In 2020, the month after the presentation of Union Budget, the COVID-19 pandemic struck the world, including India. A year later, as the next budget presentation is nearing, the business world and entrepreneurs are eagerly waiting for the government’s strategies to revive the stagnant economy. “India will spend money,” Finance Minister Nirmala Sitharaman said last month. This suggests the government may invest more in the sluggish economy. Representatives of the business and corporate sectors have already shared their thoughts with the Finance Minister.
The business community believes that a stimulus is essential for micro, small and medium enterprises and startups. India has 63 million MSMEs. In the financial year 2019-20, MSME-related products accounted for 49.81% of the total exports. Besides, the sector employs 110 million people. The budget is expected to continue its efforts towards economy stimulus packages such as ‘Atmarinbhar Bharat’.
There are more than 40,000 startups in India. Of the 30 unicorns, 18 have large foreign direct investments. The industry hopes that the upcoming budget will address their concerns such as easing FEMA rules and facilitating foreign fund flow in and outside India.
The current system is not conducive enough for foreign investment. For small-time investors, the process is a deal-breaker. Moreover, it adversely affects MSMEs and startups that rely on foreign investment.
Although India offers a wide range of investment opportunities, MSMEs and startups can make use of them and work seamlessly with global customers, distributors, investors and other partners only if the rules get upgraded.
Levying dividend tax is equivalent to double tax. It needs to be updated. Tax rates should be reduced to attract more foreign investors and to retain skills, patents and intellectual property as national assets. Also, simplifying GST and labour laws will facilitate businesses.
The Federation of Indian Chambers of Commerce and Industry has recommended increasing the limit of Section 80C, which is related to the income tax deduction, from Rs. 1,50,000 to Rs. 3,00,000. This will increase investment and individual profits.
The biggest question before the finance minister is how to gather resources at a time when tax revenue is significantly low. Initiatives like the ‘Gold Monetisation Scheme’ can bring capital trapped in the black economy, and thereby boost the sovereign rating of the country. Transferring tax collection from import duty to GST will also increase revenue. Solving tax losses and facilitating investment processes will accelerate wealth flow.
The current situation expects an aggressive approach from Nirmala Sitharaman. The business community is looking forward to the ‘budget of the century’.