The initiatives announced by Finance Minister Nirmala Sitharaman in her Union Budget 2022-23 showed India's continued commitment to enhancing productivity and creating jobs, a top India-centric American business advocacy group said on Tuesday.
Finance Minister Sitharaman unveiled a Rs 39.45 lakh crore Budget, with higher spending on highways to affordable housing with a view to fire up the key engines of the economy to sustain a world-beating recovery from the pandemic. While she primed up spending on infrastructure to create jobs and boost economic activity, Sitharaman did not tinker with income tax slabs or tax rates. Her budget for the fiscal year beginning April 2022 proposed a massive 35 per cent jump in capital expenditure to Rs 7.5 lakh crore, coupled with the rationalisation of customs duty, an extension of time for setting up new manufacturing companies and plans for starting a digital currency and tax crypto assets.
Overall, the initiatives show India's continued commitment to enhancing productivity, creating jobs, and capitalising on nine per cent projected growth to integrate into global value chains. Critically, to achieve these goals, the budget embraces efficient tools and vital outcomes like increasing the use of digital technology, mobilising private capital and climate-sensitive development, US India Business Council (USIBC) president Atul Keshap said. USIBC, in a statement, congratulated Sitharaman on the presentation of the annual budget.
"As always, the details are important. The announcement of a 35 per cent increase in capital expenditure is a significant step forward, especially after the substantial increase in the prior budget. The commitment to a rapid rollout and supportive ecosystem for 5G technology is also notable," Keshap said. "The key will be to translate these initiatives into accelerated infrastructure development on the ground that speeds up travel, lowers logistics costs and broadens digital access by attracting private investment, he said.
He said the budget embraces digital technologies to advance key goals like financial access, quality healthcare, enhanced educational and skilling opportunities, and higher agricultural output. The government can only maximise returns from these initiatives if it creates a level playing field for competition among firms who supply key inputs, be they digital payment providers or life sciences companies, Keshap said. Under this budget, private investment will continue to be a key driver of growth. Efforts to ease doing business like reducing the time to set up a business, eliminating thousands of compliance requirements, and making land management more efficient will help achieve this objective, he said.
The acknowledgement of the role that venture capital and private equity play in flowing quality investment into new enterprises and job growth is critical, as is the commitment to enhance the ecosystem for these firms' operations, he said.
Keshap said the government can make prompt progress in this area by finalising the framework for the direct overseas listing of Indian companies and making the scope of investments subject to Press Note 3 more clear and assessments time-bound. More also can be done to reduce discriminatory tax and regulatory frameworks in areas like banking and insurance and promote more efficient tax administration and dispute resolution processes, he said. Observing that integrating into global value chains is a delicate balance between increasing competitiveness of the domestic industry and opening the economy to trade, he said building 100 new cargo terminals will make it easier and less costly for manufacturing inputs to enter the country.
The increase in the PLI scheme for solar manufacturing is also a step in the right direction. But phasing out customs exemptions without lowering tariffs on imports like medical devices, medicines, agricultural products and steel risks slowing India's desire to be a global competitor and may constrain its access to global markets and their large quantities of investment capital, Keshap said.
The 12 per cent increase in the capital budget expenditure for defence will help support India's border security and Indo-Pacific ambitions. Still, increasing targets for indigenisation of production may slow India's access to the equipment it needs to safeguard its security. Making India a more friendly manufacturing environment for international defence companies will be critical if they are to supply.
India's defence needs in a prompt and efficient manner, said Keshap, the veteran American diplomat who replaced Nisha Desai Biswal as USIBC's president early this year. The defence budget was on Tuesday increased to Rs 5.25 lakh crore for 2022-23 from last year's allocation of Rs 4.78 lakh crore with a major push on procurement of weapons and military platforms from domestic players as well as to involve them in defence research and development.
Keshap previously served as US Ambassador to Sri Lanka and Maldives; as well as Charg d'Affaires at the US Embassy in New Delhi;?Principal Deputy Assistant Secretary of State for East Asia and Pacific Affairs;?US Envoy for Asia Pacific Economic Cooperation, and Deputy Assistant Secretary of State for South Asia in Washington, DC.
