The Modi 3.0 Government should maintain its focus on public infrastructure capital expenditure (capex) while allocating a significant portion of the incremental hike for 2024-25 towards developing rural infrastructure. This approach in the upcoming budget would help boost consumption in rural India, Sanjiv Puri, President of the Confederation of Indian Industry (CII), suggested.

He also felt that a portion of the ₹2.1 lakh crore RBI dividend bounty must be used for Capex spending in rural areas in activities such as rural housing, warehouses, etc. 

“There is lot of potential to spend in rural areas. It can be in rural housing, agri infrastructure, warehousing and wherever physical infrastructure is needed. It can also be in Digital infrastructure”, Puri told businessline in an interview, his first after assuming charge at the helm of CII in May.

Puri called for measures in the budget to create a very vibrant and thriving ecosystem in the rural economy so that one can get growth on a sustainable basis. “India is a very aspirational society. Youth today are more concerned about getting sustainable income”, he said.  

Puri’s suggestion is significant as the upcoming budget is widely expected to be a rural and consumption-focused one, giving a political answer to weak consumption and distress in several rural areas in the country.

The recent elections have clearly reflected the rural distress with incumbent governments in States such as Odisha and Andhra Pradesh getting voted out.

CII now wants the capex allocation in the full budget to be increased by 25 percent over the Revised Estimate of 2023-24 as compared to the 16.8 percent increase seen in the interim budget. For 2024-25, the interim budget had pegged the capex spend estimate at ₹ 11.11 lakh crore.

He also suggested that the PMSVANIDHI scheme be extended to Rural India and that special schemes on the lines of MNREGA need to be framed for the urban poor.

Unlike the past few years, rural India may get potentially higher weightage in the budget speech as well as allocations as well. The upcoming full budget is expected to be rural and consumption-focused compared to urban and capex-heavy budget exercises of last few years.

Puri also said that the Centre must stick to its earlier announced fiscal consolidation glide path (5.1 percent fiscal deficit by March 2025) although temptations to be bit more populist would be there given the recent election outcomes.

He expressed confidence that the upcoming budget would continue to be “development” oriented — like the previous editions over the last decade.

“I am not expecting a big shift in policy. The fact of the matter is that policies of the past has worked well for us and that is why GDP has done what it has. It is a process. It is a policy framework that has worked. That is what makes CII optimistic about future. I see really no reason to change tracks in a big way here”, Puri said.

“It’s a journey that some of the things articulated as policy measures has to be taken further in terms of implementation and new areas of measures taken to unlock the potential of the economy. We believe the journey should continue as it has been established it is a proven framework”.

Bank Privatisation

Puri said that Modi 3.0 Government must take steps to implement the announced privatisation of Public Sector Banks (PSBs). Finance Minister Nirmala Sitharaman had in her Budget Speech for 2021-22 said that the government intended to privatize two public sector banks and one general insurance firm, other than strategic stake sale in IDBI Bank. However no progress has been achieved on this front till date.

“The reason we have brought this (issue of bank privatisation) up is that to finance India’s growth the country needs many large banks. We have very few big banks in India today. Privatisation of Two banks was announced — implementation of this is what we are making a case for”, Puri said.

Puri said that it would be good for the economy if this gets implemented. He highlighted that year-on-year the Centre has not been meeting its disinvestment targets. “There is good opportunity now to get this done”, he said.

GST, Customs Duty

Puri said that India must bring Goods and Services Tax (GST) under a three-rate structure with moderation of rates.

“We know it is a subject not related to Union Budget. We are only stressing the need to go in that direction and create a roadmap. As we transition to three rates, then moderation of rates can be considered.

Over a period of time as revenue buoyancy comes in, moderation should be examined as it will provide fuel to consumption. Moderation in GST rates will drive down inflation and boost consumption”, Puri said.

CII President also called for a three-tiered import duty structure. 

“Ultimately we are looking at moderate import duty rates for primary, intermediate and finished goods. It should be 0-2.5 for raw materials, 2.5 -5 for intermediate and 7-7.5 for final products. There can be carve outs. Important thing is that duty structure should incentivise value addition within the country”, he said.

Anti-Dumping Mechanism

Puri also called for further strengthening of anti-dumping mechanisms in the country both from the government side as well as from the industry side. 

“There are many sectors today where industry is talking about increased imports. Both the Capacity of the industry to identify and report the increased imports and the Government mechanism to impose anti-dumping duty must be improved. 

It is not a protectionistic attitude. At the same time, we also cannot ignore but protect Indian interests. We do not want the domestic industry to be killed by increased dumping”

RBI Rate Cut

Puri said that CII is hopeful that Reserve Bank of India (RBI) will go in for some reduction in interest rates in the second half of this year. 

“We are hopeful as monsoon is good and hopefully food inflation will be in a better trajectory as compared to the past. That should prompt RBI to go in for a cut,” he noted.

Social Welfare

Puri said that the government must not lose sight of its social welfare priorities while focusing on pushing growth and development.

“Whatever are the remaining pressing requirements for social welfare, the people who need it must be supported. We have to also look at how do we as an economy thrive in the long term.  How do we create a virtuous cycle. These kind of resources (RBI dividend bounty) are only transient. So we have to create the momentum in the economy. 

The policy-making team has been looking at how to create a cycle of investment and growth. For inclusive growth, these kinds of investments need to happen. Climate is a big issue. We need to invest for adaptation”, he said. 

Investments have to happen on public capex, human capital development such as skilling and healthcare, he added.

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