New Delhi, Dec 14 (IANS): Industry body CII has recommended a three-pronged strategy for Budget 2021 centring around the key themes of growth, fiscal consolidation and strengthening of the financial sector that would help overcome the impact of COVID-19 on the economy.
The recommendations were presented to Finance Minister Nirmala Sitharaman at a meeting with industry leaders held on Monday.
Presenting the suggestions, Uday Kotak, President CII said, "this year's Budget comes at a time when the Indian economy is recovering from the unprecedented shock caused by COVID-19. The government has an unenviable task of ensuring a fine balance between supporting economic recovery and growth on one hand and ensuring macro-economic stability on the other. CII's suggestions take this aspect into cognisance."
Elaborating on the key themes of the CII recommendations, Kotak said, "CII has suggested that the Budget proposals should focus on growth, and alongside look at fiscal management from a 3-year perspective. Aggressive disinvestment and monetisation of assets can augment government revenues at a time when tax revenues have fallen sharply".
Kotak further added, "Government expenditure should be prioritised in three areas - infrastructure, healthcare and sustainability. The Budget proposals should also address two critical areas of boosting private investments and providing support for employment generation".
Emphasising on the urgent need for financial sector reforms, Kotak said "achieving the vision of India being a USD 5 trillion economy is contingent on having a strong financial sector. The government should bring down its stake in PSBs to below 50 per cent through the market route, over the next 12 months, except for 3-4 large PSBs such as State Bank of India, Bank of Baroda and Union Bank. The government should also create, government-owned, professionally-managed Development Finance Institutions (DFIs) to finance key sectors of the economy, on the lines of KfW Germany, Brazil Development Bank (BNDES), and Korea Development Bank. This could be achieved by infusing equity in NABARD for financing agriculture and rural sector, SIDBI for financing MSMEs and IIFCL for financing infrastructure.
Other suggestions given by CII include aggressive disinvestment of both loss-making and a few profit-making PSUs, especially given the fact that the capital markets are performing well and also explore sale or leasing of government's surplus land.
The industry body has also recommended that government should look at deficit management from a 3-year perspective given that the complete economic recovery is expected only in FY 2022.
The last Budget provided details on off-budget expenditures and their financing as an annexure. Take forward this effort and bring in greater transparency in deficit numbers. This implies realistic revenue projections, avoiding off-budget borrowings and realistic estimation of costs of various schemes, CII said.
It has also suggested that the government should consider bringing down its stake in PSBs to below 50 per cent through the market route, over the next 12 months, except for 3-4 large PSBs.
For infra financing, CII has suggested creation of a government-owned, professionally-managed Development Finance Institutions (DFIs).
"COVID impact is expected to exacerbate the NPA problem, affecting the credit cycle. To address this issue, facilitate multiple bad banks, by allowing Alternate Investment Funds (AIFs) to buy bad loans," it recommended.
On the tax front, CII has suggested the need to ensure a stable tax regime and maintain the sanctity of contracts for government and quasi government entities, as well as for state governments.
It also recommended extension for 'Vivad se Vishwas' scheme. As the operational challenges arising out of COVID-19 are likely to continue for some more time, extend the scheme till December 31, 2021, it said. Appeals pending on or before June 30, 2021 could be considered eligible for the scheme, CII said.