Modi 3.0

Finance and Corporate Affairs Minister Nirmala Sitharaman is set to engage in crucial pre-Budget discussions with key figures from the Indian industry this Thursday. These discussions aim to assess the industry’s expectations for the first comprehensive Budget of the Modi 3.0 government.

The upcoming full-fledged Budget, expected to be presented in the latter half of July, is anticipated to outline the economic roadmap of the Modi-led Government for the next five years.

This meeting holds significance as it marks the first high-level interaction between the government and the industry since Narendra Modi began his third consecutive term as Prime Minister on June 9.
Industry leaders are likely to emphasise the continuation of the government’s public capital expenditure-driven growth strategy, which has been evident in recent years, according to sources.

Rural push

The upcoming Budget is expected to heavily emphasise Rural India, possibly as a strategic response to sluggish consumption trends in those areas, according to sources. Economists and analysts will closely follow the June 20 meeting to hear industry recommendations on utilising the Rs 2.1 lakh-crore surplus from the Reserve Bank of India. There is significant anticipation regarding whether this surplus should be fully dedicated to fiscal consolidation, partly directed towards enhancing social welfare expenditures under the new coalition government, or entirely channelled into bolstering capital expenditure on public infrastructure.

Industry leaders, including Anish Shah from FICCI, Sanjiv Puri from CII, and Sanjay Nayar from Assocham, are expected to attend the pre-budget meeting. Additionally, the Finance Ministry plans to engage with top industry bodies separately this week, led by Revenue Secretary Sanjay Malhotra, as per insider sources. One of the critical points of interest will be India Inc’s stance on the Modi 3.0 government’s approach towards disinvestment and privatisation, given the varied outcomes observed in this domain over the past decade.

Structural reforms

The industry is seeking structural reforms in taxation. Discussions at the June 20 meeting are expected to include policy measures aimed at propelling India to become the world’s third largest economy. Alongside proposals regarding capital gains taxation, industry leaders are likely to advocate for increased free trade agreements. Sources indicate that despite benefiting from a corporate tax rate reduction in September 2019 — when the base rate was slashed from 30 per cent to 22 per cent for existing companies and from 25 per cent to 15 per cent for new manufacturing firms, Corporate India is not anticipated to push for further cuts in tax rates.