Budget must help slash business costs to propel growth: PHDCCI

The upcoming interim budget must focus on reducing the cost of doing business, especially at factory level and address issues around cost of capital, cost of power, cost and availability of land, cost of logistics besides cost of compliance, industry body PHD Chamber of Commerce and Industry (PHDCCI) has suggested. 

Although procedural requirements have been relatively reduced and the communication between the government departments have become transparent and hassle free, the cost aspect still needs to be relaxed further, PHDCCI has said in its pre-budget memorandum submitted to the Finance and Corporate Affairs Minister Nirmala Sitharaman here recently. 

PHDCCI President Sanjeev Agrawal said that reduced cost of doing business and level playing field in the country will increase the competitiveness of Indian industry and exporters and reduce imports of the items where India has domestic capabilities. 

On February 1, Finance and Corporate Affairs Minister is expected to present an interim budget (vote-on-account) for 2024-25 in the wake of likely general elections in April or May this year. 

On cost of capital, PHDCCI has submitted that the banking sector should transmit the full effect of three status quo in repo rate and lending rates immediately to reduce the cost of capital for the businesses. 

This will rejuvenate domestic demand and enhance the competitiveness of producers in the domestic market and exporters in the international market, the chamber has submitted. 

On cost of power, Agrawal highlighted that in India, costs associated with getting electricity have reduced significantly over the years. The government has taken many steps to get electricity easier, faster and cheaper. However, the per unit charge of power are still significantly high, he noted. 

On cost of land and availability of land, PHDCCI has highlighted that obtaining land is one of the most important parameters of ease of doing business. The procedure to acquire land should be free from complex and costly procedural bottlenecks, PHDCCI has submitted. Land reforms such as increase in the lease period and creation of land banks for the use of industry should be focused, Agrawal said. 

On cost of logistics, PHDCCI noted that over the years the time involved in transportation of goods has reduced significantly. However, the cost of logistics still remains high thereby leading to an increase in the overall cost of doing business, it added. 

Going ahead, the government should further improve the export logistics infrastructure, remove bottlenecks at ports to reduce costs and improve ease of doing business for industry, Agrawal said. “India has been struggling with high logistics costs, making exports uncompetitive when compared to those of other nations”, Agrawal said.  

Noting that a number of mandatory regulatory compliances had a cascading effect on the overall cost of doing business, Agrawal suggested that all regulatory bodies including SEBI, MCA, among others must ease the regulatory procedures and must have a lenient view on the policy environment “during this difficult period”.

FDI CAP REFORMS 

Noting that India is emerging as the preferred destination for Foreign Direct Investment (FDI), Agrawal however said that the complexity and variability of sector-specific FDI Caps and restrictions in the country pose challenges to investors. Simplifying these policies can reduce uncertainty and make India more attractive, he said. 

“Concerns about subjectivity and potential delays in national security reviews should be addressed. Harmonisation of procedures and approvals is essential to level the playing field. Simplifying operational guidelines in sectors like retail and banking can alleviate compliance burdens and make India a more attractive destination of foreign investments”, Agrawal said. 

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