Union Budget 2022: Decoding Expectations Of India Inc And What Lies Ahead

With curbs in place amidst Covid third wave, large enterprises, corporates, taxpayers as well as small traders expect relief in the form of rebates in direct and indirect taxes in the upcoming Budget

With the increase in inflation rate, it is expected that the government shall offer some more relief in excessive surcharges being levied on individuals earning higher amounts, according to analysts. Image: Getty

New Delhi: With just a few days left for the Union Budget, India Inc and market experts have their eyes on the upcoming Budget. We take a look at what analysts in the market and economy expect from the General Budget scheduled on February 1. Here are some of the sector-wise proposals being voiced by India Inc.  

Consumer Durables

Nikhil Mathur, MD India, GfK

In the coming Budget, the industry is expecting an increased focus on energy-efficient products with reduced GST tax slabs and added incentives. Some reforms that are likely to boost manufacturing include reduction of corporate tax, expansion on production-linked incentives (PLI), and rationalisation of tax rates on products such as ACs, televisions, etc. The government’s commitment to make India a global manufacturing hub and Aatmanirbhar with Make in India initiative will help in increasing expansion of the tech and durables market.

Housing

Ashish Jain, MD, Star HFL

As a part of the housing finance fraternity, I do believe there are the five major areas where the budgetary support, if announced, will give a positive moment of truth to the entire sector and in turn give a fillip to the entire economy, as housing forms a major component of the entire GDP. The PMAY subsidy, introduced by the Centre in 2015, has lent a positive hand to the end users, specifically the EWS and LIG segment customers. The same is due to expire in March 2022. We believe the same should be extended further for a period of five years as there is an inherent demand for housing, most of it coming from the EWS and LIG segment. Budgetary allocation to the NHB towards refinance lines needs to be continued and enhanced given the activity in the sector and the number of smaller HFCs requiring support from the NHB towards its onward lending operations. Regulatory direction to banks for enhancement of their allocation to priority sector lending, especially to housing thereby increasing liquidity to the sector. Deductions for home loan principal repayment, over and above the existing 80C and hiking the Rs 2 lakh tax rebate on housing loan interest rates under Section 24 of the Income-Tax Act to at least Rs 5 lakh removal of GST for a period of five years on purchase of units by EWS and LIG segment customers to give impetus to the housing sector.

Asset Management

A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC

Expect the Budget focus to remain in fuelling economic activity and support employment generation. A boost is needed for sectors such as real estate, private sector investment, infrastructure development, textile, chemicals, and manufacturing. A high probability of improvement in the breadth of the market, resulting to benefit many good well-governed mid- and small-sized companies. Considering the increased risk appetite for investing in equity, the IPO market should continue to remain robust in the years to come. An enhanced awareness for people to start investing, because SIP as an investment tool has found enduring acceptance from investors and will continue to be the single most useful tool for retail investors to participate in capital markets.

Automobile

Farrokh Cooper, CMD, Cooper Corporation

The forthcoming Union Budget should emphasise measures to help the economy recover from the pandemic and to boost consumption-led demand. The automotive industry expects relief from the Budget in multiple areas. To achieve sustainable growth, business communities should be encouraged to invest more in industry and businesses. I believe that the government should fix industry income rates for at least five years so that industrialists can make long-term financial planning and take appropriate decisions about investment in their industries. Furthermore, the government is now encouraging businesses to establish large industries, and they should be treated equally with medium and small industries in terms of receiving timely payments from the government and private sectors so that they can pay small and medium enterprises. Furthermore, the government should prioritise managing inflation and lowering the cost of raw materials and fuel. To boost exports, existing incentives must be increased. There is also a need to accelerate the GST refund procedure to provide liquidity to the industries. The industry is also eagerly awaiting news on the scrappage policy. Given the current market conditions, we anticipate significant initiatives to revive growth and boost investor confidence in the Budget.

MSMEs

Ramanujam Komanduri, country manager, India, Pure Storage

With restrictions in place amidst the third wave of Covid, large enterprises as well as small traders are seeing a dip in their business activities. Both corporates and taxpayers expect relief in the form of rebates in direct and indirect taxes in the upcoming Budget. We also expect the introduction of simplified compliances to facilitate the ease of doing business. The finance ministry could also introduce special stimulus packages to the MSME sector which is vital for economic revival. There may also be a positive surprise in the form of a relaxation of GST regulation and relief for sectors that have particularly suffered during the pandemic. The government, to provide further impetus to business growth, could also introduce fiscal policy initiatives to build a strong digital infrastructure for the MSMEs and enterprises. While India has one of the most dynamic technology ecosystems globally, we hope that the government will reaffirm its commitment to ‘Digital India’ through appropriate allocations and policies in this Union budget.

Stock Markets

B Gopkumar, MD & CEO, Axis Securities

The advent of new Covid variants and the associated uncertainties has kept the markets and the economies globally on edge. We hope that the Union Budget could bring about some confidence and stability in current volatile markets. With state elections lined up in over five states in 2022, we believe that a focus on job creation and investment-driven growth would be paramount. We see that asset monetization and higher disinvestment will continue to fund the development projects. To boost consumption, we expect an increase in the limit of standard deduction and home loan tax deductions. Overall, we believe that policy reforms and government spending on infrastructure development will boost economic recovery, giving ample opportunities to retail investors for growth.

Telecom

Tony Verghese, partner, J Sagar Associates

With several reforms being announced in the telecom sector, there is indeed an interest on how the budgetary allocations will follow these reforms. There is a need for budgetary allocations for the development of 5G technology, including equipment. Further, the spectrum auction possibly to be held during this year is likely to also open up the satellite services sector, which already has a lot of focus basis the SpaceCom Policy, hence the investment onto space technology along with equipment manufacturing in this space may be an area that is likely to have a focus in the budget as well. It is also likely that the issues relating to the sale of BSNL and MTNL may be a point of contention, given that the revival plans haven’t really worked well, and they having not migrated their technologies, in spite of access to spectrum

Logistics

Prem Kishan Gupta, CMD, Gateway Distriparks

With the Union Budget 2022 set to be announced, we expect the government to focus on investing in infrastructure that will allow for the total cost of logistics to be reduced for the end customer. With some sections of the Western Dedicated Freight Corridor already operational, we look forward for the entire corridor to be completed connecting the NCR and major maritime ports viz., Mundra, Piapavav, and Nhava Sheva this year and continue its focus on improving infrastructure by prioritising other corridors like the North-South, East-West, East-South, and West-South for uninterrupted movement of freight trains to facilitate domestic cargo. This will enable the logistics industry to keep moving ahead. In addition, there should be investments made towards digitisation of supply chain management with a focus on new technologies like IoT. With the third pandemic wave and uncertain times ahead, the industry is expecting policy support and tax relaxations that will help boost ease of doing business for the industry. The logistics cost in India is around 5 per cent more than the global average which leads to a huge competitive gap. The government should take steps to address the supply chain inefficiencies and reduce the gap.

Railways

Vishnu Sudarsan, partner, J Sagar Associates

The year 2022 looks to be a promising year for Indian Railways. There is an urgent need to increase the budgetary spend for Indian Railways for it to develop capacity, infrastructure, and enhance rail freight share. Capacity expansion over the next few years will be critical for increasing India’s competitiveness as logistics and freight movement by rail will play a critical role to cater to growing demand up to 2050. Besides capacity creation by railways, track safety, improvement in speed, and digitisation of locomotives is critical for it to be competitive and create opportunities for private sector participation. With RLDA leading the initiative on station redevelopment and privatisation of heritage railway lines, budgetary announcement for revamping stations, relaunching private trains, and other privatisation measures, including the new dedicated eastern freight corridor, procurement of rolling stock on lease, procurement of aluminium coaches (as part of PLI scheme), and privatisation of DMRC routes, with better risk allocation and sunset period are urgently required for the railways in India.

Personal Finance

Kumarmanglam Vijay, Partner, J Sagar Associates

In the past few years, the government has brought down tax rates for companies. However, tax rates applicable to individuals remain inordinately high. An attempt was made in Finance Act 2021 to provide marginally lower rates if individuals were to opt for an alternative regime and agreed to forego a set of deductions. As it provided only marginal relief, it met with a lukewarm response. With the increase in inflation rate, it is expected that the government shall offer some more relief in excessive surcharges being levied on individuals earning higher amounts. Further, as the tax on long-term capital gains on the sale of listed shares is in place, it is expected that securities transaction tax should also be done away with. With no social security mechanism for the masses, inadequate public health as well as education infrastructure, middle-class taxpayers expect the government to increase thresholds for contribution to pension funds, relief for medical expenses, and separate deduction for tuition fees paid to educational institutions.  

Human Resources

Ajoy Thomas, VP & business head, TeamLease Services

The Indian e-commerce industry has managed to gain substantial growth owing to a rapid increase in internet-user penetration and greater demand for easy access to goods and services among consumers from all walks of life. The possibilities are endless when it comes to e-commerce. The e-commerce sector should look for an impetus to digitise and incentivise e-transactions. I hope that the government cuts corporate tax rate across the board to spur growth. To amplify 'Make in India' initiative, it is time for the government to encourage product companies by introducing incentives that help them become globally competitive and take product innovation to the next level. Last year, the retail sector had shown several signs of recovery, and is aiming for a complete revival on all metrics. This is driven by the rising demand from consumers. Experts believe that the increasing purchasing power has led to growing demand. The government ought to take actions, bring measures for the sector that may further impact the growth in the consumption, or at least not let the consumption go down. The Budget should cover certain benefits for start-ups, such as reduced taxes for companies with a turnover less than Rs 10 crore and complete exemption from taxes for a duration of three years and on profits earned during the first five years. This can benefit the overall start-up ecosystem. Going by this, I am expecting better tax benefits for the start-ups and SMEs that can further aid growth.