Ahead of the Union Budget, Pune Inc expects a lot from Union Finance Minister Nirmala Sitharaman. Prashant Girbane, Managing Director of Mahratta Chambers of Commerce and Agriculture (MCCIA), talks to The Indian Express about the budget and what Pune expects to deliver.
How healthy is the economy before the budget compared to last year? Speaking of Pune, has the economy recovered from the second wave? Is the third wave worrying?
According to the first projections recently announced by the NSO (National Statistical Office), this financial year, India’s GDP is expected to grow by 9.2% year on year, against a contraction of 7.3% last year following the disruption caused by the pandemic. That would be around 1.4% real GDP growth compared to the pre-pandemic fiscal year FY 19-20. There is undoubtedly a significant recovery over the course of the year, but some sectors like MSMEs and contact services have yet to catch up. The monthly economic survey of Pune-based businesses also highlights this. In the 21 monthly surveys of approximately 150-200 businesses, it is evident that smaller businesses are lagging behind in the recovery compared to larger ones. The third wave has undoubtedly added to the woes. Prior to the third wave, MSMEs surveyed expected a full recovery by the end of March. However, after the onset of the third wave, their responses shifted to full recovery by May-June, on average.
What are the main concerns you would like the Union finance minister to address in her budget speech?
We are planning a growth budget with growth of 9% or more. Thanks to all the interventions of the last year, we are on the road to recovery. Therefore, we need to start on the slippery path of fiscal consolidation, i.e. reduce the fiscal deficit from 6.8% this year to around 5.8%, and then, over the next 3-4 years , bring it back to the ideal FRBM limit of 3%.
The budget should include more capital spending for infrastructure development, as this would help create a multiplier effect, stimulate consumption and create jobs. Like last year, it is also expected to increase by around 25% from Rs 5.4 trillion to Rs 6.9 trillion this year. The budget should also support strong job-creating sectors like MSMEs and housing to enable job-led growth.
Given the slow recovery of MSMEs which contribute 30% of India’s GDP, they require special attention. MSMEs expect the successful system of credit guarantees to continue, although it will require less allocation than last year. Non-credit programs like technology upgrading and quality assurance should accelerate with adequate budget allocation. The departmental budget must be increased by less than Rs 5,700 cr (other than the ECLGS component) to finance these programs.
Policy announcements from TReDS and GIS Digital Pipeline Linkages to address late payments and continued ease of doing business would be welcome.
What are the specific requests in Pune?
As Pune is home to tens of thousands of MSMEs, these announcements would also help Pune. National allocations to investment infrastructure must find sufficient additional allocation in Pune, the district that contributes the most to the country in exports of engineering goods. It is also the district that is home to the largest city in the country which is not a state capital and therefore lacks the deserved attention. The review is expected to include the air, road and rail infrastructure that would serve Pune and many adjoining districts.
MSMEs in Pune have complained about the rising cost of steel and iron inputs. Can the Minister of Finance respond to this concern?
Indeed, soaring commodity prices have impacted most MSMEs by reducing their already thin margins and, therefore, undermining their sustainability. Many MSMEs have suggested a reduction in customs duties, and this is something the GF can consider and announce.
What do you think the budget should address in the startup space?
India has the third highest number of start-ups in the world. With 90 unicorns, India also has the third highest number of unicorns behind the United States and China. Start-ups innovate products and services and create jobs. They need continued support like the “fund of funds”, an extension of tax benefits and a streamlining of capital gains tax on unlisted start-ups. It is currently double that of listed companies.
The budget should include a specific allocation to support start-ups developing cloud-based pay-as-you-go solutions for MSMEs in the B2B space. It will undoubtedly catalyze the sector which contributes 30% of India’s GDP and provides over 90% of jobs in the industry.