On February 1, 2023, Indian Finance Minister, Nirmala Sitharaman, will present the Union Budget for the fiscal year 2023–2024 in the Parliament. Citizens anticipate potential changes to government policies affecting commerce and taxation throughout India as each new budget approaches.
As industries gear up for another budget, industry leaders must take a careful look at what the future holds. With rapidly changing technological advancements impacting every sector of society, it is increasingly important to understand how this impacts economic growth and where potential risks may lie. The pre-budget survey 2023 by Deloitte, which surveyed senior leaders across different industries and categories of companies, paints a clearer picture of the future and will help leaders make decisions that will bring success and continued growth to their organizations.
There is hope for India’s growth prospects, even though the global economy is not doing well. India is expected to grow quickly, and the policy announcement of the forthcoming budget will likely help support this growth while also taking into account the concerns around inflation and global risks. The following points express what the industry hopes to see from the budget.
Industry insights and expectations
Industry leaders have a positive economic outlook
- 62% of industry leaders are confident about India’s positive outlook. The economy is likely to achieve the 7% growth as projected by NSO’s early estimates. This growth will be due to the rising domestic demand and the government’s push for capital expenditure.
- Some of the challenges that may impede this growth include the global recession, currency fluctuations, inflation, and skilled labor shortages.
- The respondents of the Deloitte survey expect that this year’s budget will be more favorable to their industry’s growth than last year. They anticipate that the government will take proactive steps to protect India from any economic risks this year.
Leaders expect the government to take the digitization drive to the next level
- The government’s digitization drive has been received well by the industry, especially the energy, BFSI, and automotive sectors.
- Among all the government’s digitized tax administration initiatives, the GST portal and e-invoicing system have been recognized as the most useful. The GST portal makes it easier to file returns and refunds and to resolve doubts.
- 65% of the respondents say working with the private sector to invest in digital projects, new technologies, and innovation will probably help the government’s digitization efforts.
Atmanirbhar has proved to be effective
An impressive majority of respondents agree that Atmanirbhar Bharat has been a successful program.
- They suggest that its capacity should be further enhanced by prioritizing supply chain resilience and making compliance easier.
- To bolster foreign direct investment (FDI) inflow to India, the initiative could gain additional support through improved clearance measures.
- Sectors such as energy, food processing, and electronics manufacturing particularly believe in the potential of Atmanirbhar Bharat’s capabilities for developing robust supply chains.
- The Production Linked Incentive (PLI) scheme is believed to be a powerful catalyst for industrial growth, spurring businesses to establish larger production bases and fortify their exports.
- To ensure further efficiency gains in multiple sectors such as food processing and telecom & technology, survey respondents favored extending the incentives already put into place over additional years.
Industry expectation on taxation policy reform
Tax reform has been touted as an essential avenue to drive industrial growth.
- Most respondents have suggested that the most impactful direct tax reform would be to make compliance simpler. This sentiment was echoed strongly by those in food processing, textiles, electronics, and capital goods industries.
- Respondents also anticipate the government to reduce tax litigation.
- Additionally, many believe that changing the capital gains tax structure through rationalized rates across all assets and indexation of gains would have positive impacts on businesses.
- The call for reforming the GST tax structure is strong, with a drive to simplify its tariff due to beliefs that this would lead to less confusion and fewer legal disputes. The expected top changes from the union budget include improved accessibility of Input Tax Credit (ITC) and abolishment of GST credit restrictions.
- Survey respondents have voiced their support of group taxation, hoping to see it become a reality within the year.
- Regarding personal taxation, most expect tax exemptions and increased deduction limits for items such as house loans – measures that will give citizens more purchasing power and ultimately bolster consumer demand in the market.
Prime expectations from the union budget
- Respondents in the banking and financial services, food processing, energy, and telecom sectors have expressed a desire for further tax incentives to be included in the union budget as an effective catalyst for growth.
- Amongst the most anticipatory budget expectations are accelerated credit support and a simpler capital gains tax structure.
- Targeted sector-specific schemes, combined with an expanded Production Linked Incentive Coverage program, are among the most successful tactics to elevate industrial exports. Support for this opinion was especially high amongst respondents from the chemical and textile industries.
- Additionally, FTAs are seen to offer considerable benefits in terms of establishing global presence markets and attracting foreign investments, benefits of which will extend across sectors like Banking/Financial Services & Insurance (BFSI) and Automotive manufacturing industries through an improved exchange of technology information sharing between these nations.