Budget 2022: Increase or surge in economic growth?

The budget must continue to provide incentives to the Indian start-up ecosystem to sustain the current entrepreneurial momentum.

By Rajesh Mehta & Shanayaa S. Suneja

As growing poverty, scarcity of investment, skyrocketing unemployment rates, plummeting exports and crippling shrinking middle class plague India’s economic landscape, all eyes are on the 2022 budget like a glimmer of light. of hope for the recovery of the economy. The real question on everyone’s mind is whether this budget will also follow the odious trend of economic gain politics and just be fun for the people or really tackle the dominant pain points and propel growth . At a time when the world is at risk of geopolitical wars in the next 3 to 6 months and an international economic collapse, there is even more pressure on this budget to not only address our domestic issues, but also be broadly well-planned. From providing funds to accelerate investment without losing sight of fiscal deficit targets, to gaining consumer confidence and avoiding serious macroeconomic instability, the task at hand is nothing less than to balance on a tightrope.

Investments and capital expenditures

Central government capital expenditure has seen an annual increase of 31% over the past year, with a focus on 4 key infrastructure verticals, namely roads, railways, ports and housing. This is in line with the current two-pronged trend of manufacturing change and infrastructure spending. It has been more than a decade since the industry recorded the last phase of investment growth, so the government must continue to seize this opportunity to revive the investment cycle. In addition to the multiplier effect for the economy, the resulting job creation also benefits the urban poor. The budget must end the vicious cycle of unemployment to increase aggregate demand. Online skills building and mandatory apprenticeship programs can also be considered.

Manufacturing and MSMEs

Given the positive performance of the government’s Production Linked Investment (PLI) program in incentivizing increased private investment spending, it may be in our interest for the budget to also include MSMEs in the framework of the program. Industry experts shed light on the business threats faced by the MSME sector, especially micro-enterprises, in terms of destabilizing their supply chains and converting many accounts into non-performing assets. The MSME sector should receive an influx of funds for restructuring, greater accessibility to government measures such as the emergency credit line guarantee scheme, and simplification of rules and regulations. A fair opportunity for MSMEs to realign their position in the Indian economy and tackle pandemic distress will catalyze the process of diversifying supply chains, help large companies meet their demands by looking inwards, will increase exports and facilitate the overall growth of the manufacturing industry. Boosting our secondary sector also holds the promise of improving foreign integration, introducing forex and establishing India as a full participant in global value chains.

Innovation, new age technologies and digital transformation

The budget must continue to provide incentives to the Indian start-up ecosystem to sustain the current entrepreneurial momentum. Reducing the compliance burden along with streamlining legal frameworks by redesigning several mandatory approvals and strengthening self-governance and self-certification structures will further improve our ease of doing business and result in greater number of Unicorn startups. Bringing the gaming industry and digital transformation into the budget to incentivize investment in these new era arenas can grow and transform our business climate. New-Age companies of Indian origin that are globally dominating industries like Ed-tech are inviting India to seize e-sports territories globally. R&D in the field of cognitive sciences and space technologies must also be encouraged, within the framework of the innovation initiative.

Tax Consolidation

Reviving economic growth is impossible without also taking comprehensive measures on the revenue side. With fiscal targets looming over our heads, streamlining direct taxes to move away from the era of complex taxation and consolidating the GST may prove to broaden the tax base, improve the numbers revenue and allow the budget to provide some relief to businesses. Sector. Applying a covid consumption tax on the ultra-rich may be a measure the government should consider.

Education, health and agriculture

India lags not only developed economies but even its developing peers in terms of investment in education and health. These sectors deserve to receive long overdue attention with greater allocation of public funds and digitalization to upgrade infrastructure, improve efficiency and achieve capacity building. A stronger push to transform the Indian pharmaceutical sector into an innovator and manufacturer for the world is needed. Tax advantages should be granted within the healthcare industry to undertake R&D in the areas of biotechnology and medicine. Higher education must also be a necessary point of attention. The government’s latest attempt to rationalize the agricultural sector failed because it failed to gain the confidence of stakeholders when implementing policies. Steps must be taken to reorganize the sector, stimulate the agri-tech industry and restore farmers’ confidence.

As the gap between income groups continues to widen, prioritizing execution over allocation in the budget is needed for a faster and more inclusive economic recovery. After all, as the terrible third wave of the pandemic threatens our economy, we can only hope that Budget 2022 is the light that will lead us out of this tunnel by biting the bullet and doing what is necessary for growth. economic.

(The authors Rajesh Mehta is a leading consultant and columnist working on market entry, innovation and public policy. Shanayaa Suneja is a researcher. The opinions expressed are their own and not necessarily those of FinancialExpress.com.)

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