A number of CII recommendations found place in budget proposals, says Munjal
The proposed 35.4 per cent increase in the allocation for capital expenditure on top of the last year’s increase of 34.5%, is a booster shot for the economy and will pump prime demand and private investment as well as create jobs, CII President T V Narendran said in reaction to the Budget 2022-23 presented in parliament on 1 Feb 2022.
“In absolute terms, the budgeted capital expenditure has increased from Rs.4 lakh crores in FY21 to Rs.7.5 lakh crores in FY23,” he noted.
What is also commendable is that the Capex push has been balanced well with fiscal consolidation, with fiscal deficit for FY 23 pegged at 6.4%. This is in line with the economic strategy of higher Capex along with a gradual glide path for fiscal consolidation, as suggested by CII in its pre–budget suggestions to the Government.
The Capex push is not only limited to the spending by Union Government, but the budget also proposes to support State Governments in their capital expenditure. The allocation for the ‘Scheme for Financial Assistance to States for Capital Investment’ has been increased to Rs.1 lakh crores as against Rs.15,000 crores spent on the scheme this year.
“The scheme provides fifty-year interest free loans to states for capital expenditure,” said Narendran, appreciating the budget allocations.
The increase in public expenditure will not only help speed up infrastructure development, create demand and shore up economic growth but would create the much-needed jobs and provide the requisite impetus to our development journey.
The budget proposals cater to multiple important dimensions of the Indian economy.
It takes forward the thrust on infrastructure through the Gati Shakti interventions, which will boost the overall competitiveness of the Indian economy and create jobs.
It takes forward the thrust on manufacturing through interventions like the Ease of Doing Business 2.0, with trust as the basis for government business interface, and extending the 15% corporate tax rate to manufacturing units coming into production by 31 March 2023, from the earlier 31 March 2022.
Manufacturing is key to employment generation, absorbing the surplus workforce from the agriculture sector and boosting exports.
“Given the global supply chain disruptions in the wake of the pandemic and the changing geo-political scenario, manufacturing also assumes strategic significance, making the budget proposals significantly important,” said Narendran.
The budget provides boost to startups, the engines of innovation, job creation and social impact. The proposal period of incorporation of tax eligible start-ups by one more year, has been extended till March 2023.
A fund with blended capital is proposed to finance startups for agriculture and rural enterprise, relevant for farm produce value chain.
Defence R&D will be opened up to start-ups along with industry and academic, given that 25% of defence budget would be earmarked for R&D.
Climate Change action and sustainability have received significant attention, in line with the Prime Minister’s commitments at COP26.
The additional allocation of Rs.19,500 crores for the Production Linked Incentive for manufacture of high efficiency modules will help India achieve the ambitious target of 280 GW of solar capacity by 2030.
CII welcomed the plans for promoting circular economy, through interventions in 10 identified sectors and also on cross cutting themes such as infrastructure, reverse logistics, technology upgradation and integration.
The budget also promises to bring in policies and required legislative changes to promote agro forestry. The interventions demonstrate that the Government is following up on its commitment with concrete action.
The budget proposals also take forward the government’s priority on equitable growth. The announcements for increasing digital penetration under BharatNet through PPP; increased outlay on Pradhan Mantri Gram Sadak Yojana (PMGSY) and Awas Yojana; push for Fintech and setting up 75 Digital Banking Units (DBUs) in 75 districts by Scheduled Commercial Banks; will go a long way to promoting equitable and economic growth, according to CII President. The interventions will help in mitigating the inequalities exacerbated by the pandemic.
The budget has also extended support to the pandemic hit MSMEs, through the extension of the ECLGS up to March 2023 and an additional allocation of Rs.50,000 crores taking the total allocation to Rs.5 lakh crores. Support to MSMEs is important for job creation, for boosting exports and more regionally distributed growth and development.
The tax proposals in the Union Budget have focused on stability and predictability, which is very important for nurturing the incipient revival in the private Capex cycle. The higher gross GST collections for the month of January 2022 at Rs.140,986 crores, which is the highest since the inception of GST, is an indicator of the industry coming to a fast track, noted Narendran.
Summing up his views on the budget, President CII said, “Like last year, many of CII’s suggestions have found a place in the budget proposals and we are confident that India is on a firm path to becoming a US$40 trillion economy during the Amrit Kaal, the 25-year period to India@100.”
While reacting to the budget proposals, CII President-Designate Sanjiv Bajaj said, “The budget is a futuristic budget and its digital interventions in multiple areas will prepare India for the Amrit Kaal.”
Integrating 100% of 1.5 lakh post offices to core banking system will allow for interoperability, leading to financial inclusion specially for the farmers and senior citizens in rural areas.
The move to incorporate 75 Digital Bank units of schedule banks in 75 different districts will encourage usage of digital payments in various sections of the country.
The introduction of the central bank digital currency, Digital Rupee, in 2022-23, will prepare India for a digital economy and help in formalisation of the economy. It will help to usher in reduced dependency on cash, reduced settlement risk and would be distinct from decentralised crypto currencies which lack status of legal tender, believes Bajaj.
The announcement on Ease of Doing Business 2.0, in line with what CII had been suggesting, is a welcome move which would promote trust-based governance. The digitisation of manual processes and the integration of Central and States level compliance processes will bring in speed, ease and transparency.
The setting up of an international arbitration centre at GIFT City to speed up dispute resolution is an encouraging development as well, stated Bajaj.
The proposed necessary amendments in the IBC structure to promote cross border insolvency resolution is a good move too, as it will help to resolve the many cross border IBC cases which are stuck due to various legal hurdles, he further added.
“The budget proposals this year brought a sense of Déjà vu with a number of CII recommendations finding a place in it, like last year,” said Dr Pawan Munjal, Vice President CII, while reacting to the budget proposals.
The budget tick marks most of the items on the CII wish list – higher capital expenditure, continued focus on infrastructure; gradual glide path to fiscal consolidation, higher expenditure in reinvigorating rural economy; higher expenditure on healthcare, education & skill development; focus on export promotion, employment generation, start-ups, technology and sustainability interventions; improving EoDB & reducing CODB as well as stability and continuity in tax policy.
Dr Munjal added, “All of these make a great recipe for high sustained growth.”
The budget has multiple proposals for building the future India.
The focus on infrastructure will not only improve the quality of lives and generate jobs but will also help Indian industry become globally competitive.
Sustainability proposals which promote renewables, EVs, clean technologies, clean transport, circular economy will support India towards sustainability transition and enable it to meet its commitments made at COP26.
Digital interventions in multiple areas such as logistics, financial inclusion, ease of doing business and government – business interface, education, healthcare will improve delivery of public goods and also improve the investment climate in the country.
The budget also caters to the needs of the ordinary citizens specially the most vulnerable who were impacted the most by the pandemic, with its emphasis on delivering basic amenities such as affordable housing, drinking water, urban amenities etc.
The budget also supports the MSMEs, through the extension of ECLGS scheme and it also aims to create a more enabling environment for industry at large, said CII. fiinews.com