MVIRDC World Trade Center Mumbai welcomes the measures taken by the Union Government to improve liquidity in the hands of the middle class people and support the credit needs of the MSME sector.
Presenting the Union Budget 2020-21, Finance Minister Ms. Nirmala Sitaraman announced reduction in income tax rate for people earning between Rs. 5 lakh and Rs. 15 lakh per annum to increase their disposable income and consumption. The move to extend the deadline for availing additional deduction towards affordable housing loans will provide relief to new home buyers and support the real estate sector. India’s economic growth has slowed to 11-year low of 5% in the current financial year, which is a far-cry from the more than 7% growth required to attain USD 5 trillion economy. The slowdown has been caused largely by the decline in sales in the automobile, real estate and consumer goods sector.
The government’s move to allow NBFC financing of invoices and app-based invoice financing will reduce working capital stress of MSMEs. MSMEs will also benefit from the enhanced corpus of CGTMSE for availing collateral-free loans and subordinate debt, which will be treated as quasi-equity.
Small exporters may benefit from the increased insurance coverage under the NIRVIK scheme and digital refund of incidental taxes. However, the government should address the immediate hardships of exporters arising from the withdrawal of the MEIS scheme even before the implementation of the RoSCTL scheme. In order to prevent cheap imports from hurting domestic industry, the Finance Minister has increased customs duty on a range of consumer and industrial goods, which is a welcome initiative.
The budget contains a scheme to promote domestic manufacturing of mobile phones, electronic equipment and semi-conductor packaging. India needs to encourage local manufacturing of electronic instruments as it will not only create job opportunities, but also reduce trade deficit. India’s excessive import of electronic goods (including computer hardware, telecom instruments, consumer electronics, electronic instruments and components) contributes 26% to the country’s trade deficit.
The idea of setting up an Investment Clearance Cell for providing “end to end” facilitation for prospective investors will promote ease of doing business in the country. However, there is a dire need to introduce structural reforms to revive investment sentiment and attract foreign investment.
“In order to boost growth, the government has to attract private investment by relaxing labour and land laws, addressing regressive tax laws and enhancing finance for MSMEs,” remarked Mr. Vijay Kalantri, Vice Chairman, MVIRDC World Trade Center Mumbai while reacting to the Union Budget 2020-21.
“The government’s increased spending on healthcare, nutrition and education will deliver results in the long run. However, we need to improve investor sentiment immediately by laying out a roadmap for banking reforms, monetization of state-run assets, further simplification of indirect taxes and so on.”
The government’s target of Rs. 103 lakh crore investment in infrastructure over five years can be realized only if the private sector contributes a sizable part of this sum. We need to reform land and labour laws to attract private investment on such a large scale.
The government has rightly laid thrust on strengthening agriculture and allied sectors by setting up efficient warehouses, promoting export of horticulture from every district and announcing FPOs for fisheries. However, the much needed abolition of the Essential Commodities Act and reforming the role of Food Corporation of India to promote efficiency are missing.
The government’s emphasis on New Education Policy, the proposal to allow FDI in education and the allocation of Rs. 3,000 crore for skill development are welcome. “However, we need to create jobs in the manufacturing sector for our youth as availability of placement opportunities for skilled youth continues to be a challenge in the country,” Mr. Kalantri added.