In its pre-budget recommendations, industry body Ficci has said the government needs to continue its thrust on capital expenditure and suggested tweaking tax laws to improve India’s competitiveness as a global manufacturing hub. The body also called for additional support to MSME liquidity needs.
“The capital expenditure outlay in the last Union Budget 2023-24 was increased by 37.4% to ₹10 lakh crore. Further, the latest GDP release reported encouraging data on capital formation. Gross fixed capital formation reported an increase by 10.3% in 2023-24. Investment (GFCF) to GDP ratio has improved to a decadal high of 34.9% in 2023-24. India’s growth has thus been robust,” Ficci said.
“However, India is at an important inflection point and given the current global developments and associated headwinds, the government should continue to lay major thrust on public capital expenditure (on physical, social and digital infrastructure) in the forthcoming budget,” it added.
The industry body also demanded extension of concessional tax regime for manufacturing operations for at least five years. Concessional tax regime was rolled out in the year 2019 as a slowdown stimulus mandating a 15% tax rate for newly set up manufacturing companies. Ficci wants the sunset clause to extended by another five from the current deadline of March 2024.
“The government has consistently worked towards creating an enabling environment for making India a global manufacturing hub. Given the current global developments and most advanced countries looking at China plus one strategy, India can truly emerge as the next manufacturing hub. We must leverage this opportunity by incentivising and attracting large investments from global manufacturing companies.The Production Linked Incentive (PLI) schemes are an excellent initiative and are working well. To supplement this, the government could consider extending the concessional tax regime for manufacturing operations for at least five years. (The Finance Act 2021 had extended the sunset date under concessional tax regime of section 115BAB by only one year to 31 March 2024),” it said.
“Many global investors are today considering investment in India and extending such concessional tax regime for 5 years will ensure stability and certainty, thus bolstering confidence of investors to set up manufacturing units in India,” Ficci added.
Further, to support MSMEs for meeting their requirement for liquidity and finance, the body suggested relaxation in the NPA classification norms. “It is recommended that the 90 days limit for classifying overdue of MSMEs should be increased to 180 days so that MSMEs are not constrained to divert their working capital towards servicing of their loan-instalments and clearing of their overdues at the cost of normal business operations,” it said.
“This improvement will save a large number of MSMEs from turning sick or getting closed resulting in loss of economic activity and employment. This will also prevent avoidable classification of bad debts and unwarranted litigation by banks, thereby saving the banks from losses,” it added.
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