Industry Expectations from Union Budget 2024

Hyderabad: As anticipation builds around the forthcoming Union Budget 2024, voices from various sectors echo their expectations and aspirations for India's economic roadmap. Industry leaders and experts weigh in on crucial areas of concern, outlining their hopes and recommendations to Finance Minister Nirmala Sitharaman. From technological advancements to healthcare reforms, each perspective underscores the significance of fiscal policies in shaping India's trajectory. Here's a glimpse into the insights shared by key stakeholders before the budget presentation in Parliament on February 1st, 2024.

Anji Maram, CEO and Founder, CriticalRiver Inc: "The upcoming Union Budget 2024 presents a significant opportunity to advance India's technological and digital landscape. Focused investments in AI and technology are essential, not only to foster innovation but also to enhance productivity in various sectors. This is a strategic moment to address the skill gap in these fields through dedicated training and education initiatives. Additionally, with the rapid pace of digital transformation, it's crucial to allocate substantial resources for cybersecurity. Strengthening our cyber defenses will protect national and corporate entities from the growing range of cyber threats. Overall, this budget has the potential to position India at the forefront of the global technology stage."

Suresh VP, Co-Founder and Chief Operating Officer, Experion Technologies: "As the budget approaches, the central government must address the challenge of high unemployment rates among recent graduates. This problem is worsened by the current market situation, where big IT companies are not hiring in large numbers as they used to. To address the unemployment gap, a practical step would be for the government to actively support the growth of small and medium-sized IT enterprises to flourish under the 'Make in India' initiative. As per the project idea, a large amount of raw materials usage, technical know-how, and manufacturing should happen within India. So, the government should actively encourage these manufacturing companies to give their IT projects to Indian IT enterprises. This would significantly help in generating employment as well as boosting the economic growth of the country. Additionally, the central government should promote the development of tier-2 states, transforming them into budding IT hubs by investing in infrastructure and creating a conducive business environment. Moreover, a crucial aspect of economic growth involves the digital transformation of Kirana stores. The government should support and incentivize the digitalization of Kirana stores, ensuring proper accounting practices through the use of digital wallets. Facilitating the swift adoption of GST reporting and implementing last-mile automation for Kirana stores is paramount to ensuring timely reimbursements and overall financial prosperity. The government is actively implementing initiatives to stimulate the economy and support local businesses, exemplified by the 'Vocal for Local' campaign, which encourages individuals to sell their homegrown products. Additionally, the ONDC (Open Network for Digital Commerce), an e-commerce platform by the central government is there for people to sell their products. However, to further empower local sellers, the government should increase investment and enhance the visibility of the ONDC platform, ensuring that more individuals can easily and effectively sell their goods."

Karun Tadepalli, CEO and Co-Founder, byteXL: "Startups have emerged as a catalyst for the nation's economic growth by creating significant employment of close to a million in the last 6-7 years and playing a significant role in India's 40th position on the Global Innovation Index. While the sector has many expectations from the Union Budget, what would immediately assist startups is to reduce the rate, if not abolish, Angel Tax to make funding more effective and founders being left with better equity which otherwise they have to compromise due to such high taxation. Better financial support to the startups working in the rural areas will further encourage them for a faster and a higher growth trajectory thereby generating more employment opportunities. For the edtech industry, a reduction in the current high rate of GST at 18% to 5% would be a significant boost for the sector. This would significantly bring down the deployment costs for the education institutes and enable specially the tier 2 and 3 category institutes to utilize the new age technologies. Additionally, allocating funds for the vacant seats in the engineering colleges and providing support to leverage the existing infrastructure will further enhance the educational landscape thereby playing a pivotal role in nation-building."

Ashish Pradhan, President, Siegwerk Asia: "The current Union Budget necessitates a mindful approach to taxation within the FMCG industry. Despite the current GST rates of 18% or 12% on FMCG items, I hope for a streamlined reduction of all FMCG commodities to 5%, designating them as essential commodities. Such a measure opens up new potential for the whole FMCG value chain and promises a much-needed impetus for industry stakeholders. Furthermore, there is a need for tax exemptions for companies engaged in Research and Development (R&D) specifically focused on enhancing customer health and safety. This strategic incentive has the potential to significantly bolster advancements in these vital domains. Finally, I hope the Union Budget is well-aligned with the hues of sustainability and green growth."

Rajitha Boorugu, Partner, Indirect Tax, BDO India: "The healthcare industry anticipates a reconsideration of the GST levied on hospital room rents exceeding Rs. 5,000/-, as it significantly increases the cost of healthcare for patients, coupled with a substantial amount of record-keeping requirements for hospitals. Additionally, under GST regulations, inter-state movement of medicines and equipment to another hospital is subject to GST. As recipients cannot claim Input Tax Credit due to the provision of exempt supplies, such movements of medicines and equipment should be exempted from GST. Currently, the income from medical tourism, where the residents of foreign countries come to India for specific treatments, is also treated as exempt services, despite the hospitals recovering its charges in foreign exchange. However, such revenue should be treated as a zero-rated revenue (i.e., export of services), enabling the hospitals to claim ITC on various expenses incurred and claim a refund of such ITC."

Jeetu Bairathi, Partner, Financial Due Diligence, BDO India: "The Indian healthcare industry has achieved $372 billion and has grown at a CAGR of 22% from 2016 and it is expected to be one of the fastest-growing sectors for the next 5 years. This growth is primarily driven by investments from Corporate Hospital chains and Private Equity-backed new players. The offline healthcare sector has more than 13,000 companies in India and it has raised more than 13 billion USD of investments till now. The online Healthcare (Health Tech) sector is also expected to grow 10 times to USD 30 billion by 2030 with a penetration of 7% as against the current penetration of 1%-2%. The growth of Health tech would continue to be driven by e-pharmacies and e-diagnostics. 2023 has been a splendid year for the industry with action on all fronts viz large deals on Mergers & acquisitions, private equity, consolidations, and IPOs front. 95% of PE/VC investments in the healthcare industry in 2023 have been concentrated around hospitals (62%) and health tech start-ups (23%). Consolidation has emerged as a very strong theme in this sector where a large hospital has acquired smaller hospitals, regional hospitals, labs, and standalone hospitals to increase the geographic presence across the country and many PE-backed players adopted consolidation strategy for launching IPOs. 14 IPOs from the healthcare sector were launched in 2023 as against 12 in 2022. Public expenditures on healthcare touched 2.1 % of GDP in FY23 and 2.2% in FY22, against 1.6% in FY21 and it has been proposed to increase to 2.5% by FY2025 which is much below than the global average of 6%. Hence, the industry is seeking increased allocation in the budget. Increased participation of the private sector in the Ayushman Bharat Scheme through the PPP model is to make affordable healthcare accessible for 500 million people. On the tax front, Input tax credit (ITC) is a cost for this industry, hence moving to Zero% Tax from the exempted category will help the sector to claim ITC and this will improve the affordability of healthcare. 100% Foreign Direct Investment (FDI) in both Health Insurance and Retail Pharmacy sectors would help in further expanding healthcare access. An import ban on select medical equipment and expansion of the PLI scheme for manufacturing of such medical equipment will attract FDI in manufacturing in this sector, which is currently dominated by other services."