– By Rahul Kapoor
India, in the last decade, has risen to become one of the world’s biggest economic forces. With its growing middle-class population, increasing consumer spending, rising per capita income and emerging new businesses, India is set to pave the way in the global marketplace. As the announcement of the budget for 2024 is imminent, we would like to share some significant ways that India’s Budget for 2024 can uplift local businesses to soar in the global arena.
Research & Development (R&D)
We hope to see the government’s focus on the manufacturing sector to continue during the 2024 financial year. We are seeing tangible results of the “Make in India” program with Apple’s contractor Foxconn announcing plans to increase its Indian workforce to 50,000 and invest US$1.7 billion in Karnataka. Similar developments are taking place in other states. We would also like to see the government further increasing its support towards the manufacturing sector by allocating a significant budget to R&D and innovation. It is imperative for goods manufactured in India to be competitive in the global market in terms of quality, innovation and price. The government should also provide incentives such as tax breaks and grants to companies that are trying to push the frontiers in product development. The government can also consider setting up institutions that foster collaboration between the public sector, private sector and academic institutions for knowledge sharing and developing cutting edge solutions.
Ease of Doing Business:
Simplification of regulatory compliance is a critical angle that the government must pay attention to. India’s current rank given by the World Bank for ease of doing business is 63 which is far from where it should be to preserve India’s entrepreneurial energy. Emerging companies need to be more focused on creativity and innovation to compete with the global market versus complicated compliances and excessive red-tape. Government urgent clarification on irksome international tax interpretation issues is much needed. If the government does not issue clarification on these issues quickly, it will lead to unnecessary litigation which can be nipped in the bud. Such gray spots in the laws gravely hamper the government’s intention of ease of doing business and attracting foreign direct investment. When we connect to our network of professionals abroad, many business owners or management executives speak of wanting to establish a base in India but being fearful of the regulatory hassles and policies. In the coming years, streamlining processes should be a must to make India an attractive place for foreign investment.
Tax Treaties:
India should take a proactive approach to establish Tax Treaties with countries that could strengthen trade and investment. Having relations with key global partners and the presence of Tax Treaties could resolve problems regarding double taxation in two countries and help to strengthen economic relations. This will create avenues for Indian businesses to look at new markets and elevate India’s reputation in the global marketplace.
Infrastructure Investment:
There are many opportunities present for the government to improve the infrastructure sector. Historically, India’s infrastructure has relied heavily on importing fossil fuels which also negatively impacts the country’s balance of trade. There is tremendous scope for the government to introduce de-carbonization policies and incentives. Initiatives such as carbon credits, solar panel powered infrastructure and investment into renewable energy should be explored further. The government is already moving in this direction which is good to see. As consumers prioritize green-living, Indian businesses need to align their products to this shift to remain competitive. Separately, streamlining transportation, logistics, and port infrastructure will strengthen India’s competitiveness on the global stage. The government has already taken major steps to build port infrastructure on the west coast so the aim should be to expand to developing the east coast as well. Ports should be constructed in a manner to become comparable to those of China in terms of scope and automation. Ports should also be allowed to use accelerated depreciation, a depreciation method in which a capital asset reduces its book value at a faster (accelerated) rate than it usually would. This will provide tax savings to the ports. Lastly, tourism which is an export of service should also be prioritized. The government should consider allocating more budget towards building India’s tourism infrastructure which usually doesn’t get much attention. Given India’s rich cultural heritage, diverse traditions & cuisines and abundant historical & natural sites, the government should build India as one of the foremost tourist destinations in the world. Even countries like Italy that are significantly smaller than India attract exponentially more tourists.
For Indian businesses to thrive globally, the 2024 Budget must prioritize the above points. By taking up initiatives and allocating the right resources, the government can encourage local businesses to expand to the global marketplace and eventually become a leader. The time is now for the government to take a proactive approach with the country’s immense potential by creating opportunities and expanding the reach of Indian businesses in foreign markets.
(Rahul Kapoor is the founder & MD at RKA Corporate Advisory.)
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