Budget should focus on stepping up the pace of investment for achieving higher growth and job creation, apex industry body CII said Tuesday.
The Budget will be announced "at a time when the macro-economic milieu continues to be domestically and globally challenging", the industry body said, adding that it looks forward to suitable policy interventions which would rekindle business sentiment and help to debottleneck economy.
The Union Budget for 2016-17 will be presented by Finance Minister Arun Jaitley on February 29.
"Considering that broad-based revival of private investment is being constrained on account of weak order book situation resulting in capacity overhang, there are hopes and expectations that the Budget would increase spending by the government, public sector and by quasi-government bodies," CII Director General Chandrajit Banerjee said.
The industry body said Budget should announce some bold steps to address the issue of non-performing assets (NPAs) in the banking system.As of September 2015, NPAs constituted over 5 per cent of banks' total advances.
"The government should consider the creation of a National Asset Management Company (NAMCO) which would take NPAs off the banks' balance sheet and also focus on rehabilitation, recapitalisation and refinancing of banks. This would release capital, provide banks with lendable resources and restore their health," said CII.
Stressing that measures such as reduction in corporate tax rate will go a long way in improving the tax base, it said the government should announce a year-wise roadmap for reduction of corporate tax rate from 30 per cent to 22 per cent along with withdrawal of incentives.
"However, the incentives should be phased out in a calibrated manner, in line with the reduction in tax rate and on a prospective basis so that any investments made on the basis of these incentives are not affected," CII said.
Higher public investment in key projects especially in infrastructure sectors such as roads, railways, power and waterways would "crowd in" private investment and in turn have a cascading effect on growth, the industry body said.
It also recommended speedy implementation of industrial clusters and parks such as NIMZ, DMIC & DFC projects.
The industry body suggested incentivizing 'off balance sheet' investment proposals, such as NHAI projects, railways etc, where it is possible to generate adequate revenues.
Stating that low-cost housing has one of the highest multiplier effects on the economy and provides the largest number of semi-skilled and unskilled jobs, CII recommended that deduction on interest for housing loans should be set at
Rs 50,000.
"Housing loan repayment may be covered separately and out of the purview of exemptions under Section 80C," it said.
On revenue generation, CII said: "At a time when tax revenue is stressed, stepping up non-tax revenue through spectrum sales and PSU divestment becomes crucial.
"To raise revenue, the government should sell all its stake in the Specified Undertaking of the Unit Trust of India (SUUTI) which can yield nearly Rs 50,000 crore to be used for investment."
Besides, it recommended better targeting of subsidies by linking subsidies on fuel, fertilizers and electricity to direct benefit transfer, and said fertilizer subsidy should be paid directly to farmers as cash transfers.
Budget should aim at restoring the strength of the rural economy which has been adversely impacted by two consecutive droughts, by taking steps to stimulate rural demand, CII said.
It also suggested increased allocation on schemes such as Pradhan Mantri Gram Sadak Yojana and the Pradhan Mantri Krishi Seenchayi Yojana.
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