Steps to push private investment, capex support on Budget agenda

Source: Economic Times, 16 January 2023

New Delhi: Measures to encourage private investment, capital expenditure support to the economy, and some fresh social sector initiatives through new centrally sponsored schemes are likely to be the key themes in the upcoming budget. Education and healthcare are likely to remain in focus again with Covid still a cause for worry.

Prime Minister Narendra Modi will early this week hold a meeting with key finance ministry officials to finalise the February 1 budget, the last full one of this government prior to the 2024 general election, people familiar with the talks said.

It’s likely to be high on political messaging with assembly polls in some states this year ahead of the general election, while retaining the core focus on supporting growth and boosting investments, they said.

The budget is likely to go big on spending without compromising on fiscal consolidation, raising more than usual resources from disinvestment and asset monetisation to back higher allocations.

Eye on Economic Growth
The FY23 budget had proposed a 13.2% rise in spending over the budget estimates of FY22. A similar order of increase is likely this year too.

It’s felt that high-decibel spending is needed to make an impact on the ground, another person said.

The meeting has been called to firm up the direction of the budget, economically crucial in the wake of turbulence in advanced economies, they said.

“Measures are needed to lift growth… step-up in spending in education and health besides infra remain key,” said one of the persons cited above.

Modi on Friday met leading economists for pre-budget consultations. They advised the government to continue with the capital expenditure push and undertake measures to make India more attractive to global investors.

Investments focus
Support for states such as the capital expenditure credit line could be expanded further, along with a substantial boost for overall capital expenditure as in the last budget, which had bumped spending on asset creation by 35.4%. By the end of November, the Centre had spent nearly 60% of the budget for FY23.

A similar thrust is likely in FY24 amid signs of a nascent revival in private-sector investment. This is likely to be supported through a bouquet of policy measures to encourage private investment. This could include steps to reduce compliances, provide for easier dispute resolution, and stability in the tax regime.

Among specific measures, the government is expected to extend the lower corporate tax rate of 15% applicable on new investments beyond March 2024, and remove some customs exemptions to spur local manufacturing while focussing on easing business, they said.

Fiscal consolidation
The budget is likely to continue to prioritise fiscal consolidation amid a volatile global financial market that will be watching to see if India can sustain its outperformance.

India is projected to grow 7% in the current fiscal while the International Monetary Fund (IMF) expects a 6.1% rise in FY24, the fastest among the major economies.

The FY23 budget had proposed a fiscal deficit of 6.4% of GDP. It’s likely to target 5.8% of GDP this year on the way to the proposed 4.5% of GDP by FY26.

Economists have emphasised the need for fiscal consolidation.

“While rapid growth in tax revenue has helped India run an activist fiscal policy that acted as a shock absorber for last three years, as nominal GDP is expected to slow down in FY23-24, the need for continued consolidation is critical for debt sustainability,” Rahul Bajoria of Barclays said in a note.

India Key Budget Highlights for 2022-2023

Economy

• Capex target expanded by 35.4 per cent — from Rs 5.54 lakh crore to Rs 7.50 lakh crore. FY23 effective capex seen at Rs 10.7 lakh crore
• India’s growth highest among all major economies; we are now in a strong position to withstand challenges
• The goal is complementing macro-growth with micro-all-inclusive welfare, digital economy and fintech, tech-enabled development, energy transition and climate action
• ECLGS cover expanded by Rs 50,000 to Rs 5 lakh crore
• Top focus of the budget this year are: PM Gati Shakti, Inclusive Development, Productivity Enhancement, Sunrise Opportunities, Energy Transition, Climate Action, Financing of investments
• Productivity-linked incentive schemes in 14 sectors have received excellent response; received investment intentions worth Rs 30 lakh crore
• Economic recovery benefitting from public investment and capital spending. This Budget will provide impetus to growth

Taxes

• The government will tax income from digital asset transfers at 30%
• No deduction allowed while computing income except cost of acquisition
• Loss cannot be set off from any other income
• Gift of cryptocurrencies to be taxed at receiver’s end
• A new provision to allow taxpayers to file an updated return
• Updated return can be filed within 2 years from the end of the relevant assessment year.
• Alternate Minimum Tax for cooperative societies to be cut to 15%
• Proposal will reduce surcharge on cooperative societies to 7%, for those whose income is between Rs 1 crore and Rs 10 crore
• Tax deduction limit increased to 14% on employers contribution to NPS account of state govt employees

Jobs

• ECLGS extended till March 2023, 60 lakh jobs eyed in next 5 years
• Efforts of central, state governments leading to jobs, entrepreneurial opportunities
• Digital ecosystem for skilling and livelihood to be launched.
• This will aims to skill, reskill, upskill citizens through online training.
• API based skill credentials, payment layers to find relevant jobs and opportunities

Infra

• National highway network to be expanded by 25,000 kms during FY 22-23
• Desh stack e-portal to be launched to promote digital infra
• Strategic transfer of ownership of Air India completed now
• 2,000 kms to be brought under Kavach by FY 22-23
• Four multi-modal national parks contracts will be awarded in FY23
• One product one railway station will be popularised, 400 new Vande Bharat trains to be introduced
• PM Gatishakti masterplan for expressways will be formulated in next financial year
• 100 PM Gati Shakti terminals to be set up in next three years
• Focus on public investment to modernise infrastructure over the medium term, leveraging tech platform of Gati Shakti via a multi-modal approach
• PM Gati Shakti will pull forward the economy and will lead to more jobs and opportunities for the youth

Housing & Urban Planning

• Rs 48, 000 crore is allotted for PM Awas Yojana
• In 2022-23, 80 lakh houses will be completed for identified beneficiaries of PM Awas Yojana; 60,000 houses will be identified as beneficiaries for PM Awas Yojana in rural & urban areas
• 60,000 crore allocated for providing access to tap water to 3.8 crore households
• In 2022-23, 80 lakh households will be identified for the affordable housing scheme
• A high-level committee for urban planners and economists to be formed for recommendations on urban capacity building, planning implementation, and governance.
• 5 existing academic institutions for urban planning to be designated as Centre for Excellence with endowment fund of Rs 250 cr
• Modern building by-laws will be introduced
• A high-level panel to be set up for urban planning
• Govt to promote use of public transport in urban areas

MSMEs & Startups

• Rs 6,000 crore programme to rate MSMEs to be rolled out over 5 years
• MSMEs such as Udyam, e-shram, NCS & Aseem portals will be inter-linked, their scope will be widened
• They will now perform as portals with live organic databases providing G-C, B-C & B-B services such as credit facilitation, enhancing entrepreneurial opportunities
• A fund with blended capital raised under co-investment model facilitated through NABARD to finance startups in agriculture & rural enterprises for farm produce value chain
• Startups will promoted for Drone Shakti
• PE/VC invested Rs 5.5 lakh crore in startup, expert committee will be set up to suggest measures to help attract investment

Agri

• Govt to pay Rs 2.37 lakh crore towards procurement of wheat and paddy under MSP operations
• 2022-23 has been announced as International Year of Millets
• Railways will develop new products for small farmers and MSMEs
• A rationalised scheme to increase domestic oilseed production will be brought in to cut down imports
• Kisan Drones for crop assessment, land records, spraying of insecticides expected to drive a wave of technology in agri sector
• Ken Betwa river linking project worth Rs 44,605 crore announced
• Draft DPRs for 5 river links have been finalised
• Finance startups to be incentives to aid rural enterprises
• Natural farming will be promoted along Ganga river corridor
• A completely paperless, e-bill system will be launched by ministries for procurement
• Financial support will be provided to farmers to take up agro-forestry

Electric Vehicles

• Battery swapping policy to allow EV charging stations for automobiles will be framed
• Private sector will be encouraged to create sustainable and innovative business models for battery and energy as a service, improving the efficiency in the EV ecosystem

Education

• States to be encouraged to revise syllabi of agricultural universities to meet needs of natural, zero-budget & organic farming, modern-day agriculture
• One class, one TV channel’ program of PM eVIDYA will be expanded from 12 to 200 TV channels
• This will enable all states to provide supplementary education in regional languages for classes 1 to 12
• Digital university to be set up to provide education; to be built on hub and spoke model
• 1-Class-1-TV Channel to be implemented to provide supplementary education to children to make up for loss of formal education due to Covid

Finance & Inclusion

• Rs 1 lakh crore financial assistance to states to be provided in 2022-23 to catalyse investments
• Proposed to introduce Digital Rupee by RBI using blockchain technology, starting 2022-23
• Measures will be taken to step up private capital in infra sector
• Digital Rupee to be rolled out by 2023
• 100% of 1.5 lakh post offices will come on the core banking system, enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts
• This will be helpful especially for farmers and senior citizens in rural areas, enabling inter operability, and financial inclusion.
• IBC amendments to enhance efficiency of resolution process
• Facilitate cross-border insolvency resolution
• To speed up voluntary winding up of companies
• 75 digital banks in 75 districts will be set up by scheduled commercial banks to encourage digital payments
• International arbitration centre will be set up in GIFT city to provide faster dispute resolution
• World-class university to be allowed in GIFT IFSC free from domestic regulation, says FM

Healthcare

• An open platform for the national digital health ecosystem will be rolled out
• It will consist of digital registries of health providers and health facilities, unique health identity and universal access to health facilities
• 95 per cent of 112 aspirational districts have made significant progress in health, infra
• For mental health counselling, a National Tele Mental Health Program will be launched

Telecom

• Spectrum auction will be conducted in 2022 for the rollout of 5G
• Scheme for design led manufacturing to be launched for 5G ecosystem as part of PLI scheme to enable affordable broadband and mobile communication in rural and remote areas
• 5 pc of USO Fund to be provided for R&D and technology upgradation
• Contracts for laying optical fibre in villages to be awarded under BharatNet project under PPP in 2022-23
• Data centre and energy storage system to be given infrastructure status; move to provide easy financing

Women & Children

• Recognising the importance of ‘Nari Shakti’, 3 schemes were launched to provide integrated development for women and children
• 2 lakh Anganwadis to be upgraded for improving child health

Ease of Business

• 75,000 compliances have been eliminated and 1,486 union laws repealed to make it easier for businesses
• Next phase of ease of doing business, ease of living to be launched
• Voluntary exit for corporates to be cut down to 6 months from 2 years

Defense

• Govt committed to reduce import and promote self reliance in defense sector
• 68 per cent of capital for defence sector to be earmarked for local industry
• Defense R&D will be opened up for industry, startups and academia with 25% of defense R&D budget.
• Private industry will be encouraged to take up the design and development of military platforms and equipment in collaboration with DRDO and other organizations through SPV model.
• 68% of capital procurement budget in defence will be earmarked for domestic industry in 2022-23 (up from the 58% last fiscal)

Railways

• 400 new generation Vande Bharat trains to be manufactured in next 3 years
• 2,000 km of rail network to be brought under indigenous technology KAWACH for safety and capacity augmentation: FM

Climate & Net Zero

• Risks of climate change are strongest externalities for the world
• Funds will be used for projects that will help reduce carbon intensity of the economy
• Sovereign green bonds will be part of government’s borrowing programme in FY23
• Proceeds to be deployed in public sector projects
• 4 pilot projects for coal gasification to be set up
• Rs 19,500 cr additional allocation for PLI for manufacturing high efficiency solar modules has been made
• Low carbon development strategy opens up employment opportunity

Travel

• ePassports will be rolled out in 2022-23 for convenience in overseas travel
• E-passport with embedded chip will be rolled out

The Union Budget 2022 proposes to accelerate corporate exits by reducing the timeline to six months from 2 years earlier. The move according to experts would provide a big relief to firms seeking voluntary wind-up of business.

Source: Times Now, 01 February 2022

Finance Minister Nirmala Sitharaman proposed the establishment of a Centre for Processing Accelerated Corporate Exit (C-PACE) in the Union Budget 2022-23. This will implement an expedited corporate exit process in 2022-23 fiscal.

“Several IT-based systems have been established for accelerated registration of new companies. Now the Centre for Processing Accelerated Corporate Exit (C-PACE) with process re-engineering, will be established to facilitate and speed up the voluntary winding-up of these companies from the currently required two years to less than six months,” Sitharaman stated in her Budget speech to Parliament on Tuesday.

Despite the Insolvency and Bankruptcy Code, 2016 (IBC) significantly changing the insolvency scenario in the country, the timelines for admission and resolution of such cases have fallen woefully short of expectations. IBC was formulated as a noble law as it was meant to relieve the stress — be it of a company, a limited liability partnership, a proprietorship or partnership firm or an individual.

The insolvency resolution process was set up with the objective of addressing the stressed assets in a time-bound and quick manner. The Code is meant to be used by stakeholders at the right time, in the right case, in the right manner. However, it lost its steam in 2021, with delays and questions over actual realisations as creditors took steep “haircuts” in some cases. “Haircut” in insolvency parlance is the total claims minus the amount of realisation/amount of the claims. The December 2021 data from the Insolvency and Bankruptcy Board of India (IBBI) shows that 73 per cent of the Corporate Insolvency Resolution Process (CIRP) as of September 30, took over 270 days — a colossal rise in the maximum permissible period. The need of the hour is the speedy disposal of cases as “several important insolvency-related matters such as Jet Airways, Dewan Housing, Sintex Industries and Videocon Industries is to be decided,” according to media reports.

This has led to the need for a detailed statutory mechanism for resolving cross-border insolvency that would aid in the resolution of complex cases that involve cases of groups having multiple jurisdictions and would maximise value for all stakeholders. Now, Minister Sitharaman added that the necessary amendments to the IBC will be made in order to improve the efficacy of the resolution process and facilitate cross-border insolvency resolution.

Budget 2022: Positive ringtones for private and foreign investor participation

Source: Economic Times, 03 February 2022

This is the best time to invest in India, Prime Minister Narendra Modi said in his virtual address to the World Economic Forum, Davos Agenda 2022. This ethos was echoed by the Finance Minister (FM) when she stood up to present the Budget Proposals 2022.

On the backdrop of UNCTAD, recent publication on “Global Investment Trends”, Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated $1.65 trillion, from $929 bn in 2020, surpassing their pre-COVID-19 level. The outlook for global FDI in 2022 is positive. Measures taken by the Government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country. The following trends  in India’s FDI are an endorsement of its status as a preferred investment destination amongst global investors.

India has attracted highest ever total FDI inflow of US$ 81.72 bn during the financial year FY 2020-21. In terms of top investor countries, Singapore is at the apex with 29%, followed by the USA (23%) and Mauritius (9%) for the FY 2020-21. Computer Software & Hardware has emerged as the top sector during FY 2020-21 with around 44% share of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13%) and Services Sector (8%) respectively.

Supported by a strong pace of vaccination, India’s GDP growth at 9.2% in 2021-22 is projected to be the highest among all large economies. With India moving up strongly and steadily in the ease of doing business, it gets an edge to attract private & foreign investors. Investor confidence is strong in infrastructure sectors, supported by favourable long-term financing conditions, recovery stimulus packages and overseas investment programmes.

Deep reforms like PM GatiShakti, a National Master Plan for Multi Modal Connectivity, essentially a digital platform to bring 16 Ministries including Railways and Roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects will surely attract foreign investors. GatiShakti aims to address the past issues through institutionalizing holistic planning for stakeholders for major infrastructure projects. It will incorporate the infrastructure schemes of various Ministries and State Governments like Bharatmala, Sagarmala, inland waterways, dry/land ports, UDAN etc. Economic Zones like textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fishing clusters, Agri-zones will be covered to improve connectivity and make Indian businesses more competitive.

Under PM’s Gati Shakti scheme, USD 26 bn production linked opportunity has been created, hence enabling successful partnerships and ventures with private & foreign Investors to increase liquidity in India and offer a positive return on investment.

The FM in her speech indicated with a view to promote exports, it is proposed to replace the Special Economic Zones Act with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’. This will cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enhance competitiveness of exports.

This positive move recognises that SEZ exports increased from US$3 bn in 2005-06 to US$102 bn in 2020-21. Investment in SEZs increased from US$0.54 bn in 2005-06 to US$83 billion by 2020-21 and importantly has provided jobs to overall 2,358,136 persons till 2020-21. With nearly 40% of approved SEZ’s yet to become operational, this will surely be a booster dose for the stakeholders to invest, export and generate employment.

In a bid to boost the Data Centres and Energy Storage Systems including dense charging infrastructure and grid-scale battery systems in the country, the Government has granted it infrastructure status. Grant of status is a positive move by the Government and is an acknowledgement of the growing dependency of the success of technology enabled sectors on Data Centres. This would help build world class Data centre ecosystem by attracting investments from domestic and global players and would nurture localisation of Data centre industry. Data Centre companies would henceforth be enabled to access funds at a cheaper rate and consequently benefit the economy in the long run.

It is proposed to open Defence R&D for industry, start-ups and academia with 25 per cent of defence R&D budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organizations through SPV model. An independent nodal umbrella body will be set up for meeting wide ranging testing and certification requirements. This will open new markets for private players.

The FM in her budget speech recognised the Sunrise Opportunities like Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems, which have immense potential to assist sustainable development and modernize the country.

The proposed policy initiatives by the FM, coupled with factors like attractive Indian markets, presence of skilled workforce, stable political environment will surely be viewed positively by the investors, thereby making India an favourable destination for investment in India.

Budget 2022 should focus on ease of doing business, optimizing retail supply chain: Industry experts

Source: Economic Times, 17 January 2022

New Delhi: Finance Minister Nirmala Sitharaman is set to present the Union Budget for FY 2022 – 23 in the parliament on February 1. Ahead of the budget, industry experts share their expectations.

Promoting ease of doing business for MSMEs, optimizing the retail supply chain, and setting up a retail framework in form of the proposed National Retail Trade policy are some of the recommendations.

“MSMEs continue to be the backbone for economic growth. In a bid to boost local manufacturing and promote self-reliance, we could expect the budget to focus on the growth of small and medium enterprises as they can support the nation’s need to generate significant employment,” said Harsha Razdan, Partner and Head, Consumer Markets and Internet Business, KPMG in India.

“Enabling entrepreneurship is key and changes such as simplifying compliance procedures, easing working capital requirements, and encouraging investments can energize the sector tremendously, “ he added. 

Resonating the thought, Porus Doctor, Partner and Consumer Industry leader, Deloitte India shared, “To promote cross-border ecommerce from India, and to enable SMEs to export their products seamlessly to consumers worldwide through the online platforms, the government should look at easing documentation and other rules for export and return of products. This will encourage global ecommerce from India and pave the way for a robust multi-channel retail ecosystem in the country.”

He further added, “For growth in the hybrid capabilities, it is important for the government to make budgetary allocations and implement policies to support retail growth in India, including a common regulatory framework for retail across the whole country.”

“National Retail Trade policy has been a longstanding demand of the retail industry which does the rounds every year. The retail sector expects the government to accelerate and implement the national retail trade policy to streamline the growth of all formats of retail trade and remove the distinction between e-commerce and physical retail,” said Doctor.

The proposed retail trade policy is in talks and as per reports, its draft is expected to be shared soon for public comments. 

Recently, sharing Budget 2022 wishlist, Preet Dhupar, CFO of the Indian arm of furniture retailer, Ikea, said “We look forward to the roll-out of the National Retail policy, bring offline and online retail into a single policy framework, reduce the compliance and regulatory burden, give industry status to retail along with financial incentives to large scale projects.”

“The government has proposed to implement a national retail trade policy. We could expect the policy to look at digital inclusion, technology investments, and skill upgradation as key elements of retail growth and augmenting job opportunities,” said Razdan from KPMG in India, on National Retail Policy. 

“However, implementation of the policy and its framework in the real spirit will be critical, ” he added.

Core sector gets 46% of outlay

Finance Minister Pranab Mukherjee today allocated a large chunk of the total plan outlay of Rs 373,000 crore for 2010-11 to infrastructure sectors, including road, power, railway, ports and airports.

“I propose to maintain the thrust for upgrading infrastructure in both rural and urban areas,” Mukherjee said, while presenting the budget in Parliament today. Over 46 per cent of the total plan allocation – Rs 173,552 crore – for 2010-11 has been earmarked for infrastructure development. Last year, the proportion was around 30 per cent.

Mukherjee more than doubled the plan allocation for power to Rs 5,130 crore for the next financial year. A major portion of this corpus was directed at the Restructured-Accelerated Power Development and Reforms Programme (R-APDRP) to bring down distribution losses and improve capacity addition.

To build the corpus of the National Clean Energy Fund set up earlier, Mukherjee also announced a cess on coal production at a nominal Rs 50 per tonne. This will be levied on imported coal, too. Around 75 per cent of the power generated in the country is coal-based.

In another step at cutting domestic carbon emissions, the government increased the plan outlay for the renewable energy ministry by 61 per cent to Rs 1,000 crore for 2010-11. The ministry is implementing the ambitious National Solar Mission, aimed at setting up 20,000 Mw of solar power capacity by 2020.

Budget 2010-11 provided a concessional customs duty of five per cent for solar power generating equipment. “I propose to exempt a few more specified inputs required for the manufacture of rotor blades for wind energy generators from central excise duty,” the FM added.

Allocations for roads and railways together were over 36,600 crore, an increase of Rs 3,300 crore. Mukherjee said the government has made changes in the policy framework for public-private-partnerships to make a visible impact on the road sector. It has also targeted construction of national highways at the pace of 20 km a day.

Mukherjee also said disbursements of the India Infrastructure Finance Company, set up to provide long-term financial assistance, would touch Rs 9,000 crore by March 2010 and reach around Rs 20,000 crore by March 2011. He said the take-out financing scheme, where banks sell their loan book from infrastructure companies to IIFCL, announced in the last Budget, was expected to provide funding of Rs 25,000 crore over the next three years.

Source : Business Standard. 03/30/10