PHDCCI Calls for tax cuts, MSME Support, and Boost to Manufacturing ahead of 2025-26 Budget

MUMBAI: In a key industry interaction with Finance Minister Nirmala Sitharaman, the President of PHD Chamber of Commerce and Industry (PHDCCI), Hemant Jain, put forth a series of crucial recommendations aimed at fostering India's economic growth. The proposals primarily focused on simplifying the tax structure, boosting the manufacturing sector, and creating a more conducive environment for Micro, Small, and Medium Enterprises (MSMEs).

One of the central recommendations was the reduction of tax rates for individuals and Limited Liability Partnerships (LLPs) to 25 per cent. Jain emphasised that this move would not only ease financial pressures on businesses and individuals but also stimulate investment and increase economic activity across various sectors. Simplifying the tax structure would further reduce compliance costs, increase disposable income, and ultimately drive consumer spending—encouraging business expansion and economic growth.

Jain also highlighted the need to eliminate the inverted duty structure, which currently affects industries like cement, aluminium, steel, and paper products. This structure leads to higher costs for domestic manufacturers, making them less competitive globally. Addressing these inefficiencies, Jain said, would help bolster the manufacturing sector.

The PHDCCI also called for reforms to support the MSME sector, the backbone of the Indian economy. Key proposals included extending the classification norms for MSMEs under Non-Performing Assets (NPAs) from 90 days to 180 days, allowing businesses more time to manage their financial challenges. The Chamber also suggested expanding the scope of the Interest Equalisation Scheme to include MSME service exporters, who are crucial to the economy but often face financial constraints.

Additionally, PHDCCI proposed extending the MSE Facilitation Councils, which currently cover only micro and small enterprises, to include medium-sized enterprises. This would address delayed payment issues and ensure quicker settlement of dues, which often pose liquidity problems for MSMEs.

PHDCCI's recommendations further called for reforms to make India a global manufacturing hub. Jain proposed that the government aim to increase the manufacturing sector’s contribution to GDP from 16 per cent to 25 per cent by 2030. To achieve this, significant reforms are needed to enhance productivity, reduce the cost of capital, and improve logistics. Moreover, PHDCCI urged the government to expand the successful Production Linked Incentive (PLI) scheme to more sectors, including medicinal plants, handicrafts, and space technology, to further strengthen India's manufacturing capabilities.

Looking ahead to the 2025-26 Union Budget, PHDCCI anticipates an increase in the budget size from Rs48.2 lakh crore in 2024-25 to over Rs51 lakh crore. The Chamber recommended a substantial rise in capital expenditure, particularly for infrastructure development, which it views as crucial for creating jobs, boosting demand, and stimulating economic growth. PHDCCI has suggested increasing capital expenditure from Rs11.11 lakh crore to over Rs13 lakh crore.

While commending the government's efforts in infrastructure development, Jain urged more attention to Tier 2 and Tier 3 cities, as well as the creation of smart villages with adequate public utilities. Expanding infrastructure beyond major urban centres would ensure balanced regional growth and create business opportunities in smaller cities and rural areas.

PHDCCI also recommended policy initiatives to increase female participation in the workforce, which currently stands at just 32 per cent, the lowest among the world’s top 10 economies. The Chamber called for targeted measures to enhance women’s participation in the labor market, thereby improving overall economic productivity.

In closing, Jain and the PHDCCI delegation, which included Mukul Bagla, Chairman of the Direct Tax Committee, Dr Ranjeet Mehta, CEO and Secretary-General, and Dr SP Sharma, Chief Economist, presented their pre-budget memorandum to the Ministry of Finance.