Deepak Sood, Secretary General, ASSOCHAM
In the current geopolitical situation where transnational companies are seriously working on a China-plus strategy, India is positioning itself to emerge as a global manufacturing hub by 2030. The union government has unveiled a series of measures like Gati Shakti (supply chain), Production Linked Incentives (PLI), Make In India, reduced corporate tax rates (to 15 percent), etc., to attract global investment and promote domestic enterprise.
These measures have already started showing results even as the overall global sentiment has been queered by inflationary headwinds.
Union Finance Minister Nirmala Sitharaman will present the budget for 2023-24 against this backdrop. India Inc. is pinning great hopes on it for several bold measures that will ensure that India continues to remain an outlier with a sustained growth rate of 7 percent.
India is no longer constrained by Chinese dominance, which has been dented by Covid and geopolitics. Following serious supply-chain disruptions during Covid, MNCs realised that it would be wise to diversify their supply-chain risks.
The resilience of the Indian economy makes it attractive as a manufacturing hub. It has replaced the UK as the fifth largest economy of the world, and is expected to overtake Germany and Japan to become the third-largest economy within a decade. Some of the factors that work in its favour are continuing economic liberalisation, a young demographic profile, and rising employment.
While the economy has shown outstanding recovery post the pandemic, it is still vulnerable to global developments due to volatility in international energy prices and financial markets.
The geopolitical crisis, inflation, and a global slowdown looms large over India too. In fact, it has already impacted exports, which was one of the sectors that helped the economy recover last year. The global crisis is expected to last for a while, which makes it all the more necessary to strengthen the domestic economy with policies that encourage new avenues for revenues and also generate employment.
There has been an emphasis on calibrated steps to grow the domestic market in order to maintain the growth trajectory. This was evident in the pre-budget consultation, where the Finance Minister met with industry leaders, exporters, and infrastructure experts about their expectations from the budget. Below are some of the points raised by ASSOCHAM and others:
The PLI scheme was introduced in 2021 with an initial outlay of around Rs 2 lakh crore for 13 sectors. These incentives have done much to boost domestic manufacturing, investment, as well as job creation. It is therefore advised that the government continues to focus on it.
There is continued emphasis on creating a conducive atmosphere for business and helping grow private investment. This includes addressing the need for a single-window system for approvals, clearances, licenses, etc., including a reduction in the number of licenses. This will not only encourage cross-border commerce, but also enable SMEs to export their products worldwide.
Most industry associations, including ASSOCHAM, have strongly recommended a reduction in income tax rates for the salaried class. This would lead to a rise in disposable income, which in turn will boost domestic demand. It’s been suggested that the tax rebate benefits for consumption expenditure be increased to Rs. 5 lakh per annum. It has also been recommended that the 15 percent corporate tax rate for new investments in manufacturing be extended to all sectors, including services.
Since inflation has hit everyone hard, it is suggested that increasing direct taxes be avoided, and the 18 percent interest rate for late payment of GST be reduced to 12 percent for SMEs as it is too high for small businesses.
A transparent, paperless, end-to-end system to facilitate on-time payment is required. This will not only inject liquidity into the market but also encourage businesses to reinvest. Indeed, this will popularise Make in India both within the nation and internationally.
While exporters are asking for credit at affordable rates, MSMEs are asking for restructuring of existing loans, with a one year moratorium and an additional two years to repay the loans. They have also requested that loans should be classified as NPAs (non-performing assets) after 180 days of non-payment instead of 90 days as manufacturers often struggle to get timely payments from their buyers, leading to defaults in servicing the loan.
To help generate employment it is suggested that the upcoming Budget should introduce reforms in the agriculture and food processing sectors. This will help expand the food processing industry and encourage rural entrepreneurship, which will generate employment. There is also a need to identify new sectors in MSMEs, like travel and tourism. Prioritising tourism infrastructure development will lead to employment creation as well as growth of MSMEs. Needless to add, there should also be wide-ranging initiatives across industries to generate employment.
Deepak Sood is Secretary General, ASSOCHAM
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