BUDGET COUNTDOWN. It’s a question of continuity and change

As we begin the countdown to the Budget, what is it that industry would like to see in the announcements the finance minister will make? Ficci has held a series of consultations amongst its members and while we have put forth and shared a detailed submission with the Government, at a broader level there are seven areas where we would like to see action.

First, the thrust on public investments as seen in the last two budgets must continue. Capital expenditure should grow and there should be focus on the creation of productive assets in the economy. The ‘crowding in’ of private investments will have to be led by the Government through its own investment programme aimed at large infrastructure projects, particularly in the rural areas. As the core sectors of the economy start gaining traction, we will see demand improvement in related areas of industry.

Second, consumption demand that has been the key driver for the economy in recent times needs to be strongly encouraged. There has been an evident slowdown in demand due to de-monetisation because of the temporary liquidity squeeze. Through a recalibration of the tax slabs and tax rates, the finance minister must look at leaving more money in the hands of the people.

Third, a cut in corporate tax rate at this juncture will help boost business confidence and make more companies commit to further expansion alongside increase in demand. Beginning last year, the Government initiated the process of lowering the corporate tax rate though it was limited to new companies. This process needs to be hastened and we should see reduced rates being applicable to all companies.

Fourth, the move towards formalisation of the economy is encouraging. We should ensure that for enterprises in the informal sector there are enough incentives to move into the formal system. Unorganised small set-ups can be encouraged to make this shift by offering them ease of registration, minimal regulatory and procedural compliances, and easy exit combined with lower taxes and subsidies/incentives such as social security benefits, skill development opportunities, access to finance at lower rates, and preferential treatment in government procurement.

Fifth, on the digitisation front, the chief ministers’ group has already outlined a series of measures to the Prime Minister. Ficci too has made a set of suggestions to promote digital means of payments. Many of our members have put in place plans for completely moving to the cashless mode of receipts and payments. We need to incentivise people to opt for the use of digital modes of payments. There is need for an awareness campaign that would help people understand their benefits, as well as clear any doubts about the security-related aspects of using such modes. The national optical fibre network (NOFN) also needs to be scaled up rapidly, and digital infrastructure requires a boost. This should be in focus when the finance minister presents the Budget on February 1.

Sixth, on the banking side, we expect greater infusion of capital to strengthen the public sector banks. Likewise, there is a need to pursue the disinvestment programme with greater vigour. The recent decision to divest government shareholding in general insurance companies is a positive move and we hope to see more of this in the coming fiscal.

Seventh, we have seen several positive measures in the recent past, both through legislative changes and through administrative action, that have helped reduce uncertainty and address some key long-standing taxation issues. Engagement with taxpayers has improved, and attitudes and perceptions on both sides are gradually changing. Going ahead, we hope to see continuation of the same.

While these are some of the key areas where we would be looking for action in the Budget, may I add that there is one more area —perhaps even more critical than points listed earlier — where we hope the Government will provide some guidance. And this relates to the issue of electoral funding that is increasingly coming into focus with the Prime Minister himself urging all political parties to come together in order to usher in reforms. Ficci hopes the Budget speech will also touch upon this subject and strengthen the reform credentials of the Government.

The writer is the president of Ficci