The pre-Budget consultation meeting held by Finance Minister Nirmala Sitharaman on December 30 has sparked a fresh wave of proposals aimed at bolstering India’s economic growth, especially in the stock market and MSME sectors. One of the key suggestions that emerged from the meeting, led by the PHD Chamber of Commerce & Industry (PHDCCI), was the abolition of the Securities Transaction Tax (STT). The idea is to reduce the tax burden on stock market investors and encourage more investments, ultimately stimulating growth in the economy.
Key Suggestions from PHDCCI
At the pre-Budget consultation meeting, PHDCCI suggested that the government should abolish the STT, which has been a significant burden on investors. According to PHDCCI, the recent increase in the long-term capital gains tax (from 10% to 12.5%) on listed shares has already aligned stock market tax policies with those of other assets. Therefore, the removal of STT could create a more favorable environment for stock market participation.
Between April 1 and December 17 of the current fiscal year, the government collected Rs 40,114 crore through STT. PHDCCI believes that removing this tax would not only relieve investors but also boost stock market activity. “This move would reduce the tax burden on investors and encourage more investment in the stock market, thereby stimulating economic growth,” said the industry body.
Proposed Measures for MSMEs
Apart from the proposal to abolish STT, PHDCCI also put forward other measures aimed at encouraging business growth and fostering investment. They suggested reducing tax rates for individuals and Limited Liability Partnership (LLP) firms to 25% in the Union Budget 2025-26. Additionally, PHDCCI recommended an increase in capital expenditure to over Rs 13 lakh crore for the next fiscal year, up from the Rs 11.11 lakh crore allocated in the current fiscal year.
Another suggestion that was highlighted was the expansion of the Production Linked Incentive (PLI) scheme. PHDCCI recommended that the PLI scheme be extended beyond the 14 current sectors to include industries like medicinal plants, handicrafts, leather, footwear, gems and jewellery, and the space sectors. This expansion could further accelerate economic growth and make India a hub for innovation and manufacturing.
Recommendations from ASSOCHAM and FICCI
Other industry bodies like ASSOCHAM and FICCI also submitted their suggestions during the pre-Budget consultations.
- ASSOCHAM’s Proposals:
ASSOCHAM recommended that banks be mandated to periodically disclose the number and amount of collateral-free loans granted to Micro, Small, and Medium Enterprises (MSMEs). Additionally, they suggested increasing the allocation for MSMEs in order to enhance the credit flow, similar to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) established during the COVID-19 period. - FICCI’s Proposals:
FICCI, on the other hand, recommended a 15% increase in the capital expenditure for FY 2026 over the Rs 11.11 lakh crore that was allocated in the 2024-25 Budget. They also called for rationalizing TDS/TCS rates and limiting the imposition of TDS on transactions already covered under GST. Further, FICCI recommended increasing the health sector allocation to 2.5% of GDP by 2025 and expanding the scope of priority sector lending to include climate adaptation and electric vehicles (EVs).
Conclusion
The suggestions put forth by various industry bodies in the pre-Budget consultation meeting underline the importance of reforms to promote investment, enhance business opportunities, and strengthen key sectors of the Indian economy. The abolition of STT, in particular, has the potential to reinvigorate the stock market and attract more investors.
As the government prepares for the Union Budget 2025-26, these proposals will be carefully considered. They highlight the need for tax reforms, increased capital expenditure, and a continued focus on making India a global leader in innovation and manufacturing.
This year’s Budget promises to set the stage for India’s continued growth and recovery, especially in sectors such as stock market investments, MSMEs, and health.
