Chandrajit Banerjee | Industry hopes for sustained growth, competitiveness & building inclusion

The Union Budget 2024-25 has a special significance. It comes at a time when the Indian economy is in top gear, having clocked a stellar 8.2 per cent growth for 2023-24. The forthcoming Budget should sustain this growth momentum. Being the first Budget of the new government, it should set the tone for the government’s reform agenda for its full term.

Here, I make suggestions focusing on three pivotal issues.

First, public capex has been a key driver of India’s impressive GDP growth over the past three years. It has also facilitated large-scale employment in the construction sector, bolstered the competitiveness of the Indian industry by creating world-class infrastructure, and is crowding in private investment.

Although signs of revival in private capex are evident, it remains to become broad-based. Sustaining the momentum of public capex is crucial to fortify the private capex recovery into a broad-based investment cycle and continue with the much-needed infrastructure building.

The Interim Union Budget 2024-25 increased the capex allocation by 16.8 per cent over the revised estimate of 2023-24. This should be enhanced to 25 per cent.

On the fiscal deficit front, the revised estimates for fiscal deficit for 2023-24 came in at 5.6 per cent of GDP, lower than the 5.8 per cent of GDP estimated in the Interim Budget. Additionally, the transfer from the Reserve Bank of India has been Rs 1.1 lakh crore more than the estimates in the Interim Budget. Given these, the glide path of reducing the fiscal deficit to below 4.5 per cent of GDP by 2025-26, must be adhered to, ensuring continued macroeconomic stability.

Second, India is endowed with a favourable demographic dividend, given its young population. The urgency to capitalise on this cannot be overstated for which quality employment generation at scale is necessary. Employment generation is also a growth imperative. India remains a consumption driven economy, and employment generation is critical for broad-based demand generation. Higher demand will provide impetus to private investment, and both will drive long term sustained high growth and resilience.

Building on the success of the Production Linked Scheme, an Employment Linked Scheme (ELI) should be launched for labour intensive sectors, providing incentives based on outcomes linked to employment generation. Some of the suggested sectors include tourism, logistics, retail, media and entertainment, toys, textiles and apparels, and wood-based industries. To address the issue of low female labour force participation rate in the country, higher incentives could be provided for women’s employment.

Further sector-specific interventions should be made for strengthening the competitiveness of these sectors to enable their growth.

Micro enterprises and self-employment need to be promoted. The successful PM-SVANidhi scheme for street vendors could be extended beyond December 2024 and be expanded to rural and semi-urban areas. The government should promote micro enterprises like “Drone Didi”, which will also develop an ecosystem for technology induction in agriculture. Integrated rural business hubs for providing social infrastructure in clusters of villages along with a scheme for rural industrial parks to promote non-farm jobs could be launched.

India’s demographic dividend coincides with a global workforce shortage in many developed countries. Given the positive reputation of the Indian workforce worldwide and India’s strong relationships with many developed countries, a proactive approach towards facilitating access to overseas employment opportunities for Indian youth should be developed. The Budget could announce an International Mobility Authority to take up this agenda on a mission mode.

A mapping exercise should be conducted to identify countries facing labour shortages, the skills in demand, and their alignment with the skills available in India.

Based on this, country-specific interventions can be implemented to facilitate overseas employment opportunities.

Third, Indian industry has an important role in India’s growth and development and policy should foster its competitiveness enabling it to realise its true potential.

India’s share of global manufacturing and merchandise exports does not reflect the country’s potential. More work is needed on the EODB and CODB front. The past decade has witnessed significant improvements in many of these aspects. The Budget should build on these to further strengthen the competitiveness of Indian industry.

All approvals for industry, both from the Central government and the state governments, should be made in a time-bound manner through the digital National Single Window System. This should be applicable for approvals and compliances for setting up new businesses, for existing business and for winding up of an existing business. The thrust on the decriminalisation of business laws should continue.

To alleviate the legal burden on businesses, Alternate Dispute Resolution mechanisms should be adopted more widely, in conjunction with an increase in the number of dedicated courts and benches for resolving commercial disputes.

Innovative solutions to enhance accessibility of land such as land banks and land pools for industry are urgently needed. To reduce the cost of power and logistics, two major cost components for industry, a roadmap for eliminating the cross-subsidisation of power to other end users and railway passenger fares, by industry, should be outlined. The inclusion of fuels and electricity duty under GST is strongly recommended, which can significantly reduce the costs for industry.

To make manufacturing future-ready two missions could be launched, a Mission on Advanced Manufacturing and a Mission on Advanced Materials. The future of manufacturing is green, hence sectoral roadmaps for achieving Net Zero should be prepared.

R&D is key for industrial competitiveness. For this the operationalisation of the Rs I lakh crore fund for encouraging R&D in the private sector, announced in the Interim Union Budget 2024-25, should be expedited and should be done in consultation with the end user -- that is, industry.