Union Budget 2025-26: CII Proposes Tax Cuts, Wage Hikes, Fuel Duty Cut

CII Proposes Bold Reforms in Union Budget 2025-26 to Spur Economic Growth

In anticipation of the Union Budget 2025-26, the Confederation of Indian Industry (CII) has presented an ambitious agenda aimed at boosting disposable incomes, stimulating consumption, and fostering economic growth. The industry body has urged the Central government to implement a slew of measures, including cuts to personal income tax, reductions in fuel excise duties, and hikes in welfare spending.

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Focus on Fuel Excise Duty Cuts

One of the key proposals involves reducing excise duties on petrol and diesel, which the CII argues are pivotal to controlling inflation and increasing household spending power. Currently, central excise duties contribute about 21% to petrol prices and 18% to diesel prices. Despite a significant drop in global crude oil prices since May 2022, domestic excise duties have remained unchanged.

“Fuel prices have a cascading effect on inflation. A reduction in excise duties can help rein in costs, enhance consumer spending, and drive demand,” the CII stated in its proposal.

Rationalizing Income Tax Rates

CII also spotlighted the disparity between individual and corporate tax rates. While the corporate tax rate stands at 25.17%, the highest marginal personal income tax rate soars to 42.74%. The chamber proposed a recalibration of tax slabs, particularly for individuals earning up to ₹20 lakh per annum.

“A rationalized tax structure will not only improve disposable incomes but also encourage greater compliance, spurring growth and potentially offsetting revenue losses,” CII noted.

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Boosting Welfare and Rural Demand

The industry body has called for targeted increases in welfare spending to invigorate rural demand. It proposed:

• Raising the daily wage under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) from ₹267 to ₹375, as recommended by the 2017 Expert Committee on Fixing National Minimum Wage. This would require an additional ₹42,000 crore annually.
• Increasing the annual payout under the PM-KISAN scheme from ₹6,000 to ₹8,000, benefitting an estimated 10 crore farmers at an additional cost of ₹20,000 crore.

CII also urged the government to revisit cost benchmarks under housing schemes like PMAY-G (Pradhan Mantri Awas Yojana - Gramin) and PMAY-U (Urban). Additionally, it advocated for consumption vouchers targeting low-income groups, which could be issued to Jan-Dhan account holders to drive demand for specific goods and services.

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Addressing Declining Household Savings

Raising concerns over the dip in household savings, CII highlighted that the share of bank deposits in financial assets has dropped from 56.4% in FY20 to 45.2% in FY24. This decline has been attributed to low interest rates, a preference for equities, and high taxation on deposit interest income.

To reverse this trend, CII recommended:

• Reducing tax rates on interest income from bank deposits.
• Lowering the lock-in period for fixed deposits with tax benefits from five years to three years.

Economic Growth and Inflationary Challenges

CII Director General Chandrajit Banerjee emphasized that domestic consumption remains the backbone of India’s growth narrative. However, inflation has significantly dented purchasing power.

“India’s economic growth needs to be bolstered by enhancing disposable incomes. This will stimulate demand and sustain momentum,” Banerjee said.

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Balancing Growth with Fiscal Prudence

While the proposals involve additional expenditure, CII has framed its recommendations as growth-oriented and fiscally balanced. As the government gears up to present the Union Budget 2025-26, these suggestions reflect a push for policies that prioritize consumption and welfare without compromising fiscal responsibility.

If adopted, these measures could redefine India’s economic landscape, driving a balanced recovery and fostering inclusive growth.