This is part of a special series of articles by the country’s foremost voices, ahead of Union Budget 2024, aiming to draw attention to the critical reforms that can help India in its journey to become a developed nation by 2047.
In a few days from now, finance minister Nirmala Sitharaman will present her seventh consecutive budget, a record in India’s history. This is also the first Union budget in the third term of Prime Minister Narendra Modi’s government. Undoubtedly, we expect directional continuity in policy announcements with a thrust on economic growth, social development and sustainability, in line with the vision for Viksit Bharat 2047. Here are the key priority areas this budget should focus on.
The first is to scale up manufacturing. Domestic manufacturing must take a giant leap for India to be a global manufacturing hub. This is a necessity if we are to create scores of jobs and chart out a path for prosperity for our citizens.
A 360-degree planning of the entire value chain—from design to manufacturing—must be done, especially in hi-tech areas such as defence, electronics and semiconductors. Micro, small and medium enterprises (MSMEs) are an integral part of the ecosystem, and the industry must work with the government to enhance their presence and leverage their strengths.
Second is a simplified tax structure. The government has taken numerous actions to make the tax structure one of the best in the world. We expect continuity in tax policy, with further simplification of the tax regime as it will enhance ease of doing business and help improve investor confidence. For instance, we must work towards a simplified capital gains tax regime by having just two or three broad heads of asset type and by bringing uniformity in the applicable rates and holding period for instruments within the same asset class. Government should also lay down a road map for rationalization of TDS, or tax deducted at source, rate structure as this will considerably ease the compliance burden on taxpayers and avoid litigation due to characterization disputes.
Third is greater thrust on research and development (R&D). Over the next three years, India must enhance its overall R&D spend to more than 1% of GDP (from 0.7% currently). The ₹1 trillion corpus announced in the interim Union budget for research and innovation in sunrise sectors needs to be operationalized. It must be ensured that TRL (technology readiness level) 2-4 research is taken up to innovations with TRL 8-9 implementation levels. Further, a collaborative approach for creating innovation clusters is required, co-locating the private sector, academia, investors, start-ups and government-funded R&D institutions for critical areas such as renewable energy, water, smart mobility, new materials, and life sciences. The government can examine a shift in focus of publicly funded research in autonomous government laboratories to publicly funded research in higher education institutions as this will build a supply of advanced research talent needed by companies.
Fourth is focus on skills and quality jobs. A pertinent economic issue that needs to be addressed is the dichotomy of unemployment and skill gap. Only 3.3% of our labour force in the age group of 15-59 years has formal vocational training and even among the future workforce (age group 15 – 29 years), this ratio is less than 5%. This is starkly low when compared with 52% in USA, 75% in Germany and 96% in South Korea. Greater spend towards vocational training and skilling is much needed. Collaborative PPP models of skilling must be explored to ensure that acquired skillsets match industry expectations.
Fifth is to get more women in the country’s workforce. India could boost its annual growth by 1.5 percentage points if around 50% of women could join the work force (as against 35.9% in FY23). With right skilling, and supportive policies and schemes, we can place many more women in manufacturing roles. We must facilitate and incentivize market access for women entrepreneurs through public procurement and greater use of e-commerce. We must also increase access to finance and capital for women and young entrepreneurs. There should be a continued thrust on women empowerment in this budget as seen in the earlier budgets. More lakhpati didis with right skilling will be a win-win for rural economy.
Sixth is to strengthen the farm-to-fork economy. We need multi-faceted policy interventions to unlock the potential of Indian agriculture and to strengthen the entire value chain from farm to fork. To boost agri productivity, the government should launch an agricultural yields mission for the bottom 100 districts on the lines of aspirational districts. A collaborative centre-state approach towards establishing potential agri-clusters may also be considered. Developing farm gate infrastructure including scientific storage, grading, processing, lab testing, packaging, price discovery mechanism, point of sale/purchase, and transport facilities will be critical to modernize agriculture and reduce post-harvest losses (from the current 40% to 20%). Further, India must work on developing climate-resilient seeds through R&D collaboration between private sector and government agri-research institutions.
Seventh is to continue focus on sustainability. India has set for itself the target of ‘net zero’ by 2070. We need an enabling policy framework that can target resources towards both green areas as well as transition areas. Another facet of promoting sustainability is circularity, which can by itself help us economize use of resources of all kinds. The government should come out with a national taxonomy for green finance which will set a standard framework and nudge banks and other financial institutions to set sustainability targets and align their business strategies accordingly. Likewise, there is a need to create pathways for green transition for all sectors, and development of a national framework for circular economy.
Anish Shah is president of the Federation of Indian Chambers of Commerce and Industry.
