By R S Jalan
Indian Union Budget 2021-22: The past year has been really trying for India and the World as a whole. The upcoming Union budget will have provision for many learnings and takeaways which emerged from the pandemic. There were many positives too that were made visible due to the pandemic which especially highlighted the Indian resilience and the ability to bounce back. It brought to the forefront our need to be self-sufficient as an economy.
Last year around the same time, the Indian economy was already decelerating i.e. growing at 4.1%. With the impact of the COVID situation, it is now projected to contract at 7.7%. The Government has a herculean task of pulling the economy from the throes of this contraction and hence must focus on infrastructure development which is a huge multiplier to stimulate economic growth in the country. To ensure that the Indian industry is ready to support the vision of $5 trillion GDP by 2025, the budget must allow more freedom and ease of doing business. The Government needs to work on further simplification of compliances and reduced regulatory burdens.
To give further impetus to the Government’s initiative to create an Atamnirbhar Bharat, it is important to boost domestic manufacturing across sectors and give domestic manufacturers a shot at fair competition. Hence the budget must strengthen anti-dumping policies. The MSME sector that employs almost 50% of the Indian workforce is faced with huge setbacks in both the informal as well as formal sector. The NBFC sector which has been instrumental in ensuring last mile credit to MSMEs needs to be supported to increase liquidity which will in turn boost investment, job creation and enhance consumption and growth in the economy.
The Textile Industry needs a package of relief in the upcoming Budget. A revision of the Technology Mission on Cotton with a focus on transfer of technology, clean cotton branding for Indian cotton and cotton textile products is much needed to revive the industry. Expeditious conclusion of FTA agreements with Britain, EU and US and the removal of “anti-dumping duty on import of VSF will help the textile achieve global competitiveness as the demand for viscose staple fiber and its blended textiles and clothing market opportunities has increased steeply not only in India, but also across the globe. The textile industry is one of the largest employment generator and has a major share in the GDP and foreign remittances. The government should look at attractive rates of newly implemented scheme RoDTEP to take care of state and central embedded taxes.
Chemicals is another industry where government intervention is necessary. In order to make the soda ash industry self-sustainable and cost competitive, the government needs to speed up the allotment of leases of Salt, Limestone and Lignite mines for captive use. Soda ash is a capex heavy industry and would certainly welcome some CAPEX based incentives to facilitate fresh investments in capacity addition. India is currently a huge net importer of alkali chemicals and government intervention in terms of protection and incentivisation of domestic industry from export giants is sought. The government should look at raising the import duty from 7.5% to 15% to restrict imports and boost Make in India. Ease of doing business for setting up the new projects, relaxation in land allotments and single window clearance for regulatory approvals will have a direct bearing on the “Atma Nirbhar Bharat” scheme promoted by the government.
Another key sector with a huge multiplier effect that is in need of immediate support is the reality sector. Measures to revive stalled RERA certified projects will have a positive cascading effect on many other sectors, boost income levels and spending which will benefit the economy. The pandemic has also exposed the existing gaps in our social infrastructure and healthcare. The upcoming budget must have provisions for better healthcare and increased investments in research and development of healthcare services and products.
The impact of the pandemic has particularly been devastating for the informal sector and the rural economy is facing huge setbacks. The upcoming budget needs to ensure increased rural income and spending by way of more job creation. Enhancing MSP support to farmers will improve their spending capacity and the consumption boost will thus create greater demand and subsequently higher returns for various industries and investors. Boosting spending power and consumption at the microscopic level will directly result in a healthy growth for the GDP and the budget is well placed to support this organic growth.
A very important development accompanying the pandemic is the massive acceleration and in some cases forced digitisation of almost every sector of the economy. Digitisation is the future and we are well in the process of adopting it. The sudden momentum has made it imperative to enhance our investment in training, and skilling the youth and re-skilling the existing workforce with digital skills to make the most of this change.
(R S Jalan is Managing Director, GHCL. Views expressed are the author’s own.)