Resilient Policy Expectations To Offset Global Slowdown, Geopolitical Challenges
With Budget 2023 around the corner, all eyes are on the Union Finance Minister with hopes of growth-led stable and resilient policy announcements to offset global slowdown, geopolitical challenges and the disruption in supply chain that would allow India to continue its growth rate of 7% which is amongst the best in the world.
Some themes which will be important from the Budget are:
Make in India
As per Industrial Production Index, industrial production has recorded an increase from 118.1% in FY 2020-21, to 131.6 % in FY 2021-22, from base year of FY 2010-11. To boost employment, investments, create jobs and tackle the current account deficit, the government is expected to increase expenditure on its manufacturing promotion schemes. Production-linked incentive (PLI) schemes announced for 14 sectors have been welcomed by the industry. With 717 applications approved under the PLI scheme, it aims to attract significant investment, create jobs and boost export opportunities. Sectors such as mobile phone manufacturing, have witnessed significant growth where exports of mobile phones have doubled to US$ 5 billion in six months, i.e. till October 2022, as against US$ 2.2 billion in 2021-2022. Also, a significant investment of approximately INR 23,000 crores has been being committed to the pharmaceutical, and medical device sectors, under the PLI scheme.
The government also has a significant focus on the electronics sector as electronics manufacturing is a priority for the government, given the world’s ongoing chip shortage and the fact that a significant portion of India’s import bill is towards electronic import. Accordingly, the government may need to consider new PLI schemes, or amend the existing ones, across sectors where the government believes there is potential for investment, exports and job creation. Government can also consider policies along the lines of the Public Procurement (Make in India), phased manufacturing plan and fiscal and non-fiscal incentives such as development of export clusters to promote import substitution.
Digitization
The Budget is expected to further boost the digital-first approach that India is following to become a US$ 5 trillion economy, while also addressing issues the IT sector is currently facing, due to declining margins and interest rate hikes. To address these rising concerns and boost the IT sector, government is expected to take actions through promotional schemes to improve investment in research and development, digital infrastructure and internet penetration, thereby enhancing utilisation of cutting-edge technologies. Reforms are expected from the Budget through schemes to incentivise IT start-ups, promote ease of doing business and foster digital skill development.
Healthcare
The healthcare sector will attract government attention in the upcoming Budget. The long-standing demand of the industry to increase allocation to the health sector and improve access to quality care is expected to be a priority as the Indian government aims to create a strong global brand identity for Indian healthcare. Similarly, to promote medical value travel, the government should consider bringing in an institutionalised framework to build an ecosystem of world-class infrastructure, institutions, and skilled doctors for global patients.
Another area that the government is expected to focus on is health research, which will benefit from investments in research and development, the setting up of a dedicated institute for research on medical devices to achieve self-sufficiency in the sector.
Sustainability
There has been a strong emphasis on electric vehicles, demand for which was very high in 2022. This is likely to continue to remain a priority together with renewable energy capacity, green hydrogen, financial decentralisation of hydropower projects and promotion of grid-scale battery storage systems, given that green finance and energy security rank high on India’s G20 agenda.
Conclusion
The Union Budget 2023-24, with the right policy interventions on investment in manufacturing, physical and digital infrastructure, skill development, job creation, integration of medium and small enterprises and building demand on a pan-India basis, can pave the way for a resilient and sustained economic growth to meet GDP growth rate expectations.
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