CII banks on Budget to revive investments

26 Feb '16

4 min read

Ahead of the Union Budget the Confederation of Indian Industry (CII) has said that it looks forward to suitable policy interventions which would rekindle business sentiment and thereby boost the economy.

In a press release, the CII said that the Union Budget for 2016-17 will be announced at a time when the macro-economic milieu continues to be domestically and globally challenging and the focus should be on stepping up the pace of investment expansion for achieving higher growth and job creation.

“Considering that broad based revival of private investment is being constrained on account of weak order book situation resulting in capacity overhang, there are hopes and expectations that the forthcoming Budget would increase spending by the Government, the public sector and by quasi-government bodies” according to Chandrajit Banerjee, Director General, CII.

According to the CII, higher public investment in key projects especially in infrastructure sectors such as roads, railways, power and waterways would ‘crowd in’ private investment and in turn have a cascading effect on growth. The CII has also recommended speedy implementation of industrial clusters and parks such as NIMZ, DMIC and DFC projects. The National Investment and Infrastructure Fund (NIIF) needs to be activated to provide more avenues for infrastructure financing.

CII would also recommend incentivizing 'off balance sheet' investment proposals, such as NHAI projects, railways etc., where it is possible to generate adequate revenues. The idea could also extend to identifying and promoting more PPP opportunities where the viability gap funding helps facilitate a much greater economic return.

Low-cost housing has one of the highest multiplier effects on the economy as there are over a 150 industry segments directly linked to the home construction Industry. It also provides the largest number of semi-skilled and unskilled jobs. The CII recommended setting deduction on interest for housing loans at Rs 50,000. It also said housing loan repayment may be covered separately and out of the purview of exemptions under Section 80C of the Income Tax Act.

On revenue generation, the CII maintained that at a time when tax revenue is stressed, stepping up non-tax revenue through spectrum sales and PSU divestment becomes crucial. To raise revenue, the government should sell all its stake in the Specified Undertaking of the Unit Trust of India (SUUTI) which can yield nearly Rs.50,000 crore to be used for investment.

On expenditure control of non-productive items, the CII recommends better targeting of subsidies by linking subsidies on fuel, fertilizers and electricity to direct benefit transfer. Fertilizer subsidy should be paid directly to farmers as cash transfers.

The Budget should announce some bold steps to address the problem of non-performing assets (NPAs) in the banking system. As of September 2015, NPAs constituted over 5 per cent of banks’ total advances. The government should consider the creation of a National Asset Management Company (NAMCO) which would take NPAs off the banks’ balance sheet and also focus on rehabilitation, recapitalisation and refinancing of banks. This would release capital, provide banks with lendable resources and restore their health.

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