India Inc.’s Wishlist for Budget 2025- Focus on GST Reforms, Manufacturing Growth, and Stimulating Consumption

Budget 2025 – As Finance Minister Nirmala Sitharaman prepares to present her eighth Union Budget on February 1, 2025, India’s corporate sector is looking for bold measures to address the challenges posed by a slowing economy and a weakening rupee. The country’s GDP growth dropped to 5.4% in the second quarter of FY 2024-25, the lowest in seven quarters, and consumer sentiment remains subdued. Amid this, businesses hope for structural reforms in the upcoming budget to stimulate growth, with specific emphasis on rationalizing GST rates, bolstering manufacturing, and boosting domestic consumption.

Rationalizing GST Rates

A key expectation from the corporate sector is the rationalization of the Goods and Services Tax (GST) structure. Simplifying GST rates, especially lowering taxes on essential goods and increasing them on luxury or non-essential items, could help the government revive consumption without significantly impacting revenues. By aligning tax rates across different sectors, this could also reduce the cascading effect of taxes and address the confusion around tax classifications, which often lead to litigation.

Certain sectors have voiced their specific demands for tax relief. The insurance industry, for instance, is seeking a reduction in the GST rate on health insurance premiums, which are currently taxed at 18%. In addition, the real estate sector, particularly the cement industry, is lobbying for a reduction in the GST rate on cement, which is taxed at the highest rate of 28%. Lowering GST on such essential sectors could alleviate operational costs and contribute to overall economic growth.

India Inc. also believes that reducing personal income tax rates, particularly for individuals earning up to ₹25 lakh per annum, could provide consumers with more disposable income, thereby stimulating demand. Simplified tax regimes would also improve the ease of doing business, positioning India as a more attractive destination for global investments.

Encouraging Manufacturing Investment

Another crucial demand from India Inc. is an increased focus on manufacturing, with many industry bodies calling for higher capital expenditure (capex) allocations in the upcoming budget 2025. The Confederation of Indian Industry (CII) has suggested a 25% increase in capex over the ₹11.11 lakh crore allocated for the current fiscal year. The Federation of Indian Chambers of Commerce and Industry (FICCI) has proposed a 15% increase, emphasizing the need for enhanced infrastructure investments to stimulate manufacturing.

Additionally, CII has called for the introduction of a second phase of the Production-Linked Incentive (PLI) scheme, specifically targeting sectors like ready-made garments. Expedited trade agreements with the European Union (EU) and the UK, along with labour reforms, are also being requested. The industry is keen on expanding the PLI scheme to cover more sectors beyond the current 14, including medicinal plants, handicrafts, leather and footwear, gems and jewellery, and even space technology. Targeted incentives for high-value sectors such as electronics and precision machinery are also expected to boost India’s competitiveness in global manufacturing.

Support for Small and Medium Enterprises (SMEs)

Small and medium enterprises (SMEs) are vital to India’s manufacturing ecosystem, and their growth is a key focus for industry leaders. To support these businesses, experts are advocating for increased access to affordable credit and enhanced support for innovation. India Inc. believes the Budget 2025 should prioritize measures that enable SMEs to scale up and expand into international markets.

Several industry bodies have recommended additional funds to enhance credit flow, drawing inspiration from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which was set up during the COVID-19 pandemic. To further empower SMEs, there is a call for the creation of specialized MSME universities dedicated to entrepreneurship training and skill development, which would help fill gaps in the workforce and foster innovation.

Boosting Consumption

Lastly, stimulating consumption is a significant priority for India Inc., especially in sectors dealing with consumer goods and retail, as well as the fast-moving consumer goods (FMCG) industry. Corporate leaders are hopeful that tax reliefs in the budget 2025 will provide consumers with more disposable income, fueling demand and leading to job creation across various sectors. A rise in private consumption would not only benefit the retail and FMCG sectors but also provide a broader economic boost, helping to revive growth in a sluggish economy.

Budget 2025

India Inc.’s wish list for the Union Budget 2025 emphasizes key reforms that could improve economic prospects. Rationalizing GST rates, increasing investments in manufacturing, supporting SMEs, and boosting consumption are seen as essential steps toward fostering sustainable growth and overcoming current economic challenges. By implementing these measures, the government could potentially pave the way for a stronger, more resilient economy in the years to come.

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