The budget must aim to provide an impetus to consumer demand
PremiumMuch has been achieved but more can be done to spur local manufacturing and raise consumption
Last year’s budget exhibited resilience and reflected a progressive vision of a roadmap to a faster economic recovery. Its structured approach sought to initiate growth via its focus on the six pillars of health and wellbeing, infrastructure, human capital, inclusive development, innovation and R&D, and ‘minimum government and maximum governance’. This displayed the government’s strategic commitment to the overall development of India. From a successful vaccination drive to ensure well-being and an emphasis on production-linked incentive (PLI) schemes to create and nurture global manufacturing champions for an Atmanirbhar Bharat, to enhancing opportunities for our youth through multiple schemes and strengthening the overall research ecosystem with a focus on innovation and R&D, there was a great deal of progress in the past year.
Despite the unprecedented setback caused by the pandemic in 2020 and second wave of covid in the first quarter of 2021-22, the year held out promise, with the entire economy showing green shoots in the second half. The upcoming quarters project an encouraging picture for industries across sectors, including consumer durables, electronics, energy, electricals and wiring devices. Together, the Centre’s intent to reduce the compliance burden on businesses and the PLI scheme look set to propel the economy.
We expect the budget for 2022-23 to initiate reforms that would help raise consumption by increasing resources in the hands of consumers. Consider the impact: if consumers have higher spending power, sales go up, aiding local production, which in turn drives the Make in India agenda too, and leaves a positive impact on the overall economy. Plus, rising healthcare expenses call for an increased limit of deduction on health insurance premia—this will encourage the uptake of health policies. Optimizing tax slabs to aid salaried professionals will also help, be it a larger standard deduction, tax-off on housing-loan interest or the inclusion of a wider set of mutual funds under 80C deductions.
Against this backdrop, our efforts at enhancing the growth of consumer durables and the electronics industry are playing a key role in our economic revival. We hope the government will examine items that would stimulate domestic manufacturing and expect a hike in import tariffs on fully-assembled audio products. Audio technology is an emerging segment and with new players foraying into the market, demand and ways to meet it are at an all-time high. We expect some audio tariff barriers to encourage domestic manufacturing.
Additionally, GST rationalization could play a crucial role in raising market consumption. Consumer durables like ACs and TV sets need relief. Consumers prefer products that offer value propositions, and these are no longer ‘luxuries’ as they have become common household items. Lowering their GST burden to 18% from 28% would help offset price pressure, boost affordability, and thus spur the penetration level of ACs in India. Moreover, the energy efficiency of ACs has steadily increased and they now offer added features like air purification, which is important in urban markets. Similarly, while TV screens larger than 105cm are slotted as premium, they have become the most sought-after models now, and so we hope the government reduces GST on LED screens (above 105cm) to 18% from 28%.This will aid our efforts towards making premium technology products accessible to potential customers who are held back from upgrading by the high cost of adoption. Placing premium screens in a lower GST slab would be a progressive step towards democratizing such technology.
We also look forward to the Phased Manufacturing Programme (PMP) for TVs to drive up domestic production.
While the government has already approved investments under its PLI scheme as a step towards its goal of Atmanirbhar Bharat, we would urge policymakers to review the export incentive for ACs under its Remission of Duties and Taxes on Export Products (RoDTEP) scheme, and consider raising it. This will encourage exports and ease supply-chain challenges that have led to a dramatic increase in logistical costs.
Given the government’s agenda to encourage the manufacture and sale of electric vehicles (EVs), localization of EV charger manufacturing will help faster EV adoption. It is thus an expectation that the budget will help lessen the cost of component imports vis-a-vis imports of pre-assembled EV chargers.
To encourage exports and put locally made products on a globally competitive platform, we would expect more fiscal incentives, especially for products with 30-40% domestic value addition. This would help industrial development in the country.
The pandemic has increased the awareness and penetration of insurance to some extent. From the perspective of end consumers, a reduction of GST on insurance premiums and addressing double taxation would provide relief and allow people to save more, which would increase their purchasing power.
In conclusion, we are hopeful of a growth-supporting Union budget for 2022-23 and expect allocations that are balanced and thought-through, so that it not only gives an impetus to India’s economic progress, but also enables direct benefits for end consumers.
Manish Sharma is CEO, Panasonic India and South Asia; and chairperson of the FICCI Electronics and White Goods Committee
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