Entities from critical sectors also expect tax/tariff incentives for EVs, equipping youth with industry relevant skills and industry status to real estate sector.
New Delhi: With India’s economy showing resilience amidst headwinds due to the tightening financial conditions and geopolitical tensions and challenges of inflation and supply chain disruptions, India Inc entities from critical sectors of the economy, while largely optimistic about GDP growing over 6.5%, are hoping that Budget 2023 will fuel growth across industries by building strong domestic demand and focussing on capital expenditure. Setting the tone of the Budget expectations, CII’s Business Confidence Index rebounded to its highest reading in almost two years of 67.6 in the October-December quarter from 62.2 in the previous quarter, reflecting a subsiding of concerns around the impending recession and its impact on the Indian economy as well as confidence over their company’s investment cycle recovering during the next financial year and capacity utilization level rising in the range between 75-100 per cent during the Q3FY2023.
Sanjiv Bajaj, President, CII, suggests a fillip to ease of doing business through further digitization, faster and time-bound clearance, contract enforcement, alternate dispute redressal mechanism, a genuine single window system encompassing central and state clearances and on the need for revitalizing the investment as well as consumption demand to infuse vibrancy in the economy. A pre-budget survey by Deloitte Touche Tohmatsu India reiterates conviction that the Budget would fuel the economy to remain resilient while balancing concerns around inflation and global risks. “Critical to this growth will be the pace of capital expenditure, infrastructure development, and the need to boost infrastructure financing through private partnership,” says Sanjay Kumar, Partner, Deloitte India. “With the vision of attaining a USD 5 trillion economy, the government has adopted a focussed approach towards ease of doing business and enhancing industrial growth, generating employment, and increasing investments. Union Budget 2023-24 holds great expectations from the industry to continue this momentum and lead the country towards economic prosperity,” says Kumar.
There is a lot riding on the automobile sector with India now among the top three auto markets in the world amidst the persisting challenges of supply of chips and environmental hazards. While the momentum in the electric vehicle industry has been building positively with increase in demand for EVs and Government commitment to promoting and prioritising electric mobility, Hitesh Garg, India Country Manager, NXP Semiconductors, a global USD 8.88 billion semiconductor manufacturer, points out that with the FAME-II (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) scheme slated to expire on 31 March 2024, the EV industry expects the government to continue with the effective measures to encourage the faster adoption and manufacturing of electric vehicles in India. “The EV market is expected to grow at a CAGR of 49 per cent during 2022-2030 and hit 10 million-unit annual sales by 2030 with the potential to create millions of direct and indirect jobs over the course of the next few years,” says Garg, underlining the need for this government support.
Garg gets endorsement from the Society of Manufacturers of Electric Vehicle which is also looking at the extension of FAME’s validity since the industry has yet to reach the penetration level that the subsidy was supposed to catalyse. Companies want the FAME II scheme to be linked to e-mobility conversion rather than being time-based since according to market trends, e mobility, particularly for two wheelers, has the potential to continue growing once it reaches 20 per cent of the total 2-wheeler market.
Aditya Munjal, Director, Hero Cycles, calls for giving a boost to electric bicycles. “With the upcoming Union Budget 2023-24, we are hoping for the inclusion of cycles and e-cycles in the existing schemes and policies such as PLI and FAME-II, that would help transform the bicycle industry in the country. With severe supply chain disruptions globally, this is our opportunity to take the pole position in supplying e-cycles to the world,” says Munjal.
There is plenty missing in the EV ecosystem as initiatives like R&D for localization, supply-side support and charging infrastructure have not taken off due to the nascent stage of the industry, non-availability of resources to attract investment and the pandemic. “As a leading EV-charging network in the country, the government should re-examine its tax and tariff policies on not only EVs but also related component requirements for the e-mobility ecosystem. For instance, a GST rate of 18 per cent is applicable on battery components and other raw materials with a relatively modest 5 per cent on the purchase of EVs. This creates a discrepancy in the market even leading to blockage of working capital for the industry,” says Akshit Bansal, Founder & CEO of Statiq. Lowering of customs duty for Lithium-Ion cells used for EV production to zero until cells start getting manufactured in India is also needed, say other EV players. Kartikey Hariyani, Founder and CEO, CHARGE+ZONE hopes that with various OEMs entering the market to set up manufacturing facilities, Budget 2023-24 will offer faster tax depreciation for EVs and charging infrastructure. “The introduction of advanced EV batteries technology and charging infrastructure under the existing Production Linked Incentives scheme could aid in fast-tracking the creation of an ecosystem for EVs in India,” says Hariyani.
In other realms of Indian industry and business, Rajesh Sharma, Managing Director, Capri Global Capital calls for priority sector lending status for gold loans. The concept of pledging gold for emergency funds is widely popular in rural markets and is used as an effective tool to avail short-term credit by the rural population to meet the capital requirement for business, an agrarian community for various agri-production needs, or personal commitments. “Gold loan focused NBFCS have been fulfilling the credit demand of under-penetrated markets with typically small ticket sizes ranging between Rs 50,000 to Rs 1 lakh. Offering priority sector lending status to the gold loan in the upcoming Budget will pave the way for the banks to participate with more potency and fund gold loan NBFCs at a subsidized rate,” says Sharma. “The lower cost of funds will ultimately benefit the borrowers with lower borrowing costs. It will aid in greater institutionalization of gold collateralized credit,” he adds.
The jewellery industry is pinning hope on the forthcoming Budget to push exports and generate jobs in the sector, says Colin Shah, MD, Kama Jewellery. “Customs duty cut on gold and a progressive repair policy for jewellery will help the sector immensely. We are also very hopeful that there will be presumptive taxation on our special notified zones for rough diamonds and abolition of duty on the seed used for lab-grown production,” says Shah.
In the education sector, Mohan Lakhamraju, Founder & CEO, Great Learning wants the Budget to focus on equipping youth with industry-relevant skills, expanding avenues for youth to have easy access to affordable higher education and providing multiple opportunities for them to develop cutting-edge skills. “A couple of initiatives can be taken by the Government in the upcoming Budget. Allow edtech companies to formally partner with universities to offer online and hybrid degree programs in order to achieve the gross enrolment ratio targets set by the government and remove GST on upskilling programmes to make them more affordable for people. Apart from improving the overall employability of the workforce, these measures will lead to more innovation and technological advancement in our country,” says Lakhamraju.
In the healthcare sector, Pankaj Balwani, Founder & CEO, of Xplore Lifestyle, expects the Budget to address the affordability issues that patients face due to high customs duties and taxes on medical devices, which happen to be fairly high compared to other countries including neighbouring countries. “So, the high rate of 18% GST on certain medical devices must be brought down. At the same time, the 5% Ad Valorem Customs Health Cess tax also deepens the burden on the industry and eventually on the patients, something the government needs to rethink. The budget must remove the TDS on free medical device samples which encourages doctors to use devices that could possibly be superior to the existing ones and could better address issues of both efficiency and economy from a patient’s standpoint,” says Balwani.
While 2022 was a landmark year for the Indian real estate sector with residential housing sales increasing by over 50% in comparison with 2021, there are challenges that need to be addressed to sustain the momentum which includes the long-due “Industry” status to the sector. “Given that the real estate sector is amongst the largest employment generators in India, with an “Industry” status, real estate will be able draw equity investment, restructure its debt and borrow at cheaper interest rates ultimately benefiting end buyers and driving the industry for millions engaged,” points out Sharad Mittal, Director & CEO, Motilal Oswal Real Estate Funds. Mittal suggests bringing parity in the capital gain structure for different asset classes including real estate.
“The current capital gain structure is different for different classes with variations in even short and long-term capital gains. There needs to be a parity in the capital gain structure across asset classes. Due to unavailability of input tax credit in the hands of developer and high GST slabs (18% and 28%) on key raw-material items such as steel and cement, developers have to pass on these costs to the end-users. Any course correction in the GST shall improve the affordability of properties in the hands of the eventual buyer,” says Mittal.