Industry body Assocham on Thursday made a strong case for doubling the income tax exemption limit to Rs 5 lakh in the forthcoming Budget so that the economy gets a consumption boost.

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Currently, the maximum amount of income which is not chargeable to income tax is Rs 2.5 lakh. In case of persons in the age bracket of 60-80 years, it is Rs 3 lakh and Rs 5 lakh for senior citizens who are above the age of 80.

During a media interaction, Assocham President Sumant Sinha opined that companies in sectors like steel and cement are now beginning to make plans to increase capacities.

Talking about the downside risks, he shared that globally, the world might go into recession and that will impact the external sector, and therefore may affect India's gross domestic product (GDP).

In its pre-Budget recommendations, the chamber said the government should increase the exemption limit for income tax to at least Rs 5 lakh so that more disposable income is left in the hands of consumers and the economy gets a consumption boost and further leg-up in the recovery.

Sinha said buoyancy in both direct and indirect taxes should give enough elbow room to the government for raising the income tax exemption limit.

The government must respond to the proactive steps other nations are taking to support the production of green hydrogen as India strives to become a major energy producer. Attention should be given to sustainable and green industries to promote job growth and a green economy, he said.

"Boosting consumption by leaving more money in the hands of the consumers is a low hanging fruit for a further recovery in economic growth," said Deepak Sood, Secretary General, Assocham.

The chamber said along with consumption, the other path to sustainable growth would be further promoting investment.

In this direction, it said the 15 per cent corporate tax rate for new investments in manufacturing can be extended to all sectors, including services.

Suggesting another relief measure, it said the interest for late payment of GST should be reduced to 12 per cent from 18 per cent. "The penal interest rate of 18 per cent is too high, particularly for MSMEs," it said.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2023-24 in February in the Lok Sabha.

Asked about India Inc's investment scenario, Sinha opined that companies in sectors like steel and cement were now beginning to make plans to increase capacities which is necessary because as consumer demand picks up, if productive capacity is not increased in some of these areas then it will lead to higher inflation.

Talking about the downside risks to the economy, he shared that the world might go into recession and that will hit our external sector, and therefore might have an impact on the gross domestic product.

However, Sinha added that commodity prices and oil rates will come down, which will be positive for India.

Sharing his views on the Production Linked Incentive (PLI) schemes, the Assocham President observed that "there are clearly more applicants that are coming in than there is money to be allocated, not in all sectors but certainly in some sectors."

He suggested that the government can reallocate funds between the PLI areas.

Replying to a question, he said, globally, job losses are happening mostly in the technology sector.

"It might go into other manufacturing sectors eventually but right now the front end is really in the tech sector and part of the reason is that the tech sector had hired a lot more ahead from where they were from a demand standpoint," he said, adding that as global demand is slowing down, some of the companies are having to pare their headcount. 

In India, Sinha said, a lot of the hiring was driven by the fundraising by some of these companies. He added that the laying off is not so much economy driven as it is funding driven.