Budget 2020-21: The journey to successful companies, jobs and the march to a high growth economy is a journey that we all have to take together
By Ganesh Natarajan
Budget 2020-21: What can one say of a Budget which has aspiration, development and compassion as its watchwords? Announcements are fine and as always there were quite a few made while some industry demands were ignored, but the devil lies in the details of implementation. With the economy in its current moribund state, a lot needs to be done beyond the Budget. Let us specifically look at the impact in three areas—the exports industry, particularly IT, the small and medium enterprises (SME) sector, including young entrepreneurial entities and overall job creation, all of which have a great role to play in the future of our country and its position in the world.
Let us first look at the opportunities for job creation, where the Economic Survey released a day earlier flagged exports and a “like-China” strategy as the best way to create new jobs in an environment where private sector investments in the country have been woefully low. A mistake of the past has been the focus on capital intensive “Make in India”, when the real opportunity could have been in labour intensive assembly, textiles, arts and crafts-related work spread across many states and small locations around the country. China succeeded in a big way with electronics assembly and Bangladesh has stolen a clear march on us with garment manufacturing and exports. To make this happen, a strong focus on the SME too is an imperative.
To be fair, the Modi government has made all the right pronouncements in the last two years to boost this segment. Major measures have been undertaken to enable technology upgradation, better credit flows and market access. Financial easing, including portal-based loan approvals, has resulted in over 1.5 lakh loans sanctioned of nearly Rs 50,000 crore value in the first 12 months. Guidelines on at least 25% of total purchases of central public sector undertakings (PSU) from MSMEs through use of the government e-marketplace portal have also resulted in transparency and ease of doing business for SMEs. The Budget this year has not moved that needle much though the announcement of data centre parks throughout the country and fibre-to-home in all gram panchayats will create a level-playing field for tech enabled businesses to spring up all over the country.
In the IT exports sector, the Budget has been silent on any new schemes but the absence of any significant government moves to overtax or reduce the profitability of businesses will motivate entrepreneurs as well as global majors to continue their investments in Indian facilities and people. Some small announcements like the Nirvik scheme for exporters and the scheme for reversion of duties and taxes on exported products are also welcome. For larger firms, the abolition of dividend distribution tax and the adoption of a taxpayer charter to address tax harassment should assuage existing fears. Beyond the Budget, the continuance of industry-friendly labour laws and an environment where both manufacturing and services exports can flourish is the best one can hope for to ensure that these sectors show double-digit growth in the next year and enable the achievement of the 6.5% GDP growth target.
Startups have reason to cheer this Budget. Seed funding to support ideation and development of early stage startups, a strong focus on IPR which should help the product development eco-system, deferment of tax liability on sale of employee stock options by five years and the enhancement of the turnover limit for claiming 100% deduction from profits to Rs 100 crore and period extension from seven to 10 years will create a positive climate for serious entrepreneurs to start and build successful companies.
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The biggest concern is still the future of jobs. As Harari has said in his path-breaking book Homedeus, the jobs of the future will not be what our young engineers have been trained for and the country has to invest in preparing both youth and employed folks for new job and entrepreneurship opportunities on an ongoing basis. The focus for the skills ministry and NSDC should be to encourage entrepreneurs to build compelling training content in each area where future opportunities will lie. The traditional industrial training institutes (ITI) and skills institutions will need to focus on new areas for job entrants and re-skilling and up-skilling youth in organisations and even adults looking for new careers. The move in the Budget to offer online courses at all major universities is a welcome step in this regard but one has to watch the implementation carefully.
Overall, there are many positive steps in this Budget but the journey to successful companies, jobs and the march to a high growth economy is a journey that we all have to take together.
The writer is chairman of 5F World, Kalzoom Advisors, Social Venture PartnersKalzoom Advisors and Social Venture Partners