Union finance minister Nirmala Sitharaman presented her second budget on February 01, 2020 at a time when the economic growth has plunged to a six-year low amidst a persistent slowdown in the economy followed by a weak demand.
Here is how India Inc reacted:
“The Budget 2020 would lead to creation of a New Aspirational India, anchored around Agriculture, Health and Education. This Budget, seeks to strengthen grassroots of the economy with its positive push towards creation of a strong agriculture infrastructure, which will give a big push to India’s rural sector. The rate cuts in the Personal Income Tax rates would increase disposable income in the hands of the Indian middle class which will enhance consumption through improved purchasing power. These two positive budgetary intervention together would drive a strong demand growth that drives the Indian economy in turn. This is a budget that unveils the roadmap to Prime Minister’s vision of US$ 5 trillion economy by 2024-25 by reinvigorating the hopes of both urban and rural consumers.”
“India currently does not have the infrastructure, capability, skillset and technology to manufacture higher end footwear. Therefore, increasing customs duty of footwear from 25-35 percent may not have a significant impact on imports. Presently, at the entry price, we anyway manufacture 30 percent of our footwear in India, and we will continue to do so. The government should proactively promote and enable footwear factories which can handle more technical manufacturing. This is a huge opportunity as India can definitely take share from China and far East – not only for domestic, but also international consumption.”
“Thankful to the Hon'ble FM for accepting the start-up sector's request for ESOP taxation reforms. Also, the higher time & turnover limits for carry forward of losses for start-ups will enable them to optimize growth decisions in formative years.
Overall, Budget 2020 is a thoughtful weaving together of specific proposals to tackle varied issues. Measures to improve access to finance for MSMEs and reduced taxation for the middle-income segment are welcome steps. Boosting physical infrastructure, expanding digital connectivity and growing use of technology in government functioning are important building blocks for the long-term growth of the Indian economy.”
“Custom duty rates increase on footwear, toys, furniture, etc. and announcement to relook at duty benefits on FTA country imports will have to be analysed by some MNC brands and stores including incremental obligations. This will subtly motivate some of them to start exploring to shift manufacturing base to India. For manufacturing and export from India, availing refund of federal duties including electricity duties etc. is a positive development. Overall, Budget 2020 seems to give reasonable push to the personal consumption story, especially by proposing reduced income tax rates for various slabs, ambition to double farmers income, fasal bima yojna, agricultural credit enhancement, etc.”
“Government’s push towards a digital market is in the right direction with enhancing reach of government e-market place for procurement, e-invoicing, dynamic QR codes, cash rewards for seeking invoices, etc. However, before implementing these initiatives, FMCG and retail players would expect proper guidance and clarity on mechanism. Furthermore, the retail sector uses lot of ‘point of sale’ billing systems and hence would expect more clarity before mandatory introduction of e-invoicing. Also, incentive to small retailers in the backdrop of GST and demonetization, by increasing threshold for exemption from tax audit from Rs 1 cr to 5 cr is a welcome step. However, the condition that less than 5 percent of total business transactions should be in cash, may pose practical challenges to small retailers in availing this benefit.”
The budget has been a mixed bag this year – positive for the middle class and startups but not so conducive on other aspects. For the benefit of the startup ecosystem, the government has proposed the creation of an investment clearance cell. This will help address many bottlenecks faced by budding entrepreneurs. The duty refund for export products comes as a welcome move for players like The Hillcart Tales. However, given that the tea industry is amidst rising costs of production and stagnant selling prices, we hoped to see these issues addressed.
“The Budget has stated that the Scheme for Remission of Duties & Taxes on Exported products will be launched this year which will refund the duties and taxes levied at the Central, State and local levels, such as electricity duties and VAT on fuel used for transportation, which are currently not getting exempted or refunded under any other existing mechanism. The implementation of this scheme will certainly go a long way in improving the competitiveness of the textiles products in the export markets.
This is an important decision as PTA is a critical input for the textile fibres and yarns and removal of anti dumping duty will make its availability to the industry at competitive prices and give a boost to downstream value added product.
The proposed National Technical Textiles Mission with a four-year implementation period from 2020-21 to 2023-24 at an estimated outlay of Rs 1,480 crore, will give the much needed encouragement to this sector and provide the much needed breakthrough in product development.”
“Digital revolution plays a crucial role in the growth of the Indian startup ecosystem and Initiatives like online tax assessment, facial assessments, facial KYCs will provide the much needed stack, essential for the growth of startups. ESOPs have become instrumental in Indian corporate and startup ecosystem to woo high-value employees and retain talent. Exemption of taxes on ESOPs will further encourage companies to introduce ESOPs in their companies at a large level, which in turn will allow them to attract world-class talent while keeping employee costs in check. India is the third largest startup hub in the world , the introduction of an Investment Clearance Cell and seed funding will provide a boost to young entrepreneurs of India who are enthusiastically looking to build a bootstrapped business, and build sustainable revenue businesses.”
Budget 2020 was more focused on development. Government has allocated additional funds for the promotion of tourism and transport services - like airport, railways, highway sectors. This will boost the travel and hospitality industry and will generate employment, connectivity and will result in inbound traffic to India. Due to the proposed tax slabs, there will be an increase in the disposable income which will channelize further economic growth. We are hoping that the economic situation will improve in the near future and will be beneficial to the hospitality industry.
"The Union Budget 2020 is out and there are some useful propositions of new schemes to generate and boost employment in the country. Make In India is the need of the hour and import of cheap Chinese goods in India has brought downturn in the economy.
Government's move to increase customs duty on 300 items and the proposition of a new scheme for promoting the manufacturing of electronic item in the country are the steps in right direction. These schemes will not only invigorate the 'Make In India' move of Government by generating employment opportunities but will also help India dream bigger. Nevertheless, I am of the view that more items should have been included in the customs duty list which would cover almost all the sectors in order to increase the revenue of the domestic industries considerably.”
“We welcome the moves proposed by the government to introduce special measures for perishable goods in Budget 2020. Measures like adding refrigerated coach in trains for transportation of perishable goods like milk, meat and fish will be a game changer for the meat retailer industry. Also, the government's steps to boost fish production to 200 lakh tonnes by 2022-2023 is going to bring about a cheer to the marine farmers. Skill development fund allocation by the government for the youth in the rural sector to provide jobs in the fisheries segment are the steps that were required to boost the meat and seafood retail, as well as enhance the rural sentiments and provide more opportunities for growth. Seamless national cold supply chain for perishables through PPP Model for swift transportation on national and international routes is a welcome change to cater to the demands of the domestic as well as global markets.”
“We welcome the measures taken in the Union Budget 2020-2021 pertaining to the agriculture and fisheries sector. I have always maintained that fish is the highest and easiest profit-making commodity and it is a sector that can provide employment to numerous youths. The government has also realized the potential of the sector and proposed schemes that will not only benefit the sector but the overall economy of the country. Adequate focus has been given to the marine fishery resources as well.
The 3477 ‘SagarMitras’ and 500 fish farmer organisations as well as fish processing and marketing will boost employment opportunities in the sector. The aim to increase fish production to 200 lakh tonnes by 2023 will ensure northward growth. Enhancing fishery exports will also add to the growth.
The expansion of agricultural credit to Rs 15 lakh crore will only mean more financial aid for farmers and improve the sector.
However, the livestock feed industry was expecting an address on the raw material deficit as well as pricing issue that has been plaguing the industry for quite long now and offer some relief. Emphasis should have also been given to farmer’s price realisation issue in the poultry sector.
The introduction of Kisan Rail by Indian Railways for quick and easy transport of perishables across the country and Krishi Udaan by the Ministry of Civil Aviation on international and national routes will immensely help improve value realisation, especially, in the North East states and tribal districts. This will uplift the sector further.”
“Focus of Government on entrepreneurship and agriculture sector in this year's budget will boost the confidence of a lot of entrepreneurs in the agriculture segment. The setting up of cold chain infrastructure in the country is much needed and it is good to hear that govt is planning to improve the same. FM's focus on easing out the investment related problems to start-ups such as pre investment advisory will also be really helpful to young entrepreneurs. Overall the budget looks positive towards start-ups and improving the logistics and infrastructure of the agriculture segment. Also, we appreciate government's move and it would be great to see the milk production capacity doubling from 53.5 MT to 108 MT by 2025.”
“FY 2019 witnessed a lot of volatility in terms of prices of daily commodities like onions, which were with the average price of Rs 58 per kg in 2018 to Rs 150 per kg towards the end of 2019. Schemes like ‘Village Storage Scheme’ and additional investments in setting up warehouses will help allow storage of such goods for a longer period and reduce wastage, which is about 20 percent of the total production. This will help in stabilising the prices and controlling inflation, which in turn should boost consumption.
Additionally, schemes such as ‘Kisan Rails’ and ‘Krishi Udaan’ which will ensure refrigerated transport of these goods to a wider geography, thus reducing the price volatility and price differences across states. This will benefit the farmers, rural India which still accounts for about 70 percent of the total population according to our research at Euromonitor International.”
"The government remains committed to accelerate consumption in budget 2020. Government measures of reducing corporate tax and initiatives to boost MSME sector will definitely help accelerate industrial and corporate growth in the country. Measures like simplifying GST and income tax relief are sure to give a requisite push to consumer consumption and demand thereby accelerating growth across industries. Additionally, the allocation of funds for infrastructural development is a welcome move clearing path for expansion. We expect more measures/announcements specific to the retail industry from the government in the coming future that will give the right impetus to the industry."
“There has definitely been an increase in the budget allocation for the Tourism and Hospitality industry, from 1416 cr in FY 19 to 2500 cr this fiscal year, but since this is one of the fastest growing industry, there could have been a better announcement. Some positive changes have also been announced such as concession in corporate tax rate, which will be beneficial, help us to remain competitive in the market and also help create maximum employment. A proper budget has also been set aside for food processing sector, which will boost the rural economy.”
"The second union budget has been very helpful, it is something that the entire QSR and hospitality sector has been waiting for. This budget puts the money where it belongs - in the peoples pocket.''
“Overall the budget looks like concentrating more on Infrastructure and Agriculture development which can directly increase the Purchasing Power and thus demand can be increased. This can help the Food and FMCG industries to increase demand and there by a higher sale. However we expected some relief in the form of Input Tax Credit as Taxes in Project purchases, Services and Rent forms a major expense in our business and hope this request will be considered in the days to come”
''It appears that in an attempt to simplify the tax structure by doing away with exemptions while lowering tax rates, the government may have ended up actually complicating taxation for individuals by offering tax payers a choice between the old system and the new one. Not taking away LTCG and taxing dividends in the hands of recipients are negatives in my opinion. For the restaurant industry, the much awaited and logical step of allowing input GST credit has not been considered despite it burdening an industry that employs millions but is struggling with high costs and low profitability/ returns on investment.”
“Despite no mention of National Retail Policy, the Union Budget seems to be aspirational as the FM announced setting up of Investment clearance cell which will benefit the overall economy of the country. Although the government has also laid emphasis to boost the MSME sector by proposing necessary amendments to the Factor Regulation Act 2011 which will enable NBFCs to extend invoice financing to the MSMEs through TReds.
The announcement of introducing a scheme to provide subordinate debt for entrepreneurs of MSMEs will give a major push to the sector. The retail sector will also get benefit from the allocation made for skill development as it will encourage entrepreneurship in the country.”
“We welcome the amendment made by the government to boost domestic manufacturing and attract large investments in the electronics value chain. CEAMA is committed to promoting indigenous manufacturing of appliances and consumer electronics in the country and the announcements in this budget shall provide the necessary boost to the ‘Make in India’ initiative.
The scheme focused on encouraging the manufacture of mobile phones, electronic equipment and semi-conductor packaging will benefit the electronics industry at large.
The duty increase on certain components like compressors and motors and in some cases on Finished Goods, will help to further develop the manufacturing eco system in the country in the long run and is aligned to the Make in India initiative. However, the move is expected to result in some price escalation in the short run, on products like Refrigerators, Air Conditioners, Coolers, Washing machines, Air Purifier and Chest Freezers.
Government's continued attention towards skilling especially new-age skill sets such as AI, Robotics will help improve the quality and quantity of skilled labour - critical to industrial growth. Additionally, taking electricity to every household by promoting ‘smart metering’ will be a great step as it will result in a direct and positive impact on the consumer durables sector. Also, this would give consumers the freedom to choose the supplier and rate as per their requirements.
The rationalizing of personal income tax slabs can help in increasing the number of taxpayers and would also assist in increasing disposable income in the hands of consumers. This will equally benefit the domestic savings rate and consumption. The increase in the income available for discretionary spends will help boost the demand of consumer durables in India, particularly in the mass segments.
With respect to the Free Trade Agreement (FTA), the government’s move to incorporate a suitable provision in the customs Act will help boost domestic manufacturing in the long run.
CEAMA continues to advocate the lowering of GST on Air Conditioners and large screen Televisions to 18 percent, which continues to be in the highest tax slab of 28 percent. The offset will help in reducing the price pressure and spur demand for both Air Conditioner (Split and Window) and Television (above 32 inches), as both have a huge opportunity for volume growth.
“The Hon. Finance Minister in Budget 2020 has introduced the decision of rearranging custom duty on 300 products to promote domestic manufacturing. On footwear, customs duty has been hiked from 25 percent to 35 percent along with raw materials customs duty from 15 percent to 20 percent to protect labour intensive MSMe sectors. While this move is a welcome move especially for a Make in India brand like us who believe in domestic quality manufacturing, it will marginally shake our production costings due to our dependencies on good quality/ imported raw materials required for manufacturing the ruff and tough shoes, Woodland is known for. The budget is a people's budget with core support to the individual income tax to enhance disposable income to pump up the money cycle in the economy.”
“The Union Budget has some welcome announcements for start-ups and the economy at large. The setting up of an Investment Clearance Cell for entrepreneurs (which will also offer funding assistance), deferring the ESOP tax burden on employees for five years (or until they exit the company if this occurs earlier), the abolishing of audits for small companies with an annual turnover of INR 5 crores are all steps that will create an enabling environment for start-ups. The digital refund of duties to exporters is another good move. The robust allocations for agriculture, infrastructure development, nutrition programmes and other segments could also help boost jobs creation. Nonetheless, the bottom line will vest on how well these programmes are implemented.”
The budget announcement clearly proves that the govt recognizes the retail sector contributes to about 10 percent of the GDP and so there is adequate weightage given to boost this sector. However, the finance ministry’s move to increase import duty on wooden furniture to 30 percent from the current 20 percent is surely going to impact a brand like ours which sources furniture from across the world to offer the Indian market with an eclectic mix of top-line designs and material. This surge will lead to higher costs in India and is not consumer-friendly.
However, the tax relief given to the salaried with an annual earning between 7-15 lakh is quite significant and will help them with more disposable income which eventually may help boost the country's economy.
The last year has been a slow one but we are finally seeing many of the new measures introduced by the current government come full circle and inject faith in the policies; here I refer to the crackdown on filing GST by all. The finance minister revealed the average household can save up to 4% of its overall income because of reduced GST tax relief. We are happy with the support extended to the sector through eased FDIs and improved infrastructure and hoping that 2020 is going to be a good year.”
''The Government's focus on development is clear and reinforced with the allocation of additional funds to the Airport, Railway and the Highway sectors. This will boost business and leisure travel thereby generating employment, connectivity and overall economic development of catchment areas. This commitment towards tourism sector through allocation of Rs 2,500 crore, infusion of Rs 1.7 lakh crore in infrastructure sector, doubling of aircraft fleet and enhanced focus on cultural tourism among other aspects, is bound to create a multiplier effect on inbound traffic to India, thereby propelling the travel retail economy to further growth. With digitisation and infusion of positive funds in the economy, we look forward to rubber hitting the road in the days to come.''
“We congratulate the government on presenting a holistic budget for the common man and it’s encouraging to see that the government has taken bold initiatives at large. The removal of DDT and 100 percent tax exemption by the government will open gates for foreign investment, making India an attractive destination for investment. The tax benefit proposal will significantly benefit and we expect an increase in the spending power of the consumer which will eventually boost demand and supply.”
“We welcome the moves proposed by the Narendra Modi-led government to introduce extraordinary measures for the development in rural areas in Budget 2020. Skill-development fund allocation by the government for the youth in the rural sector to provide jobs will enhance the rural sentiments and provide more opportunities for growth. As one of our main focuses is also the rural India, higher rural income would help in picking up consumption. Doubling farmer income by 2022 will also bring a positive change for FMCG companies growth. Even a cut in personal tax rates to spur consumption will also lift shares of FMCG companies.”
“Individuals with total income of 15,00,000 will come under 12.5 percent tax on their entire income and if we look at the weighted average size that will definitely increase spending power in the economy. Not just that, we shall see a huge number of new taxpayers becoming a part of the ecosystem. It is a positive step by the government and will play an integral part in the GDP growth rate in the long run.”
“In the Union Budget announced by the honourable Finance Minister, there are measures and initiatives charted out that will aid consumption growth, particularly when it comes to taxation. In the current macro environment, more money in the hands of consumers through rate cuts, elimination of DDT etc. bodes well. The Finance Minister has also set the tone at the top by being empathetic about No Tax Harassment, resolving litigations etc. Furniture is a US$ 42 million category in India with MSME leading the charge in this industry. Resolving credit issues, APP based working capital solutions and more strategic aspects like National Logistic Policy are all initiatives that address core issues of our MSME sector.
While these efforts will help boost the economy, it is imperative to arrest slippage in the Fiscal Deficit. To augur investment in our economy an aggressive disinvestment agenda, reforms including that of the government machinery etc. would have been welcome.”
"The feel-good factor in the budget announcement was definitely the new tax regime that gives more money in the hands of the consumer as it will boost consumption, unless negatively impacted by the revised exemptions."