Union Budget rightly focuses on inclusive development, but misses big bang reforms
MVIRDC World Trade Center Mumbai compliments Government of India for announcing various progressive steps to promote Make in India, integrate the country into global value chains and enhance social inclusion.
The measures outlined in the budget will enhance employment opportunities, support credit growth to industry, create economies of scale in farming, improve access to credit for women, among others. Some of the measures in the budget will also address stress in the NBFC sector and attract foreign direct investment.
The finance minister has followed a twin goal of promoting the welfare of poor people on the one hand and improving ease of doing business for the industry.
Among the progressive measures announced in the budget are attracting foreign firms to set up mega-manufacturing plants, allocating Rs. 70,000 crore for bank recapitalization, reforming India’s financial sector and setting up a panel to realize Rs. 100 trillion infrastructure investment.
The government’s move to invite global companies to set up mega-manufacturing plants will promote Make in India and increase employment opportunities. Mega-manufacturing plants will be set up in semi-conductor Fabrication (FAB), solar photo voltaic cells, lithium storage batteries, solar electric charging infrastructure, computer servers, laptops, etc. The budget has also announced a slew of measures to promote financing for infrastructure projects, developing corporate bond market, integrating India into global financial system and supporting MSME sector.
The government has rightly taken steps to set up 100 new clusters, 80 livelihood business incubators, setting up platform to enable early clearing of bills receivables by MSMEs. However, the government must take more steps to ensure that banks, instead of acting as recovery agents, become lenders and encourage entrepreneurship. There is a need to uplift enterprises by rationalizing the tax structure, simplifying laws, rules and regulations, and implementing the government’s vision of ‘Minimum Government, Maximum Governance’. This will also stimulate the government’s ambitious ‘Make in India’ plan.
It is laudable that the government extended pension to about three crore retail traders and small shopkeepers with annual turnover of less than Rs. 1.5 crore.
In order to empower women entrepreneurs, the government has rightly expanded the Women SHG interest subvention programme to all districts. Further, the government has offered a loan of up to Rs. 1 lakh under the MUDRA Scheme for one woman in every self help group.
With the objective of boosting exports of traditional artisanal products and creative products, the government will obtain patents and geographical indicators. Further, in order to create a sustainable agri-value chain, the government will form 10,000 new Farmer Producer Organizations.
The Center also welcomes other initiatives such as resolving legacy disputes in indirect taxation, improving ease of filing taxes, proposal to set up National Research Foundation (NRF), among others.
In a much needed relief to the stressed NBFC sector, the government offered partial credit guarantee for banks purchasing assets of financially sound NBFCs.
In order to empower start-up enterprises, the government has proposed to start a television programme, where start-up enterprises can discuss issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning.
The government has also laid thrust on infrastructure development by promoting Public-Private Partnership to realize Rs. 50 lakh crore investment in railways. The government has announced its ambition to create a national highway grid by restructuring national highway programme.
While the increased thrust on infrastructure investment is laudable, the government must expedite implementation of the existing projects and address issues plaguing stalled projects.
For strengthening India’s international relations, the government has proposed to open four new Embassies in African countries during the current year. Hon’ble Finance Minister has also announced the revamp of Indian Development Assistance Scheme (IDEAS) to explore alternative models for supporting developing and least developed countries.
In its pursuit to attract foreign investment, the government plans to relax FDI norms on aviation, media (animation, AVGC) and insurance sectors. The government has also proposed to ease local sourcing norms for FDI in Single Brand Retail sector.
MVIRDC World Trade Center Mumbai welcomes measures to promote ease of filing tax returns by allowing interchangeability of PAN and Aadhaar and the launch of faceless assessment in electronic mode.
To promote cash-less economy, the government has levied TDS of 2% on cash withdrawal exceeding Rs. 1 crore in a year from a bank account and it has also waived merchant discount rate (MDR) for digital transactions.
For the real estate and housing sector, the union budget has announced tax incentives for affordable housing and proposed a Model Tenancy Law.
While the above proposals are laudable, MVIRDC World Trade Center Mumbai feels that the government must examine more measures to promote financing for MSMEs, provide financial relief to genuine borrowers and abolish regressive tax laws.
It is a disappointment that the government has just extended 25% corporate tax rate to firms upto a turnover of Rs. 400 crore, instead of making it applicable to all companies. Also, the government has continued to pursue its earlier policy of not passing on the benefit of fall in global crude oil price to the end consumers. The Union Budget has imposed Special Additional Excise duty and Road and Infrastructure Cess on petrol and diesel each by one rupee a litre.
The budget could have announced a roadmap for privatization of public sector banks, promoting agriculture investment and reforming land acquisition norms.