Budgeting For Inclusive Growth

The session in parliament was boisterous; nevertheless, the budget was largely on expected lines, True to its timing it had something for everyone – particularly, the farmers, indigent section, SMEs and also the middle-class. While it’s likely to put surplus money in the hands of individuals and boost domestic consumption, but we must not lose sight of revenue collection targets which will have to be proportional. The fiscal deficit for FY20 was revised fractionally from 3.4% of the GDP to 3.3% and it shouldn’t be allowed to slip any further. What stood out at a macro level was the government’s continued growth focus and envisioning a 10 trillion dollar economy, in the next 13 years.

For the IT sector, the big one was the announcement of National Centre on Artificial Intelligence and NASSCOM has been approached to begin work on the portal.  We have been advocating this for a long time and we really welcome this move. Given the challenges the nation is tasked with, AI adoption here is likely to be very different from the developed nations. The global AI opportunity is massive – estimated to be 15 trillion dollars by 2030, and countries are moving at a frenetic pace to secure a major chunk. At this juncture, this kind of support from the government will create the right kind of noise. But beyond the announcement, a definitive plan will have to be worked out which will enable faster adoption and capacity building.

Re-skilling in digital is something we have reiterated many times. While the government continues to invest in education but we would have much liked to see a more specific outlay towards re-skilling / up-skilling in deep tech. More so, the government continues to focus on building a digitally enabled society. The creation of one lakh digital villages and simplifying compliances through technology are amongst the many positive announcements in this budget. Also, from a procedural standpoint, the proposal to do away with one-on-one linkages with assessing officers during scrutiny will bring in greater transparency through technology. This is quite commendable and will create further opportunities for the sector. The SME focus was strong, particularly making it easier for them to do business. Briefly, they are: providing interest rebate for GST registered SMEs on an incremental loan of INR 1 crore; encouraging public procurement on Government e-marketplace platform (GeM), particularly from women-owned SMEs; and, providing support to 3 lakh Common Services Centre – rendering digital services.

Some of the announcements related to GST were actually made during the year and the GST Council’s approval is awaited. The mood is upbeat about collections increasing in the next two years, which is good news. However, several important GST clarifications related to the treatment of BPO services as an intermediary, head office and branch office transactions was not clarified.

Startups have contributed immensely towards wealth creation and employment generation. While the segment has been getting support from the government and recognition, we would have much liked some more clarity on the contentious issue of Angel Tax. The clamour for its removal continues to grow louder and we would have been happier to see some progress made on that front. Also, a roadmap for tax rationalization for large companies is much required and didn’t find a mention.

India is the 6th largest economy today and its GDP can double in the next 5 years, but it’s equally important that the growth be inclusive. Towards this, the government should be credited for making a serious attempt.

Disclaimer: The views expressed here are purely my own.

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