Finance Minister Smt Nirmala Sitharaman and Minister of State for Finance Shri Anurag Thakur at North Block ahead of the presentation of Union Budget 2019
For realising the ambitious goal of becoming a $5 trillion economy by 2025, besides economic reforms leveraging IT foundation is critical
Dr Omkar Rai
Despite the global slowdown, India has maintained consistent macro-economic stability with a moderate growth rate of 6.8% in FY 2018-19. Moving forward, India will spring up to a better growth rate with a strong foundation and proactive policies of the government will play a cardinal role in accelerating economic growth to reach higher echelon and achieve the target of $5 trillion, which has been candidly maintained in the budget speech of Finance Minister(FM).
In her maiden budget, FM has proposed Rs 100 lakh crore ($1.5 trillion) investment in PPP model to unleash the faster development and completion of major national-level infrastructural projects including National Highways, Bharatmala and Sagarmala, modernisation of railway infrastructure, development of national grids in gas, water and power and building waterways and airports to push the national connectivity and mobility on fast lane. The one-nation one-grid model will help consolidation of key resources and infrastructure in bringing more equity to national distribution of resources like water, gas, power and e-way. This will help the government in delivering those services to every part of the country by including the less-privileged in the mainstream.
For a country like India, which is reflecting the prominence of strong economic parameters across the globe, Foreign Direct Iivestment (FDI) inflows in various industry verticals are required for disruptive growth. It’s quite evident from the fact that during FY 2018-19, India attracted FDI inflows of $64.375 billion, as per United Nations Conference on Trade and Development (UNCTAD). As the stage is already set for the foreign investors, the government is further planning to ease FDI in single-brand retail, aviation, insurance and media, especially in animation, visual effects, gaming and comic, which in turn will help in fulfilling the aspirations of the respective sectors. To strengthen the growth of $280 billion Indian insurance sector, the government is planning to permit 100% FDI from the current 49% for insurance intermediaries. Similarly, increasing FDI limit in the animation sector will bolster this industry by attracting foreign players and creating employment opportunities for skilled talent available in the country.
The aspirations of the government to become $5 trillion economy can be accomplished by leveraging the strong foundation provided by the IT industry. This industry stands at $177 billion out of which $136 billion pertains to IT services exports from the country. Harnessing the 4.1 million talent pool deployed in IT industry, which is fast transforming into a product industry
Another economic reform concerning increasing the statutory limit for foreign portfolio investors (FPI) from 24% to sectoral foreign investment limit will attract more cross-border investments in listed debt securities issued by the infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). Systemic reforms in non-banking financial companies (NBFCs), housing financial corporations (HFCs) and public sector bank (PSB) recapitalisation will reassure robust credit system pushing the entrepreneurship to newer heights.
As the government is planning to encourage faster adoption of electric vehicles (EVs) and completely weed out fossil fuel-based transportation system by 2030 and allow automotive sector to comply with FAME-II, it’s essential to create an ecosystem for manufacturing EVs with infrastructure for considerable charging grids so that the transition from the current system will be smooth and effective with visible impact on the ground. A slew of measures like budgetary allocation of Rs 10,000 crore for a period of three years commencing from April 1, 2019 and income tax exemption on loans for purchasing EVS will encourage faster adoption by the public. While such initiatives will initiate demand activation in EV space, it will simultaneously attract foreign investment in setting up manufacturing units of EVs and charging materials leading to the emergence of a sector with tremendous job opportunities. Moreover, with the growing imports of fossil fuel to the tune of $111.9 billion in FY 2018-19, a huge amount of foreign currency reserves is being spent on this. With the adoption of EV, India will achieve the objectives of reducing imports, lowering carbon footprints, safeguarding the nation from dependence on OPEC countries and making future generation secure.
One of the key agenda of the government is to lower import bill in electronics eventually to bring it down to net zero import. It’s imperative to focus on manufacturing and improve the trade balance. The recent budget has a sharp focus on high-tech manufacturing in the areas of electronics system design & manufacturing (ESDM), computer hardware and mobile handsets assuring indirect tax incentives to the manufacturers. The government planning to invite global high-tech manufacturers for establishing mega manufacturing plants in the areas of advanced technologies like sem-conductor, solar photovoltaic cells, lithium charge batteries, solar charging infrastructures, computer servers and laptops will not only bolster the manufacturing ecosystem of the country but also create enormous opportunities for the youth in India.
Most of the domestic companies in India are having a turnover of not more than Rs 400 crore and those companies require regular support from the government for delivering services and products to their clients in a cost-effective manner. As these companies are providing enormous job opportunities and contributing to the economy of the country, it is pertinent to make them competitive and cost advantageous. In this context, the government has capped the turnover of the companies from Rs. 250 crore to Rs 400 crore to bring them under 25% tax bracket so that 99.3% of domestic companies can avail the tax benefits.
For disruptive growth in all industry verticals by leveraging the emerging technologies such as AI, IoT, AR & VR, Robotics, 3D Printing, Data Science and Blockchain, there is a strong requirement for the skilled manpower. Apropos a report titled “The Future of Jobs 2018” by World Economic Forum, 54% of global workforce needs to be re-skilled and up-skilled to align themselves along with the evolution of disruptive technologies. Government is also considering this aspect and looking for facilitating industry verticals to fill the skill gap. As in the case of agro-rural industry sector, the government is setting up 80 Livelihood Business Incubators and 20 Technology Business Incubators in 2019-20 to develop 75,000 skilled entrepreneurs in this sector.
We are living in an era where the youth of the country may be looking for opportunities to create job opportunities for others. We have already witnessed such momentum in the last few years in the country. Last year, around 7,700 startups were working in niche areas and creating wealth and a lot of job opportunities. Government is also working to facilitate such an ecosystem and has taken measures like an exemption for investment by Category II alternative investment fund, relaxation for scrutiny of investors in angel tax, an extension of sunset clause till March 31, 2021, and reduction in shareholding voting rights from 50% to 25%. These measures will attract more investors to invest in Indian tech startups and help them transform into global unicorns, contribute significantly in the economy of the country and motivate them to work for innovation and IPR creation. The aspirations of the government to become $5 trillion economy can be accomplished by leveraging the strong foundation provided by the IT industry. This industry stands at $177 billion out of which $136 billion pertains to IT services exports from the country. Harnessing the 4.1 million talent pool deployed in IT industry, which is fast transforming into a product industry, other industry verticals can also leverage the services and skills of the tech talent pool for automation, increasing productivity & optimisation, which, in turn, will create an ecosystem wherein the talent pool can act as a catalyst to accelerate the startup movement in a massive way in the country.
The vision of $5 trillion Indian economy by Prime Minister asserts the government’s intent to make India one of the fastest-growing global economies with a two-digit growth rate for the next five years. The government has been regularly taking significant reforms in the ease of doing business, easing of FDI, promotion of manufacturing, focus on digital transformation across the social demography, promoting startups, digital governance, projects through public-private partnership and massive public investment in rapid infrastructural development. All these measures combined with support from all the stakeholders in consolidating resources and improving the living standards of citizens will unquestionably contribute towards the realisation of $5 trillion goal by 2025.
(The writer is Director General, Software Technology Parks of India)