The Union Budget 2021 must focus on encouraging skills development, boosting digital infrastructure and simplifying the taxation framework.
The Union Budget for fiscal 2021-22 will be presented in the shadow of the COVID-19 pandemic. With the world’s largest immunization program currently underway in the country, time is ripe to further accelerate efforts to reinvigorate the economy. The upcoming Budget must therefore focus on encouraging skills development, boosting digital infrastructure, simplifying the taxation framework and making compliance easier. These are some of the key themes tech CXOs in India would like to see in the upcoming Budget. They believe these will improve the ease of doing business and shape India’s long-term growth trajectory.
Boosting infrastructure spending
Budget 2021 is expected to have a specific focus on infrastructure development. With Covid-19 estimated to have caused economic loss of Rs. 18 trillion, that’s roughly 9% of GDP. This type of loss cannot be recovered through revenues. The only option is to give a push to infrastructure to recoup the growth.
“With the world’s largest immunization drive already underway, economic recovery will be the major focus of the government. Despite the wreck created, the pandemic has offered a huge impetus to digital penetration all throughout the country, which has accelerated in the unlock phase. It is therefore critical the budget draws out bold policy interventions to strengthen digital infrastructure which will eventually help in digitizing the overall economy,” Mandar Agashe, Founder, MD and Vice Chairman, Sarvatra Technologies comments.
“We hope to see the upcoming budget prioritize building robust and responsible digital infrastructure, especially in sectors like health and education, where physical systems have been under a lot of pressure during the pandemic. We have seen commendable efforts to create Open Digital Ecosystems (ODEs) in these sectors, through the National Digital Health Mission, and the DIKSHA platform. Using the ODE approach, the government can further strengthen digital benefit transfer mechanisms, as many more households are relying on these social safety nets in the wake of the economic shock caused by the pandemic,” says Roopa Kudva, Managing Director at Omidyar Network India.
Sudeshna Datta, Co-Founder & Executive Vice President, Absolutdata, expects the government to make the necessary investments in technology hub this year. “It will, in turn, help in strengthening the infrastructure for advanced technologies such as AI, machine learning, cloud, and the Internet of Things (IoT). The Digital India Mission alongside other initiatives has provided the desired impetus to technological adoption in the country. However, there should be a stronger push towards policies promoting innovation that propel the same throughout the horizontal market. A data-driven economy should be one of the key focus areas,” she says.
Gaurav Shinh, Founder & CEO DAAS Labs agrees, “The government has started realizing the importance of new technologies like Artificial Intelligence and Machine Learning. The pandemic has been a huge boost to Edtech, AgriTech, FinTech, HRtech and HealthTech startups. So, we expect to see decisions to fuel the growth of cloud data storage, big data and AI technologies in several domains. The work from home trend due to the pandemic has seen a lot of investment being made in Tier II and Tier III cities and the trend is supposed to continue. Reforms are expected to support and enable these start-ups as they can have a huge long term impact.”
Strengthening manufacturing ecosystem
Additionally, with the global value chains being disrupted, innovation and R&D are becoming the key differentiators of growth along with an array of new digital technologies. The industry would like the government to continue with its policy focus on strengthening the manufacturing ecosystem, promoting R&D and incentivizing futuristic technologies in the upcoming Budget.
“The government should provide further incentives to industry especially when it comes to manufacturing companies, in the forthcoming Union Budget 2021. The Government can focus on attracting foreign investment, adopting cutting-edge technology, and enhance exports in order to make India a global manufacturing hub, through its ‘Atmanirbhar Bharat’ and ‘Make in India; initiatives. This in turn will boost employment opportunities for citizens which is the need of the hour in a post-pandemic world. We look forward to policies that will leave more money in the hands of consumers as it will help boost demand in the economy,” says Kishan Jain, Director, Goldmedal Electricals.
“The government’s top priority for 2021 should be on pulling the nation through the final phase of the pandemic and enable quicker economic recovery to pre-COVID levels of growth. The need for continuous hand-holding of the economy remains the top priority and Industry expects the Union Budget to include the next set of stimulus measures to spur demand,” mentions Uday Shankar, President, FICCI.
He adds that the budget must prioritize growth-oriented measures over fiscal considerations. It must focus on employment generation and on putting more money in the hands of consumers – the twin engines that will boost demand and drive growth.
Simplifying tax and compliance
While the growth trajectory is turning positive and the economy is looking up, the need for continuous support from the government remains. Demand has improved in a few sectors of the economy, but most others still require continued government support in the recovery process. Therefore, the focus during budget 2021 should be clarity and simplification on the tax front to meet this objective.
Niraj Hutheesing, Founder and Managing Director, Cygnet Infotech adds, “The 2021 Union Budget provides two big opportunities. Firstly, boost economic growth by scaling investment in digitization. Secondly, drive technology enabled rationalization of the country’s tax infrastructure. The former will bring employment opportunities through digital initiatives of Start-ups and MSMEs. The latter will enable businesses to thrive in a simplified indirect- tax compliance regime powered by new technologies like hyper automation. This will also ensure that the funds collected through GST are used efficiently and help in generating economic growth in this financial year. It is important to have a set framework and policy for GST compliance for all businesses in India.”
According to a recent FICCI survey, nearly 40% of the participants feel that ‘personal tax relief’ should be the key theme of direct tax proposals in this year’s budget. Further, nearly 47% of the respondents have mentioned that their biggest ask from the government in respect of direct tax is ‘widening of the tax slabs’.
An area closely related to demand is employment and majority of the survey participants (nearly 75%) supported ‘employment generation’ as the area for which tax incentives, exemptions should be provided by the government. The other two areas which came up in the list of priorities for seeking tax incentives, exemptions are ‘innovation’ and ‘exports’ with 53% of the surveyed companies supporting these.
As the Union Budget is used as an occasion by the government to introduce measures for simplifying the taxation framework and making compliance easier, the survey participants were also asked to highlight their current pain points from the taxation perspective and how the government can support them.
“Currently, there is a very high degree of compliance and paperwork which makes it difficult for technology companies to serve the global audience and this has forced companies to shift base outside the country. Urgent steps in this direction will help high growth companies keep base in India, generate employment across the spectrum and help revive the national economy after the shock of the pandemic,” comments Dhruvil Sanghvi, Chief Executive Officer, LogiNext.
Results show that ‘timely receipt of refunds’ is a key challenge faced by as many as 52% of the respondents. This is closely followed by ‘tax compliance’ and ‘tax litigation’ with 49% and 43% of the respondents respectively reporting the same. On the issue of stable tax policy, nearly 86% of the respondents highlighted that the government could promote this objective by bringing consistency at the tax administration level.
Ganapathy GR, Chief of Business and Strategy, Crediwatch is also hoping that the government simplifies and rationalizes compliance requirements for businesses.
“The Government can digitize these processes and use a single data depository to reduce duplication and administrative hassles. There are a multitude of schemes to support small businesses that ends up finally complicating the access to these schemes. These can be rationalized and disseminated appropriately, for more effectiveness,” he says.
Another interesting area to focus in this regard is cryptocurrency. Sumit Gupta, CEO and Co-founder, CoinDCX, believes, India is seeing tremendous traction building up for cryptocurrency following the Supreme Court lifting the banking ban. As more and more companies related to cryptocurrency set up base in India, the industry expects recognition. This will contribute to the GDP and employment by multi-fold.
“At present considering the ambiguity among investors pertaining to the tax applicability for the income earned from crypto trading, we expect the upcoming budget to bring in amendments in the income tax and GST laws thereby offering more clarity to investors, traders, and crypto organizations,” says Gupta.
Skills development and generating employment
Up-skilling and digital literacy will be business imperatives in 2021 that need to be backed by an overhaul in Budgetary outlays of skilling programs, an area experts are pinning their hopes on this upcoming budget.
“With upskilling and reskilling becoming an integral part of the new normal, and also as AI/ML and augmentation are increasingly getting integrated in the workplace, the government needs to take this opportunity to re-look at university curricula and skilling programs and update it with relevant digital-age skills. It must create the technology infrastructure and internet penetration to create a democratized opportunity to learn digital skills. Furthermore, it must come up with learning and development initiatives at various levels – national, state, districts and towns to train the fresh talent in these new-age skillsets that have become vital for survival in the post-Covid era,” states Lakshmi Mittra, VP and Head, Clover Academy.
Rameswar Mandali, CEO and Founder, Skill Monks agrees, “To ensure that skilling is prioritized the Government must provide training institutions with financial support through the Union Budget 2021- 2022, by offering subsidies on basic infrastructural facilities, providing access to low-cost funds backed by an extended moratorium period and collateral free loans.
Similarly, to encourage quality EdTech start-ups and more professionals to get into the skilling domain, the Government should look at a tax holiday for initial two years of operation. To give thrust to online training and education, more funds allocated to automate and digitize operations of training institutions will enable India to become a global hub for online education. Additionally, the Government should look at incorporating additional sanctions to the National Skill Development Corporation (NSDC) to facilitate accelerated learning and to acquire relevant skills under Industry 4.0 domain.”
According to Kamal Dutta, Managing Director, Skillsoft India, “With the rapid rise of new-age digital technologies, including Artificial Intelligence, IoT, Machine Learning, Cloud Computing, and Big Data, Indian businesses have to up their game by upskilling their workforces, something that will also add to the job security in today’s skill-driven economy. Organizing employee training, skill-development, and driving leadership programs digitally in the New Normal are capital-intensive initiatives. The scale of provisions under the Digital India mission and the Skill India campaign needs to increase to equip businesses with present-day capabilities. It will help them tide over the challenges and optimize digital transformation across market segments.”
“Also, digital transformation is no longer a self-serving interest in any business. It is something that the government should actively encourage and incentivize to make Indian players more competitive against their global counterparts,” he sums up.
According to a recent survey conducted by Deloitte Touche Tohmatsu India, respondents expect a strong push in the budget for the economy, business, and industry. According to Sanjay Kumar, Partner and Leader Public Policy, Deloitte India, said, “Schemes such as Aatmanirbhar Bharat and PLI have done especially well in supporting self-reliance and stabilizing the country’s economic growth. While these schemes have helped the manufacturing, life sciences, and consumer products sectors the most, the rest of the industry is also positive about stimulating their respective businesses through injection of R&D spend and income-linked incentives. For the economy at large, most industry leaders believe that boosting infrastructure spending would lend their sectors the needed impetus.”
IT industry body Nasscom has also submitted a detailed set of recommendations to the government with respect to direct taxes as well as challenges in customs for consideration in the upcoming Budget.
According to Nasscom, the government should consider introducing measures which prioritize the IT industry’s ability to increase its global market share. Further, it said, the e-commerce sector has played a key role in hastening the economic recovery and the government should consider introducing measures to improve ease of doing business that will help boost this recovery.