The Union government should increase capital expenditure by 25 per cent in FY26 while staying within the fiscal glide path, Confederation of Indian Industry (CII) president said Wednesday. Speaking to The Indian Express, He, warned that contraction in public capex could suppress consumer demand and a reduction in personal income tax for people earning below Rs 20 lakh is needed to boost consumption.
As part of CII’s economic outlook and recommendations for the upcoming Union Budget 2025-26, Puri said labour-intensive sectors like footwear and apparel require targeted interventions to increase exports and stressed the need for free trade agreements (FTAs) with the UK and Europe to allow domestic companies to integrate into global value chains. “Public capex has started to pick up and that has done well to crowd-in private capex. We are recommending next year that the public capex be enhanced by 25 per cent while staying within the fiscal glide path, and not to compress that any further because that can suppress demand,” he said. The central government aims to reach a fiscal deficit below 4.5 per cent next year, in line with the fiscal consolidation path outlined in 2021.
“Then, there is also a need to directly boost consumption by providing some relief to the middle class through some reduction in excise on petroleum products and reduction in personal income tax for people below Rs 20 lakh. The MNREGA wages can also be increased to whatever was recommended by the expert committee, really giving more money in the hands of people,” he added.
When asked whether private capex has fallen short of expectations, he said, “There might have been some transient factors in the recent past where certain activity kind of slowed down, but if you look at it today, CMIE has said that the announcements of capex have seen a jump in Q2. There is also data to show that the order books of industries to do with plant and equipment of capital goods is also good. Third, if you look at what our members are saying, 35 per cent are saying that they will be investing more this year, 45 per cent are saying they will be investing more next year.” On India Inc’s low research and development (R&D) spend, he said, “There is no taking away from the fact that corporate needs to invest more in R&D. It is happening in certain sectors and we need to broadbase it. With some of the newer sectors that are evolving in the country, there also R&D will improve.” He said the government should also operationalise its Rs 1 lakh crore innovation corpus for the private sector to boost R&D.
On skilling, he said the PM Internship Scheme is a “game changer”. When asked about the lukewarm response received so far, he said, “As is the case with such schemes, there would be some teething problems but we can expect to see quick ramp up. In the meantime, some operational issues are being gone over to resolve and also work is on to have the best understanding of the various facets of the opportunities that the scheme presents. I think the industry is continuing to work in partnership to see how we can take it forward as fast as possible.” On the estimated 6.4 per cent growth in India’s GDP in the current financial year, he said it’s a “decent number” given global headwinds. “We must recognise that this number is being achieved in a situation where merchandise export is depressed and China has been dumping stock around the globe and in India too. We’ve also gone through a period where food inflation has been sticky, which impacts the capacity to spend,” he said.
To partly address inflation in fruits and vegetables, he suggested creating climate-controlled infrastructure around urban clusters and giving them at nominal rates to small and marginal farmers to use for cultivation.
he highlighted the need for targeted interventions in labour-intensive sectors like footwear, apparel, tourism, and furniture. He said the apparel sector can benefit from labour reforms while giving the hospitality sector an infrastructure status could boost investments.
On the appetite for FTAs when countries across the world are raising tariffs and turning inwards, he said, “If you see the global dynamic today, it is around realignment of supply chains and building resilience. So, people want alternate sources. From that perspective, India is well placed. For India to be able to do FTAs, I think there is opportunity.”
