Budget 2021

Infra funding, digitisation may pave path to recovery: Experts

Our Bureau. Mumbai | Updated on January 27, 2021

Increased investment in infrastructure, simplification of taxation rules and digitisation are some of the key areas that Budget 2021-22 should focus on to revive the pandemic-hit Indian economy, according to experts.

Experts discussed the key expectations from the Budget at a panel discussion titled ‘Unleashing the animal spirit in a pandemic-hit economy’ at BusinessLine’s Countdown to Budget 2021 webinar on Wednesday. The discussion, powered by HDFC Bank, was moderated by Aarati Krishnan, Editorial Consultant, BusinessLine.

Increased spending

One of the key things that the Budget needs to focus on is increased spending on sectors such as infrastructure and healthcare. “So far, the government has been conservative on the fiscal front, but I think this is not the year to be conservative,” said Dharmakriti Joshi, Chief Economist, Crisil. “A solid blueprint for reviving public investment, particularly in infrastructure, can make a huge difference at this juncture.”

“Private investors, particularly large corporates, are also now in a position to start investing. Without investments, you cannot have long-term potential realisation of reaching the $5 trillion economy,” added Joshi.

The sentiment was echoed by other panellists including Rahul Shukla, Group Head, Wholesale Banking, HDFC Bank, and R Mukundan, Managing Director, Tata Chemicals and Chairman, CII National Committee on CSR.

“If the government does not tighten the fiscal deficit immediately and give us a five-year glide path, that would be a very positive measure.

“We will know in the next six months what we are going to get in terms of gross fixed capital formation that is going to come from government spending on infra,” said Shukla.

Simplifying taxation rules

Apart from spending on infrastructure, “simplification of taxation rules” is another important area of focus, according to Mukundan. “The government needs to make sure that its payment and payment release mechanisms are more digitised, more person-free, and make sure the flow is smoother,” he said.

“India needs to look at three things: rationalisation of our compliance, simplification of compliance regime, and digitisation,” Mukundan said.

Simplification in taxation rules is also required for personal taxes, with an increased focus on the salaried middle class.

“It is this salaried middle class that has been the worst hit in the pandemic. And there is a crying need for the government to reach out. They (government) can rationalise or change the slab rates and provide some more incentives,” said Neeru Ahuja, Tax Expert and Partner, Deloitte India.

According to Ahuja, tabs under the new I-T regime introduced last year can be “simplified or somehow lapsed or merged.”

“The government did increase the surcharges heavily on the higher income bracket. Such a high tax rate is not good for retaining capital in the country. There is a strong case for rationalising individual tax rates,” added Ahuja.

The Budget should also focus on providing relief to the sectors worst hit by the pandemic, which has created a dichotomy, where smaller and informal organisations have paid a higher price.

“Some of the dichotomies need to be corrected. The first would be income support for the urban poor. And second, the sectors like hospitality and tourism are not going to revive very quickly. These will require some specific support so that the government policy acts as a bridge to take them towards the recovery,” said Joshi.

The Budget should also focus on the revival of the service sector, which has taken a major hit during the pandemic. “Services, particularly those where you have physical contact — tourism or hospitality — are taking a major hit,” Joshi said.

According to Shinjini Kumar, co-founder, SALT, one way to help such sectors is to have a fresh look at the regulatory issues they face.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on January 27, 2021
This article is closed for comments.
Please Email the Editor