Budget 2020 Expectations: National Logistics Policy, Tax Reforms and Removal of Red Tapism

In less than 24 hours from now, Union budget-2020 will be presented in the parliament and the Logistics with its allied industries are once again hoping high for the promises that have remained unfulfilled in Modi 2.0’s maiden budget. In the first budget, Prime Minister Narendra Modi led government had made few key announcements to boost the industry.

High logistics cost impacts the competitiveness of domestic goods in the international markets and what ails India is infrastructure and competitive policies. In the second term, the government pushing for infrastructure with the National Infrastructure Pipeline (NIP) but the economy has taken a downturn.

As per estimates, the Indian economy will grow at 5% in the current fiscal year ending March. The growth projected is slower than the 6.8% recorded in 2018-19. In the quarter ended September 2019, growth had hit a six-year-low at 4.5%, amid tepid demand and sluggish private investment.

The emphasis will need to be on leveraging crucial infrastructure linkages for speeding industrial development and creating productive employment. The government has to bring out suitable policy reforms to facilitate the expansion of manufacturing units in smaller cities in the country to uncork the untapped demand potential of these regions. Local economies can be spurred leading to the creation of jobs and business opportunities.

The Society of Indian Automobile Manufacturers (SIAM) has pitched for a reduction in the Goods and Services Tax (GST) rate applicable to automobiles to 18 per cent from the current 28 per cent.  Long-awaited national logistics policy that has been in discussion for almost two years could come to life again. Logistics division had been working over it to link market places and faster movement of goods and better warehousing.

Ramesh Nair, CEO & Country Head – JLL said, “Measures like an increase in limit under Sec 80C, reintroduction of long-term infrastructure bond and tax-free bonds by infrastructure companies will go a long way in providing the boost.”

He said that it will be imperative for the government to lay down a detailed plan phasing out the investments in terms of sectoral utilisation and monitoring of the planned outlay. The financing mechanism of this programme is crucial for investment-led growth. Its implementation will depend upon the adequate long-term provision of funds and the budget should address these areas comprehensively.

The National Logistics Policy is the big-ticket to a planal shift in the businesses across the country and should be implemented without further delay and would then bring India in the global competition.

As the US-China trade war left some scars, India could open up new supply lines to both the US and China and expand its global trade and business footprint. It’s expected that the government will work on FDI norms considerably to facilitate giant companies from both the countries to set up huge assembly lines and production bases in India in a hassle-free manner.

Jatin Chokshi, Chief Investment Officer – Allcargo Logistics, “The Union government will need to initiate strong structural changes to achieve inclusive economic development and steer the economy on a sustained growth trajectory.”

As global geopolitical headwinds pose downside risks to export earnings and inflation-adjusted growth pegged at 5%, the Indian economy has entered a slowdown mode. The gloomy sentiment has been compounded by declining consumer demand and reduced private sector investment.

Enhancing the competitiveness of India’s manufacturing sector will increase its share in GDP and facilitate India’s integration with global value chains. The US-China trade war is a golden opportunity for India to expand its global trade footprint and facilitate companies from both the countries to set up huge production bases in the country which will spur the manufacturing sector momentum and invigorate investment climate, Chokshi said.

Further, the Indian Railways is one of the key drivers of the country’s economy, boosting it through supportive infrastructure and adequate connectivity to handle the increasing traffic volumes will help it grow and thrive. A concrete roadmap, Public-Private Partnerships (PPPs) and technology integration in the railways could unleash the true potential of today what customers are focusing on.

Suramya Nevatia, CEO – Hind Rectifiers Limited said “In the next five years, the Indian railway market is expected to be the third largest, accounting for 10 per cent of the global market. It is likely to see an 18 per cent increase in its capital expenditure (capex) for 2020-21, up from Rs. 1.6 trillion lined up for the current financial year. It will not only help in job creation but will also generate growth opportunities for smaller businesses contributing to the Indian Railways.”  

In nutshell ease of doing business should remain central to optimizing the competencies of Indian companies through the creation of an investor-friendly regulatory environment, single-window clearances for businesses and the removal of tax roadblocks. 

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