The Indian economy’s past two periods of performance would lay the groundwork for an accelerated approach.
According to recently elected CII President Sanjiv Puri, income tax reduction for those in the lowest band may need to be taken into account in the approaching complete Budget for 2024–2025 given the high levels of inflation.
In an interview with PTI, he also recommended setting up an institutional framework to foster agreement between the federal government and the states in order to effectively implement all reforms, including those pertaining to agriculture, labour, land, and power.
The trade association added that it does not believe coalition politics’ constraints will impede Prime Minister Narendra Modi’s third term of reforms. Instead, it thinks that the way the Indian economy has performed and how well the previous two administrations’ policies have worked will lay the groundwork for accelerating the process.
“In general, I would say that it is public capital expenditures, following the fiscal glidepath, a blueprint for social infrastructure investment, a green fund, and increased investment in the rural area at this time. When asked about CII’s expectations from the impending complete Budget for 2024–25, he responded, “These are the general principles.”
May saw a third straight month of increases in wholesale inflation, coming in at 2.61 percent due to increases in the cost of manufactured goods and food items, particularly vegetables.
Inflation measured by the wholesale pricing index (WPI) was 1.26 percent in the preceding month. In May 2023, the percentage was (−) 3.61%.
Shaktikanta Das, the governor of the Reserve Bank of India, stated earlier this month that the bank would only take “further policy actions” if it was certain that headline inflation would remain at 4%.
Das stated that the primary goal of the central bank is to bring the inflation rate into line with the 4 percent target. He also stated that unless the RBI is certain that the inflation rate would stay at or below 4 percent, no changes to rates will be allowed.
Puri stated that inflation is “probably going to be around 4.5 per cent this year” based on the CII’s projection and the likelihood of a favourable monsoon, which has historically resulted in a slowdown in food prices.
He continued, “What we are proposing is that the process of simplification should continue” in reference to taxes. Regarding capital gains, there are recommendations that vary depending on the instrument. Is it logical?
Puri went on to say that CII would desire the operational challenges with TDS (tax deducted at source) and rate multiplicity to be simplified.
“…over a period of time as far as customs is concerned, we should move to a three-tier structure, primary at the lowest level, intermediates in between and then the finished goods and all over a period of time should be moderate rates with some exclusions, as deemed appropriate,” he stated.
In the previous system, individuals’ income up to Rs 2.5 lakh was exempt from income tax; however, in the current system, income up to Rs 3 lakh is exempt.
The head of CII also voiced hope for the future strengthening of the reform process.
Puri expressed optimism that food prices would eventually decline due to a strong monsoon. He also disclosed that the CII projects inflation to be approximately 4.5% in the near future and that the Reserve Bank will likely lower the key interest rate beginning in October of this year.
The president of CII stated, “We think that we should see some easing of interest rates in the second half of the year.”