Amidst the current Omicron wave across the world, leading world economies, including India, are on the path of recovery from the damage the COVID-19 pandemic has done. With the predicted growth of real GDP estimated at 8.3 per cent, as forecasted by the World Bank, the Indian economy is at the centre of the limelight in world economics.

In this article on expectations from the Union Budget 2022, we have highlighted industry-wise expectations for reforms, subsidies, and support mechanisms from the Government of India.

Hospitality Sector

The hospitality sector is amongst the sectors that have been most disrupted from the COVID-19 pandemic and pursuant lockdown and travel restrictions that were imposed across the country.

This sector has been significantly suffered a crunch on liquidity and hence we expect the following reforms, support and benefits to accrue from the union budget 2022:

1. Reduction in tax rates on both corporate and normal assesses.
2. Fund for extending liquidity to the sector in form of collateral-free top-up of working capital limits
3. Increased or priority access to MSME reforms for the stressed entities.
4. Introduction of schemes for the promotion of travel and tourism by the government.

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The textile sector has relatively been relaxed post the deferred increase of GST rates. However, the entities are stressed due to rapid increase in the cost of inputs such as:

• Cotton

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Problem:

Cotton prices have swiftly gone high due to the high level of exports.

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Solution:

1. The textile industry is looking for relief in form of export duties so that more quantity can be made available for domestic and captive consumption and prices can be kept at valuation.​
2. The industry is also expecting the Government to remove or reduce the import duty of 5% levied on the import of raw cotton.

• Logistics Cost

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Problem:

Pursuant to the double-digit increase in the cost of fuel. The increase in logistics cost has squeezed the markup margins of manufacturers as well as traders.

Solution:

1. The Industry wants the Government to either reduce the fuel prices, or

2. Increase the Duty Drawback incentives available for exporters.

The services sector has been an integral promoter of the increase in Gross Value Added to the Net Income. Wherein growth in basic gross value added by financial services, etc. alone is at 4 per cent as per the First Advance Estimate of National Income for 2021-22.

Therefore, to promote rapid growth of the sector the Bombay Chamber of Commerce and Industry (BCCI) has recommended that the concessional rate of tax at 15% available to manufacturers also be extended to the service sector. 

Also, the industry expects:

1. The Government of India to direct more MSME schemes & incentives that are focused on service providers.
2. The Government of India to develop KPO & BPO parks in India to promote the export of services that will help generate forex transactions and also help the Union budget in a strong Balance of Payments.
3. Inclusion of services sector related definitions in the #StartupIndia Initiative so that more services providers can register themselves as Startup and enjoy the benefits being extended by the Government in the same.
4. SaaS, IaaS & PaaS all have been instrumental in creating Unicorn enterprises in the Indian Startup Ecosystem and hence the Government should promote such entities and introduce schemes to promote the evolving entrepreneurs in this sector.

Micro, Small and Medium Enterprises (MSME) contribute 45% of India’s Total Industrial Employment, 50% of India’s Total Exports, and 95% of all industrial units of the country that cumulatively produce more than 6000 types of products (As declared by msme.gov.in)

Therefore, it is very important that the Government of India keeps on adding benefits and increasing their expenditure on the promotion of MSMEs across all sectors in India.

To make India self-reliant and re-gain the fame of the #GoldenBird it is important that the MSME sector be made so strong that they eventually contribute the majority part to India’s GDP.

The benefits, support, reforms and measures expected by the MSMEs are:

1. Reforms surrounding import substitutes promote self-reliance and boost domestic manufacturing.
2. Businesses are also hoping for a more straightforward GST rate structure and the overall simplification of GST compliances
3. Financial support from the government in form of:​

A. Reduced interest rate to compete with the international manufacturers.

B. Development of a Central body that can educate the youth with skills, promote vocational and skill-based institutes and foster the intra-state employability opportunities so that a country rich in human resources like India can actually be benefitted from the domestic talent in an optimum manner.

1. Increase in deduction limits for sections such as 80D, 80C so that increased medical expenditures can be absorbed better.
2. A new benefitting section that helps absorb the expenditures made by a household on the treatment of COVID-19.
3. Increased exemptions limits to the households who have been fatally suffering due to loss of life amidst the Pandemic.
4. Increase in Standard Deduction for employed individuals
5. Work from home allowance to absorb increased expenditures during work from home