Budget 2020:With the finance minister Nirmala Sitharaman all set to present Budget 2020 on February 1, the Indian economy is hoping for robust policy intervention to reinstate liquidity as swiftly as it has been swept away by nearly two fiscals of headwinds.
The SMEs that the government had hoped to strengthen at the start of its second term have pinned their hopes on this budget. It is an opportune time for the government to empower SMEs with the essential tools of 'technology' and 'trade reforms' to fight the economic slowdown. One hopes to see four key focus areas make an appearance in the Budget 2020:
Digitisation needs to be incorporated at all steps of the business cycle. Especially for the growth of exports, it is essential for the traders to be able to use technology to win global business.
One of the major focuses of FTP 2015-2020 was to move towards paperless working in a 24X7 environment. To encourage an efficient and transparent mode of business, the government needs to introduce strict compliance rules regarding the digitisation of accounts, processes, deliveries and trade, thus increasing the overall efficiency and output.
Digital upskilling needs to be on the government's cards this year to generate jobs by 2022 that will meet the workforce demands of the fourth revolution. At the grassroots level, a large section of the population requires basic digital upskilling to meet the demands for skilled professionals in upcoming fields like big data and machine learning. Budget 2020 must address this with a vision of India's sustained inclusive growth and development.
Digital infrastructure must be strengthened to ensure digital exposure opportunities for SMEs. The Budget must address the allocation of funds for requirements like basic public Wi-Fi and centralised communication systems to improve business and the economy's agility.
In the past, measures for exporters such as tax neutralisation schemes have proved to be beneficial and yielded results. While the WTO is in favour of such policies, the Indian government has instead focused on providing subsidies or incentives wherein exports are rewarded a fixed percentage on the value of an exported item, capped at a specific amount regardless of the item value. The WTO has made it clear that these measures cannot continue any longer. Hence, for this budget, the finance minister should avoid the allocation of funds for such schemes.
The government needs to understand that to boost exports, we need to stop focusing on just exports. There is a need for a larger environment and ecosystem that enables the production of superior goods at competitive prices by providing access to technology and capital.
This can lead to an upgrade in the quality and quantity of exports and simultaneously reduce the need to import high-quality goods or ingredients for goods from overseas markets.
After technologically advancing the exports ecosystem and controlling imports into the country, the government must also recognise the role of fintech and alternate finance providers.
Financial services offered by these providers are always crucial to emancipate the growth of small exporters by providing them with desired working capital.
This will enable them to produce better and cheaper goods, which will provide a competitive advantage in export markets down the line.
The Ministry's Economic Survey released on 31st January has already mentioned the importance of the fintech sector to the financial health and efficiency of PSBs and the economy; one can only hope that FM Sitharaman takes cognizance of the same in Budget 2020.
(This article was first published on businesstoday.in)