- By Shankar Prasad, Founder, Pureplay Skin Sciences
Union Budget 2020 India: 2019 was a wild ride for the world economy and the start of 2020 is beginning to resemble a bungee jump. But sometimes, after being on a roller coaster, all you need is to quietly go about your day to settle your stomach. Rewind a couple of quarters, India's economic growth dropped to a six-year low of 4.5% in the July-September quarter with pundits predicting FY20's growth to be below 5%. Just a few weeks back, the International Monetary Fund (IMF) expressed concern that India is in the midst of a "significant economic slowdown".
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Given the backdrop, the country is understandably on the edge of its seat in anticipation of the upcoming budget — feeling equal parts apprehension and desperate hope. What do we really need right now? A stable, disruption-free year is what India Inc. needs to nurse itself back to health.
Whether in terms of the upcoming budget, the regulatory landscape or the geopolitical factors that will be churning in the world's pot this year — to drag the nations sentiment towards hope and growth, a shock-free budget with attention to a few key areas could prove to be just what the doctor recommends.
With GST- no news will be good news
While not a part of the Union budget, GST does deserve a special mention, particularly in light of the collections deficit that we've been experiencing. The fix, however, need not be tweaks, but just tighter implementation. When change is too frequent, it can be overwhelming and can cause an adjustment disorder in everyday business economics.
And given the current slowdown, a stable set of rules and expectations will make business planning easier as opposed to continually resetting aspects of the business according to changing regulations.
For instance, if businesses anticipate an announcement relating to GST, they will hold off critical decision-making until the fog clears, as any policy change will have implications on all parts of the business. Adjustments take a lot of back and forth till finally the new system settles. Even a small change ends up consuming the lion's share of management focus. An assurance of a stable landscape takes businesses off tenterhooks, making them growth-focused and allowing for quicker decision making.
The structure of India's customs tariff and fees system is complex to administer and susceptible to even more confusion because it is open to administrative discretion. In addition to numerous exemptions, ambiguity over norms renders further complexity to imports. For instance, when smaller parts in an import are subject to higher duty, the customs official can take the view of the entire import falling under a higher bracket. The resultant dispute consumes precious time and effort to adjudicate. Having a single rate for most items in case of customs can make compliance quicker, easier and more efficient.
Finish unfinished business
While the narrative of annual budget always centers around creating enablers for growth in an economy, a more rigorous approach towards resource planning to successfully implement the projects on the ground is the need of the hour. While focus on "Next generation infra" is certainly valid to create a resilient infrastructure, public
and private sector need to pool investment and intent towards stalled projects and up-gradation. For instance, while airports have seen an up-gradation, sea ports and urban transportation remain important areas with substantial scope for further improvement.
It's great that 70 million people are expected to enter the workforce by 2023. But India's workforce, both existing and new, is in urgent need of up-skilling and re-skilling. A NASSCOM report states that about 40 percent of India's total workforce has to be re-skilled over the next five years to cope with emerging trends like AI, IoT, machine
learning and blockchain. Intervention here will aid India to not just keep pace with rapid changes in technology, but also to live up to its commitment to be the 'skill capital' of the world. Budgetary allowance towards skill development and political will towards its implementation will also help combat the challenge of high unemployment rates in the long term.
Developing more confidence in the numbers
In August last year, the International Monetary Fund (IMF) raised concerns about delays in the release of economic and financial data by the Indian government. Voices of skepticism also emerged on the accuracy of the numbers shared. Data inaccuracy is a common challenge for governments across the globe to tackle. Demographics, resource
crunch and the absence of well-funded data collection programs can compound the issue in a country like India. Having said that, it is essential for data to be an accurate reflection of reality. When we are all trooping ahead towards one common goal, an environment of trust and transparency must be cultivated where statistics are shared in an accurate and timely manner. This will enhance macroeconomic policy-making and efficient allocation of funds.
Despite the consumer sentiment being low lately and several key sectors taking the hit of the global slowdown hard, India's demographic dividend and sheer resilience stand like pulleys on its side to pull the economy back into the pink of health. Strong political will to unleash short-term and long term reforms as well as innovative initiatives by the private sector need to come together to reverse the slowdown in the current atmosphere. And the upcoming budget is an opportune moment to harmonize and simplify the process of growth.
- Shankar Prasad is Founder, Pureplay Skin Sciences. Views are the author’s own.