India awaits a forward-looking Budget where policymakers should reciprocate in full spirit

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Author – Yogesh Mudras, Managing Director, Informa Markets in India 

January 31: The Finance Minister is expected to come with the provisions for economic revival, as the third wave of COVID-19 has gripped the country and added to the dejection of the previous two waves that caused unimaginable losses of lives and livelihoods. The Union Budget 2022-23 should essentially focus on demand generation, job creation, public healthcare, hand-holding Micro, Small and Medium Enterprises (MSMEs) and enabling the economy to regain the lost thrust of ideally double-digit growth.

As Covid-19 has severely impacted the economy in the second consecutive year, it is time for well-thought actions for maximizing the revenue while keeping public expenditure as rational as possible. As the growth drivers, investments should be leveraged by allocating relief packages to key sectors including Housing & Infrastructure, Energy, Agriculture and Food Processing, Pharmaceuticals, Healthcare, Education & Skill Development, Automobile, Tourism, Civil Aviation, Hospitality, Information Technology, Banking, Financial Service and Insurance (BFSI), Financing Growth and Sustainability, Strengthening MSMEs, Supporting Exports, Research & Development (R&D).

The Ease of Doing Business (EoDB) and compliance should be made smoother as India’s pursuit is to maintain its edge as a prominent global economy and further enhance its global positioning. The impact of economic reforms has been most visible on the primary sector (services), where India emerged as the major power in comparatively a new sector like IT & ITeS. It is time for progressive reforms in the agriculture and manufacturing sectors to avail their true potential.

The COVID-19 pandemic has globally impacted lives and livelihoods in an unprecedented manner. As the crisis has global nature, India is severely impacted as well. While the world is self-assured to see a sort of re-set, it is the time for the government and industry to reckon the urgency of figuring out their immediate priorities, including on supporting the MSMEs and Exports, the backbones of the economy. A change in approach is much needed now, before the fundamentals of the world order go into reset mode, there should be the determination to revive the MSMEs and Export Ecosystems to support the much-needed demand factor of the economy. This is the time for proactive collective action to come out of the trying time with a blueprint for the revival of the economy.

Budget 2022 expectations will be in the face of a lot of unprecedented constraints that the government must override to achieve its aim of boosting India’s infrastructure. The government must focus on infrastructure investment and provide a booster dose to the economy. The road to development relies on infrastructure that is undoubtedly the backbone of every economy and is a distinguishing factor between developed and developing nations. India is now about a $3.1 trillion size economy, and it aims to touch the $5 trillion mark by 2025. To achieve this goal, it is necessary to target a double-digit growth which must come from all the sectors – manufacturing, trade, services, agriculture coupled with an increase in export volumes.

India’s travel and tourism industry, among the worst casualties of the Covid-19 pandemic now in its third year, expects the government to announce a raft of incentives and relief measures and increase the budgetary allocation for the tourism ministry in Budget 2022. The industry has asked the government to consider a waiver of e-visa fees for all foreign tourists in the financial year 2022-23 to support a revival of travel and tourism. It also wants tourism earnings to be treated on par with exports. The Travel Agents Association of India has urged the government to adopt a ‘One India, One Tourism’ approach to the industry in the Budget, including a one-tax structure. The industry body said this would require both the central and state governments to work in tandem and agree to move tourism to the concurrent list of the Constitution from being a largely state subject. Such a move will help the sector receive the status of an industry and become more structured.

Low public health expenditure has led to the stage that India’s out-of-pocket expenditure is one of the highest. This amounts to about 63 per cent of total spending on health. The pharmaceutical sector has played a pivotal role in recent times while responding to unprecedented health adversities. Challenges for the sector ranged from allocating Capex, R&D and manufacturing for COVID-related drugs and managing the raw material supply chain, particularly those flowing from abroad. The Pharma industry would be looking for incentives for innovations and affordability. Research-linked incentives can provide the impetus to industry for increasing investment in R&D investment and build the much-needed linkages with academia to co-innovate. Life-saving drugs should be brought down at the lowest rate of GST and “zero-rating” of GST for health care services. The Budget should focus on increasing public spending on healthcare, considering India’s demographics and growing population. The Budget outlay for the healthcare sector should be increased to 2.5 per cent or around Rs 150,000 crore to drive the health sector forward. This will help expand the network while providing affordable healthcare facilities to beneficiaries. The industry also hopes the government will announce incentives in the budget to encourage setting up bulk drug manufacturing units in the country, in addition to scale-up of spending on healthcare.

India’s VC space is growing by leaps and bounds- and there is great enthusiasm among domestic investors to participate in venture funding of start-ups. However, a couple of issues seem to stand in the way of rapid development in this area. The financial services sector is the pillar of the economy. Timely and specific policy measures will go a long way to boost and strengthen this sector while also paving the way for financial inclusion.

The changing world necessitates creating a firmer ground for defeating poverty and inequality and making sustainability the steering force of business and our social action. While imagining a post-pandemic world and coping with transitory challenges, adopting the inclusive and sustainable development framework is much needed. The Union Budget 2022-23 will be defining for India in emerging from the crisis and reassuring its stake to sustainable growth. A balancing act with recognising the growth impetus and inclusiveness would do immensely well for the Indian economy in the short, medium, and even long term. While the fundamentals are still strong and supportive, the right policy measures will decide how India comes out from a crisis in the post-pandemic world.

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