The new government has already taken a series of progressive policy measures aimed at improving the business climate. While investments are key, for new projects to come on-stream demand revival is paramount. But capacity utilisation and profitability still remain at low ebb as consumer discretionary spending is muted even in a period of low inflation. This is a big challenge for the Finance Minister to introduce suitable prescriptions that would encourage spending and promote private investments. To start with, he can broaden the tax base as only three per cent of the population pay taxes, that is, only 3.5 crore people out of 125 crore besides reducing the tax burden on existing tax payers.
However, the fact remains that to boost GDP, manufacturing has to take the lead. The Make In India programme was announced to prop up the flagging manufacturing sector. But, despite over a year since it was announced, no real headway is visible yet.
This is simply because investment in manufacturing is still not viable in India despite government efforts like moving towards digitisation, simplification of procedures, single-window clearance and other such steps.
The positive impact of digitisation is yet to be reflected in indirect taxes. Taxpayers still face harassment from tax officials.
There are too many regulations that are still coming in the way for which there is a need for alignment of rules and regulations namely, land, environment and others where both State and Central laws apply.
Till this happens, it is important that more investments, particularly government spending in infrastructure, continue that would not only provide impetus to demand for goods but also employment opportunities.
The government will stick to its plan to meet fiscal deficit target but it should not be done through cutbacks on capital expenditure as it is already falling well short of its disinvestment targets.
While improvement in physical infrastructure is vital one should not lose focus on the country’s social fabric. With rising literacy, people’s aspirations are also higher. But skills required for present-day manufacturing, which is modern and technology intensive, are different.
There is a mismatch between the graduates that we are producing and the real skills required for employment and jobs.
Businesses have agreed to make Corporate Social Responsibility (CSR) expenditure towards betterment of society in conjunction with company’s operations and growth.
But current tax treatment does not deem it to be incurred for business purpose and thus not allowed for deduction, which should be immediately rectified.
I hope Mr. Jaitley’s upcoming budget will not only showcase the overriding priorities of demand revival and infrastructure development but also set milestones and time targets for all action to be taken to improve the ease of doing business in the country and help in economic revival.
The author is VC & MD, JK Paper and Director, JK Organisation
