India Inc’s Budget 2025 wishlist: GST rationalisation, manufacturing focus, measure to boost consumption and more

Finance Minister Nirmala Sitharaman is set to present her eighth Union Budget on February 1, 2025, in the backdrop of slowing economic growth and a weakening Indian currency. India’s gross domestic product (GDP) grew just 5.4% in the second quarter of FY 2024-25, which was the lowest rate in the past seven quarters. Consumer sentiment is sluggish, too.

Amid such a scenario, India Inc. is expecting the Finance Minister to move over short term solutions and spell out some major reforms. The corporate sector is hopeful of a host of measures, from GST rationalisation to a booster dose for bolstering domestic manufacturing of goods, in the upcoming Budget.

GST rationalisation

One of the key demands of the industry is the rationalisation of gross and services tax (GST) rates. Lower rates on common-use items and hiking rates on items used less or on luxury and sin goods can help the government revive consumption without major revenue loss.

GST rate rationalisation will also help streamline tax rates across sectors, thereby reducing the cascading effect of taxes and litigation related to tax classifications.

Talking of some specific sectors, the insurance sector attracts a GST rate of 18% at present. The industry is seeking a reduction in rates, especially for health insurance services. Similarly, cement which is a major component of the real estate sector and housing is taxable at the highest rate of 28%. The industry is seeking lower rates to provide relief in terms of construction costs.

India Inc. believes that such measures, along with lower income-tax rates, can increase disposable incomes and boost consumption as well. Notably, some media reports suggest that Sitharaman may tax rates for personal income up to ₹25 lakh per annum in the upcoming budget.

As an added benefit, simpler tax regimes could also enhance India’s ease of doing business, making it a more attractive destination for investments.

Manufacturing push

India Inc. is also batting for enhanced investments and increased capital expenditure in the upcoming Union Budget 2025 to push manufacturing.

The Confederation of Indian Industry (CII) has recommended raising the allocation for capex by 25% over the ₹11.11 lakh crore earmarked for the current financial year. The Federation of Indian Chambers of Commerce and Industry (FICCI) has also suggested an increase of 15% in the outlay.

Additionally, CII has recommended introducing production-linked incentive (PLI) scheme 2.0 for ready-made garments, expedited trade pacts with the EU and the UK and implementation of labour reforms.

The PHD Chamber of Commerce and Industry has also suggested expanding the PLI scheme beyond the 14 sectors to medicinal plants, handicrafts, leather and footwear, gems and jewellery, and the space sectors.

Meanwhile, industry experts are also calling for targeted incentives for high-value manufacturing sectors like electronics and precision machinery.

Focus on SMEs

With small and medium enterprises (SMEs) forming the backbone of the Indian manufacturing ecosystem, experts are demanding measures to empower these companies through enhanced access to affordable credit and support for innovation.

India Inc. believes that the budget should prioritise measures that enable SMEs to scale operations and access global markets.

Experts suggest allocating additional funds to boost credit flow, similar to the Credit Guarantee Fund Trust for Micro and Small Enterprises launched during the COVID-19 pandemic.

Industry bodies have also proposed the establishment of MSME universities dedicated to entrepreneurship training and skill development to fill any workforce gap.

Boosting consumption

Industry leaders are hopeful of tax exemptions providing more disposable income in the hands of consumers. This will help in boosting consumption. Measures to boost consumption are likely to help the industry players that deal with consumer goods and customer-to-customer (C2C) sectors like retail and FMCG. A rise in private consumption may also create more jobs across sectors. It has been a longstanding demand of the corporate sector to rationalise GST and announce tax relief to help the middle-class have more disposable income.