Union Budget 2022 should set the stage for economic revival: Experts

Just 12 days remain for the Union Budget 2022-2023 to be presented by the Finance Minister on February 1, 2022. Having an optimistic foresight with this year’s Budget, 66% of the marketers expect their budgets to increase this year (DCMN Growth Guide). Adgully reached out to cross-section of industry leaders to know about their expectations from the upcoming Budget. 

Dinesh Chhabra, Chief Executive Officer, Usha International:

“The expectation for this year’s Union Budget is that it sets the stage for economic revival, especially given the advent of the third wave. The past two years have seen the world undergo a paradigm shift as COVID-19 ushered into our lives a black swan event of a magnitude never witnessed before. Despite the highs and lows, the consumer durables industry is one that has managed to bounce back fairly well and continues to grow steadily. Having said that, the abnormal surge in the price of raw materials, which started increasing over a year ago, has cast a shadow on revenue forecasts and continues to pose a grave challenge for companies. In addition, supply-chain logistics issues are also adding to the burden for businesses. For brand uncompromising in their quality business becomes unviable, unless the part of the price rise is passed on to the consumer. This rise in prices is impacting consumer spending, adversely affecting the recovery and growth of our economy. The need of the hour is for the government to intervene and put in place some policies in this year’s Union Budget, that will facilitate rationalisation of the costs of raw materials, fuel, and help smoothen supply-chain. Further, as digital adoption and transformation accelerate, there is a need for increased allocation to improve internet infrastructure and connectivity to bridge the rural-urban divide across geographies. We are hopeful that the upcoming Union Budget will be aimed at accelerating economic reforms, promoting entrepreneurship, and providing stimulus packages that will help fuel consumer demand across sectors.”

Deepender Rana, Executive Managing Director- South Asia, Insights Division, Kantar:

“Consumer expectations from the budget has changed with the country being in the third year of the pandemic and healthcare remaining a concern. The good thing is majority have seen 2021 budget to have positively impacted them and also reflects in the Economic survey which projects the consumption story to be intact. Overall the signs are encouraging with most of the population getting vaccinated which can minimize disruptions leading to a high growth for the coming years ”

Amit Relan, Director & Co-Founder, mFilterIt: 

“The start-up ecosystem in India has already emerged as the third-largest in the global market, which highlights the massive growth of the sector in the recent years. Moving ahead, the ecosystem requires a more focused approach in terms of access to capital, allocation of more funds by the government, policy reforms for ease of doing business and creating a more supportive ecosystem in view of the pandemic’s impact. 

About the Indian ad-tech industry, it’s likely to cross $10 billion in revenue by 2030, making it one of the key contributors in terms of growth, job creation and export of services. In the global as well as Indian market, we can observe increasing ad spends over digital platforms which is likely to reach 60% of total advertising spends in 2022. Even the Indian government’s overall spend on digital advertising – including national and state governments – has already topped Rs 3,000 crore per annum, which involves outreach, promotion, and adverts. At the same time, today the techniques and tricks used by the bad actors in the value chain pose a greater threat to advertisers’ reputations through Brand Safety and Brand Infringement issues, leading to about 7-8% wastage of the overall digital spends. 

In this view, one of our key recommendations for the upcoming Budget would be that the government should subject digital advertising expenditures to auditing in the same way that it subjects other expenditures, which goes beyond determining if procedural regulations were followed and include auditing for results as well. 

The government, with a vision of a $1 trillion digital economy and the massive shift to digitalisation in recent years, should also pay attention to the ad-tech industry and take financial steps to help India’s existing ecosystem chart progress that will not only make India Atmanirbhar in the domain but also globally. Moreover, launching unique output-linked initiatives for the sector is crucial for India to position itself as a worldwide leader.” 

Shankar Prasad, Founder & CEO, Plum: 

“The three areas that the government may focus on in the upcoming Union Budget 2022 includes Taming inflation, Manufacturing incentives and cutting the export red tape.  Mostly due to supply-side issues, inflation has been running high on most inputs used by the beauty & personal care industry. Price hikes in items of daily use will further fuel inflation in the wider economy. Duty reduction and other measures aimed at tackling inflation will have a good long-term effect on the industry.

 We must make the most of the evolving global landscape and make determined efforts to further strengthen “Make in India” across the manufacturing spectrum. The country has a vast reserve of talent and resources waiting to make this happen. It’s a bit surprising that exporting out of the country is still sometimes as complicated a process as import. While there has been some simplification here over time, the longer-term vision should be that every budding entrepreneur only needs to fill in a simple one-page form and book a consignment for export to any destination in the world.”

Greg Moran, CEO & Co-Founder, Zoomcar:

“The economy is on the road to recovery and the Union Budget 2022-2023 will be crucial for the Auto sector as it can facilitate the industry’s effective revival. We are confident that with the right policies and support, the sector is poised for growth. One of the key areas for both the government as well as the Auto sector is Electric Mobility. With several Indian and international groups keen to invest in the Electric Vehicle (EV) segment, the government should focus on bolstering the infrastructure to enable easy manufacturing and usage of EVs and EV-related elements such as charging kiosks to boost demand. With regards to technology, we are in the midst of one of the biggest tech-led transitions in India and the world and we expect that this year’s Union Budget will focus more on tech-led developments in the Auto sector. It presents the perfect opportunity for the industry to capitalize on and boost growth. We also look forward to more tax incentives for the travel and trade industry.” 

Radha Dhir, CEO & Country Head, India, JLL: 

Fiscal incentives for net-zero buildings

Providing tax rebates and other fiscal incentives to develop net-zero buildings would help encourage energy efficiency and combat climate change.

Special tax status for data centre parks

India’s draft Data Centre park policy aims to make India a ‘global data hub’. Since Data centre is a capital-intensive industry special tax concession should be granted for data centre parks which can help in attracting more investments.

Increased allocation for SWAMIH fund

The progress of the Special Window for Affordable & Mid-Income Housing (SWAMIH) fund in achieving the objective of completion of stalled projects is bearing results, the allocation for the fund should be increased further. The Government should float similar funds for rental housing projects.

Accord 'Industry status' to the real estate sector 

While the Government has already provided ‘infrastructure’ status to affordable housing, the long-standing demand of according ‘industry’ status to the overall real estate sector remains unfulfilled. The growth of the real estate sector has its linkages and impact on multiple sectors and hence warrants an integrated approach for holistic and sustainable development. Since the sector has already witnessed landmark structural reforms resulting in increased transparency, accountability, and efficiency, granting of ‘industry’ will further fuel investment and employment. 

Separate provision for deduction of 'principal repayment' on home loans up to Rs 2 lakh

A separate provision allowing deduction of principal repayment (currently forming part of 80C deduction) up to INR 2 lakh would provide homebuyers higher tax benefits towards the latter stage of the loan tenure. This could be a timely relief in the current scenario where several homebuyers are grappling with honoring financial commitments. 

Removal of restriction on setting off the loss from house property against other heads of income 

The Finance Bill, 2017 introduced provisions to restrict the set off the loss from house property against other heads of income during the year. The existence of this restrictive clause severely dampens the investment sentiment in the housing market owing to lower effective post-taxreturns.

The removal of this restriction will enable the individual to claim the entire interest on his let-out property without any limit, resulting in a higher effective post-tax return on property purchase. This is expected to spur higher investments in the housing sector, at a time when developers are reeling under tremendous stress to push their inventory and generate sufficient cash flows for business sustenance.

Reduction in holding period of REITs for long-term capital gains

The success of three listed REITs has opened a new avenue for retail investors. Since REIT units are like listed shares, the capital gains tax treatment should be aligned by reducing the holding period from three years to one year. This will improve liquidity and help to increase retail participation. Further, a reduction in the holding period will provide REITs a level playing field with competing equity instruments.

Allow 100% FDI in completed residential real estate projects through the automatic route

Presently, 100% FDI is allowed through the automatic route in under-construction residential projects only. The move to permit FDI in completed residential projects will aid in unlocking the capital held up in unsold inventory, thereby rescuing cash-strapped developers. This is likely to lay a foundation for institutionally owned residential housing assets in India.

Allowing input tax credit on the calculation of GST payable in real estate

The government has reduced the GST burden by rationalising the effective rate on residential housing projects. But the unavailability of Input tax credit (ITC) to developers has resulted in a minimal reduction in prices to the home buyers, largely offsetting the GST reduction measure. If the ITC is restored it can help developers to pass on the tax benefit to homebuyers.

Similarly, ITC should be allowed on the development of commercial real estate properties meant for leasing purposes. As per Section 17(5) of the Central Goods and Services Tax Act, the input tax credit is not allowed to be claimed on the GST payable on rental income. The disallowance of ITC has thus led to higher cost of construction, blockage of working capital and adversely impacting cash flows of developers. 

Increase limit on interest deduction under section 24(B) for tax rebate

The home loan interest deduction should be increased from INR 2 lakhs to INR 4 lakhs for tax rebate under section 24(B). This will effectively improve the savings of the home buyer and aid them in the home buying decision.

Extension of benefit u/s 80EEA to avail additional Rs 150,000 interest deduction on home loans for first-time homebuyers 

This benefit (currently available for home loans sanctioned till 31st March 2022), may be extended until 31st March 2024. This will continue to benefit first-time homebuyers. Considering that most homebuyers fall in the lower and mid-income segments, this tax benefit will boost demand substantially. This will significantly benefit first-time homebuyers who will enjoy the benefits of interest subvention under the CLSS scheme and the extended tax benefits at a time when home loan interest rates are at their lowest and developers are offering lucrative deals.

Tax deduction on profits from affordable housing projects to be extended until March 2024 u/s 80IBA

A three-year window of extension would help the developers to construct affordable housing projects and boost the “Housing for All” objective. Since the launch of new affordable housing projects were severely impacted during the pandemic period, an extension of the scheme will help developers to start new projects.

A special authority should be set up for monetisation of surplus land by Government companies / public sector enterprises 

Though the government has announced plans to set up National Land Monetisation Corporation (NLMC), concrete action in this regard would further help to monetise state-owned surplus land in a systematic way. 

Extension of Credit Linked Subsidy Scheme (CLSS)

The Credit Linked Subsidy Scheme (CLSS) and the timeline to avail its benefit under the Pradhan Mantri Awas Yojana for Middle Income Groups may be extended until the budgetary allocation is not utilized.

Sachin Jain, Managing Director, De Beers India: 

“The Gems and Jewellery sector contributes to 7% of India’s GDP and forms around 12% of our export basket and plays a critical role in terms of employment generation. Over the past year the industry bounced back and performed well due to multiple positive steps taken by the government including reducing the import duty on gold and silver as well as ensuring there were no drastic increases in personal taxes. Beginning 2021, we also noticed that consumers moved towards purchases that were meaningful and brought value to their lives where jewellery played an important role. We look forward to the forthcoming budget in view that the gems and jewellery sector plays a pivotal role in the growth of the economy.” 

Neeraj Bahl, MD & CEO, BSH Home Appliances: 

“The economy has witnessed high levels of inflation across industries in the past year, influenced by rising input costs and disruptions in supply chain. Recognising these pressures, we are hopeful that the government will reduce GST to address price hike issues. We also appeal to the government to consider reduction on import duties, as high duty rates are impacting growth potential of consumer durables category especially in emerging segments like Dishwashers. We laud the government’s efforts around the PLI scheme which has given impetus to companies like us to deliver on our commitment towards ‘Make in India’. We look forward to such pro-growth schemes and measures which will further accelerate the industry to manufacture locally. We are optimistic on the recovery and growth potential of the consumer durables industry with premiumisation driving the category ahead.” 

Parag Kulkarni, Managing Director, A.O. Smith India: 

“The consumer durables industry has faced challenges with raw material costs for more than a year, and we are optimistic that the Union Budget will help reduce cost pressures for manufacturers and improve affordability for consumers. The budget may also look at reducing taxes on eco-friendly and energy-efficient products, which could help drive demand and increase consumer adoption of sustainable products.

Water purifiers and water heaters have become essential household items. We expect the budget to help rationalize tax rates on these consumer durable items, increasing the popularity and need for these products in India. We hope that the residential real estate market will also be positively impacted by the budget. Real estate is the second largest market after agriculture, generating large scale employment and supporting multiple allied industries. We are hopeful that the upcoming Union Budget will help usher in a balanced combination of reforms and regulations, which will contribute positively to India’s growth.” 

Niraali Parekh, Founder and Creative Director, Bokaap Design

"The tech and design sector is eager to know what the upcoming budget holds. I hope the government can ease access to resources, funds, and capital to startups and SMEs entrepreneurs in this space. For example, although COVID has boosted work in the tech space, businesses have curtailed their expenses in design services potentially compromising on quality. With a boost in the digital economy, UX/UI Design is more relevant than ever before. Experienced UX/UI talent in India is opting for remote jobs with American companies with higher-paying capacity or heavily funded startups. The incentives will bridge the gap between expectations and investment in branding and UX/UI services for small and medium-sized businesses. Eventually boosting studios to hire and retain the right talent and improve effectiveness without creating burnout."