Budget 2019 India: The Budget has spelt out a five-star vision of a $5-trillion economy by 2024. For that to happen, India needs to grow at 8% for the next five years
By Debjani Ghosh
Union Budget 2019 India: Currently, the Indian GDP is at $2.7 trillion, which is the sixth largest in the world. In as much, it’s a grand vision to be a $5-trillion economy by 2024. The Union Budget 2019 spells it out clearly and has the potential to take the nation on a path of high growth. However, a few parameters fall short on details, and we will have to work with the government to ensure that we stay on course and not get carried away by the optics.
Among several positive aspects, the focus on talent and startups are clearly the big ones. Particularly on talent, the government rightly identifies new-age skills in Artificial Intelligence (AI), Internet of Things (IoT), Big Data, 3D printing, Virtual Reality and robotics to be the must-haves, and imparting adequate skilling to be the primary driver of the demographic dividend.
This was a key Nasscom ask and we are delighted that the National Research Foundation has been tasked with consolidating research initiatives and skills training in these areas, including language proficiency. The allocation of Rs 400 crore for world-class higher education institutions is a significant leap towards positioning India as a high-end talent hub.
Nasscom wants the government to have a long-term view of startups, so that they get adequate legroom for innovation-led growth. While angel tax issues—the pet peeve—have been addressed and the compliance burden eased earlier, this time the government has commendably gone a step further. Startups and their founders who submit declarations and provide information on their returns will not be subject to scrutiny in respect of valuations of share premiums.
Moreover, establishing the identity of investors will now be done through an e-verification process. Furthermore, the pending cases will not be subjected to unnecessary scrutiny. Also, Private Equity Funds will now be exempted from angel tax, providing a fillip to the ecosystem players.
Greater connects can now be established through an exclusive TV channel for startups, And, towards providing easy access to funds, MSME loans upto Rs 1 crore will be approved in 59 minutes. In addition, there’s an allocation of `350 crore for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans under the Interest Subvention Scheme.
The information technology—business process management (IT-BPM) industry earns forex in excess of $130 billion and contributes over 66% of India’s services exports. Keeping this in mind – contribution by large IT companies – we are a tad disappointed on a key exclusion. The SEZ benefits will end in March 2020 and we had expected a clarification on the new SEZ policy.
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But, that did not happen. In November 2018, a committee was set up by the government which had detailed a tax-friendly SEZ policy in continuum. We remain hopeful that there will be an announcement later during the year. In a hyper-competitive environment where countries such as China, South Africa, Indonesia, Mexico and South Korea offer reduction of income tax in special zones, we cannot afford to miss this one.
There are hundreds of IT companies which have a turnover of more than Rs 400 crore. While the progress on the glide path to reduced corporate tax of 25% is appreciated, yet, a globally competitive tax structure continues to elude the large companies.
The government’s intent on fostering the right infrastructure for Digital India comes across strongly once again. There’s a continued focus on automation and streamlining of the tax administration. Towards boosting Make in India, the government has earmarked `10,000 crore over three years for electric vehicles, and provisions have been made for tax rebates and customs duty reduction.
With an aim to attract global companies through transparent bidding, the government will launch a scheme to attract investments in sunrise industries such as semiconductor fabrication, solar photovoltaic cells, lithium storage batteries and solar power charging infrastructure.
There were a few other misses such as, no incentives were announced for R&D investments and re-skilling, or any reduction given on minimum alternate tax (MAT).
The Budget has clearly spelt out a five-star vision of a $5-trillion economy by 2024. For that to happen, India needs to grow at 8% for the next five years and we will need a clearer path. As they say, the devil is in the details, but we remain confident that in the following months we will have greater clarity. And of course, as a nation, we have to execute with a greater sense of urgency!
(The author is President, Nasscom)