FM Continues Consultations With Representatives Of Diverse Sectors

FICCI has submitted its macro expectations from Union Budget 2025-26

Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman on Monday chaired the sixth Pre-Budget Consultation with experts and representatives from the #health and #education sectors

FinTech BizNews Service

Mumbai, 30 December, 2024:  Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman today chaired the sixth Pre-Budget Consultation with experts and representatives from the #health and #education sectors in connection with the upcoming Union Budget 2025-26, in New Delhi, today. The meeting was also attended by Finance Secretary and Secretary DIPAM and Secretaries of Department of Economic Affairs, FinMin India and DPIIT, GoI  and Chief Economic Adviser to the Government of India.

Earlier, Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman had chaired the second Pre-Budget Consultation with various farmer associations and leading agricultural economists in connection with the forthcoming Union Budget 2025-26, in New Delhi. That meeting was also attended by Union Minister of State for Finance Shri Pankaj Chaudhary; Finance Secretary and Secretary, DIPAM; and Secretary, Department of Economic Affairs, Ministry of Finance.

Federation of Indian Chambers of Commerce and Industry (FICCI) has submitted its macro expectations from Union Budget 2025-26: 

• Indian economy has exhibited resilience, despite persisting downside risks. Economic Survey 2023-24 released in July 2024 projected India to grow at 6.5-7.0 per cent in fiscal 2024-25 – which though a moderation from 8.2 percent growth reported in 2023-24 is encouraging given the global economic environment.
• Union Budget 2024-25 maintained a strong commitment towards balancing various objectives for achieving the vision of Viksit Bharat. Continuing and deepening reforms agenda on nine priorities outlined in the Union Budget 2024-25 will be important for sustaining resilience seen in the economy.

Some recommendations for Union Budget 2025-26 are:

1. Maintain thrust on investments: The thrust laid by the government on capex over the last few years aided recovery and ensured support to the growth momentum. Given the uncertainty amidst persisting global headwinds, government’s thrust on public capex on physical, social and digital infrastructure will be important to maintain the growth momentum. 

The capital outlay in Union Budget 2024-25 was budgeted at Rs 11.11 lakh crore. The quality of the fisc has improved over time with revenue expenditure being contained and productive capital expenditure being prioritized. We propose government to consider increasing capex in FY26 by 15 percent over 2024-25.

2. Implement next generation reforms in factor market – Create inter-state institutional platforms: We complement the government for maintaining continuity on reforms pertaining to both ease of doing business and cost of doing business. We are encouraged by the set of next generation reforms proposed in the Union Budget 2024-25.

Many of the next generation reforms lie in the state & concurrent domains and require consensus building to take them forward. Inter-state institutional platforms on the lines of GST Council can be created – especially for reforms in areas of land, labor and power.

3. Continue with simplification of tax regime: The Government has made a good start to the simplification process by reducing the TDS rates on several payments from 5% to 2% through Finance (No.2) Act 2024. To further enhance ease of doing business, it is suggested to rationalize the multiple TDS/TCS rates by converging them into a simple two or three-tier rate structure which will avoid classification disputes and prevent blockage of working capital in the industry. Also, stop the practice of imposing TDS/TCS on transactions that are subject to GST since the relevant information is already available through GST filings.

4. Announce a new Independent Dispute Resolution forum for effective and time bound dispute resolution: To reduce litigation on the direct tax matters, it is suggested to introduce a new forum comprised of independent experts like retired judges of Supreme Court or High Court, retired President/Vice President of Tribunal or professionals like lawyers or Chartered Accountants with a stipulated minimum experience to deal with disputes at assessment or post assessment level.

A time bound resolution by independent forum will build confidence amongst taxpayers who may come forth to settle the matters instead of pursuing litigation in fear of penalty and prosecution. It will reduce prolonged litigation and demands/refunds locked up due to such litigation.

5. Continue to promote sustainability: India has set for itself the target of ‘net zero’ by 2070. Moving towards this target calls for a coordinated approach amongst different segments of the economy. We also need an enabling policy framework that can target resources towards both green areas as well as transition areas. Towards this end, we need to

• Develop Carbon Capture, Utilisation and Storage technologies as a mission in line with Green Hydrogen Mission to accelerate deployment of tech solutions for industrial decarbonisation.
• Create pathways for green transition for all sectors to meet India’s net-zero emission target by 2070. The roadmaps should look at all aspects, such as technology, financing, circularity, impact on jobs, etc.
• Launch a national level vision document for circular economy that provides a framework with clear goals, strategies and initiatives that promote circular practices across different sectors.
• Initiate a review of the Priority Sector Lending framework to bring within its purview climate adaptation and climate risk mitigation activities such as clean transportation (eg. Electric Vehicles), EV charging infrastructure, sustainable water and waste management, recycling, etc.
• Announce a Centre of Excellence for developing and evaluation of climate smart agriculture technologies. Commercialize at least 5 climate smart technologies, each adopted by at least 5 million farmers over next 3 years.

6. Support women’s participation in the workforce by allowing day care expenses as an exemption upto a certain defined limit: The care economy presents a significant opportunity for both economic growth and the empowerment of women in India. The Government by providing a specific tax exemption on day care expenses can support women’s participation in the economy.

• Government may also consider forming a statutory body to certify daycare centers and regularly monitor their quality to bring standardization.
• Commuting to the place of work from home is generally seen as a constraint for women’s employment in manufacturing sector, especially when such places are away from residential areas. Building dormitories would enable more women participation in manufacturing. Government may consider allowing CSR funds to be used for setting up and maintenance of dormitories for women.
• Consider a special tax exemption upto a defined limit for working women for expenses incurred on childcare for children upto the age of 5 years.

7. Promote Atmanirbharta in Defence

• Only defence equipment made in India / partnered in India to be procured.
• Intensify research efforts to develop technologies to keep Indian armed forces ahead in areas such as robotics, quantum computing, sensors, hypersonics, directed energy and AI & ML.
• Build capabilities for millions of inexpensive small and micro-drone swarms that are weaponizable.
• Set up a Defence Export Promotion Agency that can co-ordinate with armed services, their foreign directorates, DPSUs, private manufacturers, MEA, Indian embassies, and MoD and communicate with foreign government and buyers.

8. Further farm prosperity

• Launch an agricultural yields mission for bottom 100 districts on the lines of aspirational districts programme
• Launch a national program to develop 3 million farm technicians in 5 years to provide new technologies and services to farmers. Each village (India has 6 lakh villages) could have 5-6 technicians specialized in technologies such as soil testing, micro irrigation, drones, sensors, farm machinery, post-harvest technologies as well as operation and maintenance of in-village water supply system.
• Galvanize private sector adoption of horticulture clusters by completing allotment of 12 priority clusters, launching RFPs for remaining 41 identified clusters, allowing participation by farm aggregators and encouraging adoption of individual verticals at cluster level by larger specialized companies.

9. Encourage the domestic manufacturing of PCBAs

• The Steering Committee for Local Value Addition, Manufacturing and Exports (SCALE) is working towards enhancing indigenous manufacturing capabilities, reducing import dependency and achieving scale in exports in priority sectors. Among these sectors, Printed Circuit Board Assemblies (PCBAs) has been identified for focused intervention as a part of overall electronics sector, with the objective of minimizing imports by 2030 and charting a roadmap for indigenous manufacturing of components and value-added PCBAs.
• To address the challenges associated with PCBA imports, particularly the complexity arising from varied applications of these PCBAs falling under different HS Codes, FICCI commissioned a comprehensive study on PCBA import in the non-mobile sectors. This study, encompassing analysis of approximately 3.5 million lines of data over a five-year period, revealed significant insights into the import dynamics of non-mobile PCBAs in India.
• The key asks are rationalisation of tariffs and HS Codes for PCBAs for various applications. Furthermore, as per our discussions with the industry, may we suggest that government may consider a differential of 25% on custom duty on PCBA vis-à-vis its final product. For instance, if the custom duty on finished electronic product is 20%, then the PCBA for this finished product could be at custom duty of 15%. Additionally, for finished goods which are exempt from duty, we request that PCBA for these finished goods could be allowed under Import of Goods at Concessional Rate of Duty (IGCR) Route, with much simplified process under IGCR. Also, we need to be careful that tariffs are rationalised so that no duty inversion is there.

10. Highlight importance of Primary Education

• Launch PM-led national level Information, Education, Communication (IEC) Campaign to increase national consciousness on Foundational Literacy Numeracy (FLN) to promote early years education in the country.
• Offer vouchers to parents of school going children in form of e-Rupi to be redeemed at schools chosen by parents to send children to. Focuses on outcome of schools, incentivizes virtuous competition among schools both government and private.

11. Give additional thrust to the Healthcare Sector

• Increase Public Health Expenditure: India’s public expenditure on healthcare touched 2.1% of GDP in FY23 and 2.2% in FY22, against 1.6% in FY21, as per the Economic Survey. Yet it significantly lags the OECD average of 7.6% and BRICS countries' average of 3.6%. FICCI recommends increasing this allocation to 2.5% of GDP by 2025, as envisioned in National Health Policy 2017. This will help to strengthen healthcare infrastructure, ensure equitable access, and move closer to Universal Health Coverage (UHC) goals.
• Incentivizing Preventive Healthcare: Increase the tax exemption for preventive health check-ups under Section 80D from ₹5,000 to ₹20,000. Additionally, allow employers a separate annual deduction of ₹10,000 per employee for sponsoring these check-ups, over and above current medical reimbursement limits, given the rising advent of lifestyle diseases in India.
• Promote Health Insurance: Double the deduction for health insurance premiums under Section 80D to ₹50,000. Expand eligible dependents under this provision to encourage broader health coverage.
• Healthcare as Industrial Undertaking: Recognize hospitals as industrial undertakings under Section 72A, allowing tax loss carry-forward during mergers and restructuring. This aligns with practices in the manufacturing sector and incentivizes investments in Tier 2 and Tier 3 cities.
• Additional Depreciation for Diagnostics Infrastructure: To meet rising healthcare demands under Ayushman Bharat, the government should provide 50% additional depreciation under Section 32 of the IT Act for investments in diagnostic infrastructure, especially outside metro cities. This aligns with depreciation benefits in other sectors and supports the vision of affordable healthcare for all.
• Import duties on lifesaving equipment should be reduced to ensure affordable healthcare delivery. Offering tax incentives to domestic manufacturers will attract global manufacturers. Additionally, increase the depreciation rate for lifesaving equipment from 40% to 60%, considering their short lifespan and fast-paced technological advancements.
• Incentivize Medical Value Travel for the healthcare sector to contribute to India’s foreign exchange earnings.