Industry body CII in its budget suggestions for 2025-26 has recommended lowering the excise duty on fuel to boost consumption, especially at the lower income level, arguing that fuel prices significantly drive inflation.
The budget could also consider reducing marginal tax rates for personal income up to ₹20 lakh per annum. This would help trigger the virtuous cycle of consumption, higher growth and higher tax revenue, said the CII.
“The central excise duty alone accounts for approximately 21 per cent of the retail price for petrol and 18 per cent for diesel. Since May 2022, these duties have not been adjusted in line with the approximately 40 per cent decrease in global crude prices. Lowering excise duty on fuel would help reduce overall inflation and increase disposable incomes,” the industry body said.
Chandrajit Banerjee, director-general, CII, said domestic consumption has been critical to India’s growth story, but inflationary pressures have somewhat eroded the purchasing power of consumers.
According to him, while recent quarters have shown promising signs of recovery in rural consumption, targeted government interventions, such as increasing per unit benefit under its key schemes like MGNREGS, PM-KISAN and PMAY, and providing consumption vouchers to low-income households, can further enhance the rural recovery.
The CII suggested the introduction of consumption vouchers, targeted at low-income groups to stimulate demand for specified goods and services over a designated period.
The vouchers could be designed to be spent on designated items (specific goods and services) and could be valid for a designated time (like six-eight months), to ensure spending. The beneficiary criteria can be defined as Jan-Dhan account holders who are not beneficiaries of other welfare schemes.