The Union Budget 2022-23 holds immense importance to further stimulate the economy with a great booster dose. It is the second time that the budget is presented in the Coronavirus times. As India is on the recovery path from the impact of first and second wave of Coronavirus and simultaneously fighting against the third wave, the people of India are awaiting for the Union Budget 2022-23 with high aspirations. The small businesses and employment seeking growing young population have great expectations from the Union Budget firstly the relief measures to rejuvenate from the daunting impact of corona for small businesses and opening new avenues for employment for young work force.
The economy is in its recovery phase, characterized with strong macroeconomic resilience on the back of effective reform measures undertaken by the Government during the last 20 months and untiring efforts of the trade and industry. The sharp rebound in the GDP growth from the severe contraction of FY 2020-21 caused by pandemic COVID-19 is highly appreciable and encouraging. This special year marks 75 years of India’s Independence and India celebrates it as the fastest growing economy in the top ten economies in World economic system. So, the time is most opportune to further enhance the structural reform measures with landmark decisions to boost the economy and enhanced efforts towards ‘Self Reliant India’.
Firstly, let me highly appreciate the provision of Rs. 1.97 Lakh crore under the Production-Linked Incentive (PLI) scheme for 13 champion sectors to give the right impetus to the Indian industry with linking India to the global value chains, creating jobs, giving companies a competitive edge in the global markets and making India a global manufacturing hub in the coming times.
To carry-on with such a momentum, the industry, trade and economy need continuous handholding. Also, the new treat of Omicron appears to bring some uncertainty and reasons to be cautious. The uncertainty caused by third wave of the Omicron variant has impact on business sentiments particularly the small businesses because of partial lockdowns and curfews once again, even more at a time when the global supply chain continues to be a concern, resulting in growing input and operational costs for businesses in the country.
In the last many quarters, businesses had been picked up but many industries, MSMEs, especially the micro units or small businesses have been suffering from liquidity crunches, huge losses and struggling to meet the growth momentum. In the month of November, Capital Goods and Consumer Durables industry has shown a negative growth rate at -3.7 % and -5.6 %, respectively, in comparison to corresponding period of previous year.
At this juncture, the growth of small businesses is crucial not only to sustain their enterprises but also to create aggregate demand in the economy. It may be mentioned that Micro, Small and Medium Enterprises (MSMEs) are the backbone of Indian economy, given its top-notch contribution in the economic and social development of the country. The growth in MSMEs drives the overall growth of the country as the MSMEs contribute around 30% in India’s GDP. The MSMEs have been playing an unprecedented role in various prominent aspects of the Indian economy, including contribution of around 37% in all India manufacturing gross value output manufacturing, more than 49% in total exports.
Apart from fostering entrepreneurship and generating large employment opportunities, the MSMEs also complement large industries as ancillary units and this sector contributes significantly to the inclusive industrial development of the country. MSMEs have a great potential to generate new business opportunities with futuristic interventions and head in the direction of Industry 4.0.
At this juncture, the Union Budget 2022-23 must focus on resolving the issues of MSMEs and boosting their growth and development. Although, the Government has undertaken various meaningful and effective reform measures for MSME sector since April 2020 for mitigating the daunting impact of COVID-19, the MSMEs are still in recovery phase and looks forward to continuous handholding.
Hassle free credit availability to for MSMEs and ease of doing business, lesser number of compliances with reduced costs of doing business would be crucial role for the progressive growth of MSMEs. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. This characteristic of MSMES of low capital cost of creating jobs relative to big industries should be capitalised and encouraged further.
There are more than 6 crore micro units in the country, so, relief measures for them would go a long way to create a multiplier impact of employment creation as demand creation by these enterprises will create more demand from goods and services from medium and large enterprises, creating possibilities for them to enhance production and deploy more workforce in their respective factories. So, the Union Budget for 2022-23 will be pivotal in defining the way forward for the Indian economy with a focused approach towards demand creation through small businesses and employment opportunities for growing young work force.
Enhanced consumption demand in the economy will have a multiplier effect on production possibilities, private investments and employment creation. In this regard, some of the significant focus areas could be promoting ease of doing business, reducing costs of doing business, ensuring easy and adequate financial support to small businesses and increasing competitiveness of manufacturers.
There is a need to address the high commodity prices and shortages of raw material to support the consumption and private investments in the country. Basic custom duty needs to be reduced on raw materials for manufacturers, where there is a significant jump/ more than 50% in the prices starting from April 2020. This will boost Make in India and enhance cost competitiveness of domestic manufacturers. A level playing field for the Indian industry is of paramount importance to become competitive in the national and international markets.
Although, procedural requirements have been relatively reduced and the communication between Government departments has become transparent and hassle free, however, the cost aspect still needs to be relaxed further. Reduced costs of doing business and level playing field in the country will increase the competitiveness of our industry and exporters; also, reduce imports of the items where India has domestic capabilities. The Government should focus on reducing the cost of doing business including the (1) costs of capital, (2) costs of power, (3) costs of logistics, (4) costs of land and availability of land and (5) costs of labour, availability of skilled labour (6) costs of compliances.
Further, to rejuvenate the aggregate demand in the economy, increased infrastructure investments would prove to be creating multiplier effect. The robust growth of infrastructure is the key ingredient to realize the vision to become Atmanirbhar Bharat. The various infrastructure related schemes announced by the government should be effectively and timely implemented. There was a great jump in the capital investments in the last budget with a growth of 35% on the previous year, so, this year too an enhanced growth of more than 35% is needed on the last year capital investments in the country.
The other important focus areas should be increase public investments in agriculture sector, The role of infrastructure is crucial for agriculture development and for taking the production possibilities to the next level. It is only through the development of infrastructure, especially at the post-harvest stage that the produce can be optimally utilized with opportunities for value addition and enhanced income for the farmers. Development of such infrastructure shall address the vagaries of nature, the regional disparities, development of human resources and realization of full potential of our land resource. The enhanced productivity of the agriculture sector with enhanced production possibilities would create a great scope for increased agri and food exports in the international market and create tremendous employment opportunities in the food processing sector in the country.
Enhancement of expenditure on education and skill development and ensuring vital health infrastructure to provide a major push to socioeconomic development in the country would go a long way to build a strong social infrastructure in the country. In a nutshell, the Union Budget 2022-23 must be a vibrant reform-oriented budget with a focus on demand, investment and employment. The budget should provide a great push to the growth trajectory of Indian economy by fulfilling the wishes of people, trade and industry.
(Dr. S.P. Sharma is Chief Economist & Director of Research • PHDCCI (PHD Chamber of Commerce and industry, India)
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