Written by Arvind Sharma
The Covid-19 pandemic has adversely affected all economic sectors, and all are pinning their hopes on the upcoming Union Budget to revive their operations and get back to normalcy. No doubt, 2020 has been an exceptional year, with millions staying at home, prolonged restrictions on human movement and millions getting pushed below the poverty line. Thankfully, the Government of India immediately swung into action in May 2020 to announce a slew of measures to support businesses, and people are expecting further long-term sustainable reforms in the upcoming budget.
However, owing to their distinct capabilities and being relevant at this time, the internet and digital sectors such as Edu-tech, gaming, tele-medicine, fin-tech, and over-the-top (OTT) platforms have seen a massive surge in their revenues due to internet and smartphone penetration in the tier-2 and tier-3 cities. More importantly, the role of pharma and healthcare sector in dealing with the Covid-19 pandemic has been remarkable right from day one of the pandemic till today – for instance, running awareness programs, providing treatment, and conducting the vaccine drive.
The upcoming Budget announcements may not satisfy the expectations of all economic segments and, in the context, it may be noted that tax revenues have also taken a hit. The government will have to adopt a considerate approach to ensure efficient utilisation of resources by identifying priority sectors and addressing the demands of multiple stakeholders/sectors. The pharma and healthcare sector will be the priority sector in allocating funds, and the successful implementation of the Covid-19 vaccination drive will have a huge economic impact in 2021.
India is a consumption-driven economy, and the theme of the budget should be to provide impetus to demand and re-start the economic engine. It is notable that we have already taken steps to boost domestic capabilities for key sectors by launching ‘Production Linked Incentive’ schemes, and measures for cost-efficient production, increased infrastructure spending, and tax rebates across sectors are expected to put the economy back on growth track.
There is a lot more to do in the infrastructure sector, specifically in roads, railways, ports, airports, power, and key and timely reforms in these sectors would attract private players, and increase competition and efficiency. Schemes such as Atmanirbhar Bharat and Make in India will go a long way in boosting our domestic capabilities and ensuring self-sufficiency across sectors, and I am sure more long-term and appropriate stimulus packages will be announced in the upcoming budget.
It is estimated that more than 50 per cent of India’s workforce is self-employed, which means that a cut in tax rates for middle and lower-mid income groups would act as a lifeline for the masses and help them cope up with the economic situation. On the GST side as well, there is a great potential for the government to spur demand and drive growth. Many businesses would need to avail professional services to revive their business, and therefore, a specific demand has been to reduce the GST on professional taxes from 18 per cent to 5 per cent. Though this will adversely affect government revenues in the short run, the said rationalisation will act as a lifeline for lakhs of businesses, and would pay rich dividends in the long-run.
Internet is one of the biggest forces, and we have seen the power of the internet eco-system and digital technology in pandemic times. Digital technology-based applications have seen increased acceptance, and efforts should be made to strengthen security systems to prevent any cyber-attacks, data violations, and phishing frauds. Further, it is important to realise that start-ups are permeating into all industry segments, and have immense potential to empower businesses and accelerate growth, and key measures are expected to boost the start-up and digital eco-system. The edu-tech sector has seen massive acceptance in recent times, and has the potential to provide quality education at affordable rates. More sops are expected in this sector too.
Massive investments are needed in the information technology and low-cost manufacturing segments. This will solve the dual problem of economic growth and unemployment. India should target to become a hub for electronics, automobiles, and the like.
We need novel ideas to deal with the effects of the Covid-19 pandemic, and the upcoming budget cannot be compared to any other. I hope this budget will be path-breaking and will live up to the expectations of many.
Arvind Sharma is the partner at General Corporate, Shardul Amarchand Mangaldas & Co.
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