Moneycontrol PRO
Open App

Union Budget 2021 | Focus on growth, look at fiscal management from a 3-year perspective: CII to FM Nirmala Sitharaman

The CII, in its recommendations for Union Budget 2021 to Finance Minister Nirmala Sitharaman, has said the government expenditure should be prioritised in three areas: infrastructure, healthcare, and sustainability, and that disinvestment and monetisation of assets can bring in revenues at a time when tax revenues have fallen sharply.

December 16, 2020 / 09:30 AM IST

The Confederation of Indian Industry (CII) has forwarded a three-pronged strategy for Union Budget 2021, centering around the key themes of growth, fiscal consolidation, and strengthening of the financial sector targeted to overcome the impact of the COVID-19 pandemic on the economy.

The CII has suggested that the budget proposals focus on growth, and alongside look at fiscal management from a three-year perspective. Disinvestment and monetisation of assets can bring in revenues at a time when tax revenues have fallen sharply, said the industry body.

The CII presented its recommendations to Finance Minister Nirmala Sitharaman on December 14.

“The government has an unenviable task of ensuring a fine balance between supporting economic recovery and growth on one hand and ensuring macro-economic stability on the other. The CII’s suggestions take this aspect into cognisance,” said Uday Kotak, President, CII.

“Government expenditure should be prioritised in three areas- infrastructure, healthcare, and sustainability. The budget proposals should also address two critical areas of boosting private investments and providing support for employment generation," Kotak added.

The CII recommended that the government bring down its stake in public sector banks (PSB) to below 50 percent through the market route, over the next 12 months, except for 3-4 large PSBs such as State Bank of India, Bank of Baroda, and the Union Bank of India.


It further recommended that the government create state-owned, professionally managed Development Finance Institutions (DFIs) to finance key sectors of the economy, on the lines of KfW Germany, Brazil Development Bank (BNDES), and Korea Development Bank.

"This could be achieved by infusing equity into NABARD for financing agriculture and rural sector, SIDBI for financing MSMEs and IIFCL for financing infrastructure," the body said.

Policy Recommendations

Fiscal Management

  • Look at deficit management from a three-year perspective given that the complete economic recovery is expected only in FY22.

  • Last Budget provided details on off-budget expenditures and their financing as an Annexure. Take forward this effort and bring in greater transparency in deficit numbers. This implies realistic revenue projections, avoiding off-budget borrowings and realistic estimation of costs of various schemes.

  • To augment revenues, consider aggressive disinvestment of both loss-making and a few profit-making PSUs, especially given the fact that the capital markets are performing well.

  • Also explore sale or leasing of the government’s surplus land.

Financial Sector Reforms

Achieving the vision of India being a $5 trillion economy is contingent on having a strong financial sector. To achieve the same:

  • An expeditious and efficient resolution process is critical for the health of the financial sector. The current resolution process is too time consuming, and the IBC needs enhanced judicial capacity.

  • The COVID-19 pandemic's impact is expected to exacerbate the NPA problem, affecting the credit cycle. To address this issue, facilitate multiple bad banks, by allowing Alternate Investment Funds (AIFs) to buy bad loans.

  • Create a single specialized agency, manned with relevant expertise to investigate financial sector frauds. Alternatively improve coordination between the existing multiple agencies and strengthen their expertise.

  • Create Market Intelligence Units within the Ministry of Finance and the financial sector regulators, to pick up early signs of financial distress/fraud. This will help take timely preventive measures.

  • Stronger role for FSDC, to ensure seamless coordination amongst regulators for protecting the interests of depositors and small investors.

Government Expenditure

Increase the expenditure in healthcare to 3 percent of GDP over 3 years.

Infrastructure for both rural and urban areas as infrastructure spend has one of the highest multiplier effects on the economy.

Focus on sustainability in order to build an environment-friendly modern economy.

Further, two most critical areas that require immediate attention – private investment and creation of jobs.

Private Investment

There are early signs of private investment returning. To sustain this:

  • Ensure stability of long-term interest rates, at current levels. There are concerns that rising inflation could adversely impact long-term bond yields and these need to be addressed.

  • Ensure a stable tax regime.

  • Ensure sanctity of contracts for government and quasi government entities, as well as for state governments.

Support for job creation

Section 80JJAA, provides for deduction of 30 percent on emoluments paid to new employees, for three years. This is available up to an emolument of Rs 25,000 per month. Raise the cap to Rs 50,000 per month.

Extend ‘Vivad se Vishwas’ Scheme

As the operational challenges arising out of the COVID-19 pandemic are likely to continue for some more time, extend the scheme till 31 December 2021. Appeals pending on or before June 30, 2021, could be considered eligible for the Scheme.

Set timelines for disposal of appeals by Commissioner (Appeals) on the lines of timelines set for Dispute Resolution Panel.

Restrict number of adjournments by either party to two.

Provide option of fast-tracking appeals at Commissioner and Tribunal levels on payment of a higher fee.

Allow all taxpayers, irrespective of the nature of adjustments to approach the DRP. There could be monetary thresholds, if required.

Increase monetary thresholds for Department to appeal for instance Rs 1 crore for Tribunal, Rs 2 crore for High Court and Rs 5 crore for the Supreme Court.

Increase the number of Commissioner Appeals, benches at Tribunal and tax benches at High Court for speedy resolution. If required, recover the additional expenditure by increasing the appeal filing fees.

Indirect Tax Recommendations

  • Move towards competitive import tariffs over 3 years, with lowest or nil slab on inputs or raw materials (say 0-2.5 percent), standard slab for final products (say 5.00-7.5 percent), and intermediates at intermediary level (say 2.5-5 percent).

  • Exceptions could be considered on some products in the context of policy actions such as the phased manufacturing programmes and production-linked incentive schemes, for promoting domestic manufacturing, besides some of the sectors, where tariffs are on the higher side owing to compelling reasons.
Moneycontrol News
ISO 27001 - BSI Assurance Mark