Budget 2022 identifies building blocks for sustainable growth

Union Finance Minister Nirmala Sitharaman deserves praise for instilling greater confidence among investors in India’s economic growth process. Equally importantly, Sitharaman has invested greater trust in households and firms by simplifying and making more transparent the tax regime. Taken together, a higher level of investor confidence, on the one hand, and trust-based governance, on the other, can revive capital formation in the private sector.

From a business viewpoint, it is re-assuring that the minister has contextualised this year's budgetary strategy within the long-term development strategy outlined by Prime Minister Narendra Modi as “Amrit Kaal”. The Budget has referred to three markers, namely, (a) complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus; (b) promoting digital economy and fintech, technology-enabled development, energy transition, and climate action; and, (c) relying on a virtuous cycle that starts with private investment, and expects public capital investment to help 'crowd-in' private investment.

This is a sound and balanced strategy that identifies the building blocks for sustained and sustainable growth. I welcome, in particular, several provisions of Part B of the Budget speech that show increased trust being placed in the investing, and tax-paying citizen.

Consider, for example, the announcement that the government, reposing trust in the taxpayer, will enable the taxpayer to declare the income that they may have missed out earlier while filing their return. It is indeed an "affirmative step in the direction of voluntary tax compliance", as Sitharaman has put it. Indian business will also welcome the decision to extend the timeline for the concessional tax regime of 15 percent for newly-incorporated manufacturing companies.

Equally important is the trust reposed by the finance minister in both the taxpayer, and the judicial process pertaining to appeals filed by tax assessees. The decision to defer the filing of further appeals by the income-tax department till questions of law are decided by the jurisdictional high court or the Supreme Court will help in reducing litigation between taxpayers and the government.

Finally, another important business-friendly announcement is the decision to reduce the graded surcharge on the income of members in a consortium of local and global companies formed to jointly undertake works from 37 percent to 15 percent.

The government deserves our compliments for placing its trust in India’s business, investor, and taxpaying classes. Lack of trust and transparency, and endless litigation have been the bane of doing business in India. Establishing a transparent, simple and trust-based policy and tax regime will go a long way in facilitating the ‘Make in India’ and ‘Atmanirbhar’ strategy, and boost industrial development.

While the services, digital, and e-economy are growing rapidly, we cannot neglect manufacturing. The government has rightly identified ‘Make in India’ as a priority giving the manufacturing sector the importance it deserves. The focus on the manufacturing sector in Budget 2022 should, therefore, be welcomed.

My only concern is that Sitharaman may not have provided adequately for the COVID-19 vaccine programme. It appears the budgetary provision for COVID-19 vaccines has been reduced from Rs 39,000 crore to a mere Rs 5,000 crore. This seems to be based either on the assumption that vaccine demand will taper off in the next financial year, or that citizens in need of vaccination will have to procure the same directly from private sector manufacturers. Apart from the fact that a sizeable segment of the population, especially children, remains to be vaccinated and may require booster doses, new variants and new waves may also emerge. She would, therefore, be well advised to reconsider the budgetary allocation made for the subsidised supply of vaccines.

If the government delivers on its promise of increased public investment and spending, and can boost investor and consumer confidence in the rejuvenation of the growth process, the private sector will respond in full measure, and with great vigour. Indian companies have already made their mark on the global stage, and will continue to grow, making in India, and making for the world.

Habil Khorakiwala is Founder Chairman, Wockhardt Group, and Past President, FICCI. Views are personal, and do not represent the stand of this publication.