime Minister Narendra Modi recently held discussions with leading economists and sectoral experts to gather inputs for the upcoming Budget. The meeting was attended by Finance Minister Nirmala Sitharaman, NITI Aayog Vice Chairman Suman Bery, NITI Aayog CEO B.V.R. Subrahmanyam, Chief Economic Advisor Anantha Nageswaran, and renowned economists, including Surjit Bhalla and D.K. Joshi.
Union Budget 2025 Date
The Union Budget for the fiscal year 2025-26 is scheduled to be presented on February 1, 2025.
