Industry body PHD Chamber of Commerce and Industry (PHDCCI) has called for a five-pronged strategy in the upcoming union budget to revitalise private investment and put the economy on a growth trajectory amid the "crucial juncture" of geo-political uncertainties.
The body has recommended tax rebate on consumption, and agriculture reforms along with focus on tourism for job creation in the economy, among the measures needed. On infrastructure, PHDCCI suggested that there is a need to take the capital investment in the economy to 10% of the GDP. The share of capital expenditure in GDP currently stands at about 3%.
"The Union Budget 2023-24 is being presented at a crucial juncture of geo-political uncertainties, high inflation and slowing world economic growth. At this juncture, calibrated steps to enhance domestic sources of growth would be crucial to maintain the steady economic growth trajectory," PHDCCI said in the pre-budget memorandum released yesterday.
Recommending a five-pronged strategy to revitalise the private investments, the industry body called for enhanced consumption, increased capacity utilisation in the factories, employment generation, enhancing the quality of social infrastructure and strengthening economic growth.
"To enhance the momentum in private investments, there is a need to percolate ease of doing business at the factory level, rationalisation of cost of doing business, rationalisation of taxation, state of the art infrastructure, and enhanced incomes in the agriculture sector," the industry association said.
For the much needed push to consumption in the economy, the industry body called for increased tax rebate benefits for consumption expenditure. "Tax rebate on purchase of self-occupied houses has been given ₹2 lakh only since the last many years. This needs to be enhanced with the wider scope of consumption expenditure such as purchase of more than one house purchase of car, along with other durables," it recommended.
"Consumption expenditure rebate must be enhanced to Rs 5 lakh per annum. This will not only enhance the aggregate demand in the economy but also attract private investments, increase capacity utilisation of the firms and create enormous employment opportunities in the economy," it suggested.
"To enhance the capacity utilization in the economy though consumption is the most significant ingredient, reduced costs of doing business at this juncture is also an important factor which increases the efficiency of the enterprises and enhances the production possibility frontiers," it added.
The association also called for reduction in costs of doing business with lower cost of capital, power, logistics, land and labour.
"To enhance the employment creation in the economy, we suggest further reforms in the agri and food processing sector with a great infusion of public investments in the agriculture infrastructure. Reforms in rural infrastructure logistics and cold chain are required as it would help in increasing the level of food processing industry and rural entrepreneurship," the memorandum said.
"This would lead to increased participation in global agriculture and food exports. Exports of agriculture and food processing products should be increased to the level of $100 billion in the next three years from the current level of around $50 billion in 2021-22," said the body.
The industry body has suggested that there is a need to look at the tourism sector to create employment opportunities. "In India, the majority of the travel and tourism industry is composed of MSMEs. In this regard, development of tourism infrastructure is of paramount importance and should be supported with adequate resources for the development of tourism infrastructure in the country," it added.
On the significance of infrastructure for economic growth, the body said increased spending on infrastructure will give a multiplier effect to rejuvenate the aggregate demand in the economy. "We suggest that infrastructure investment in the economy must not be less than 10% of the GDP to achieve state of art infrastructure and to become a developed economy by 2047," the body added.
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