Recommendation for budget 2024

Introduction
1. Even as the world economy faces divergent prospects in 2024, Indianeconomy is poised to outperform. India will remain the world’s fastest growing major economy till 2029 at 6.5% of GDP growth rate.

2. Priorities for the Coalition Government will be to:
(a) Have effective federalism;
(b) Have sustainable, equitable high growth;
(c) Implement promises made in their election manifestos;
(d) Stimulate growth of private consumption, corporate investment and FDI;
(e) Create jobs in private sector and MSMEs and fill up government vacancies and also review the Agnipath scheme;
(f) Improve manufacturing competitiveness / PLI schemes;
(g) Stay committed to fiscal prudence/ inflation management;
(h) Introduce next wave of reforms;
(i) Continue with high capex growth;

3. Surya Foundation Think Tank comprising a group of experts deliberated on various issues related to “Recommendations for Budget – 2024-25”. Suggestions of the Think Tank are given in the succeeding paras:

RECOMMENDATIONS HUMAN DEVELOPMENT INDEX (HDI)
4. India ranks at 134 out of 193 countries in 2022 with an HDI value of 0.644. India figures among medium human development countries. Improving RECOMMENDATIONS FOR BUDGET : 2024-2025 HDI outcomes must be on India’s to-do list. For this we have to invest more in health and education.

ADDITIONAL INDIAN MNCS
5. To achieve the goal of a developed country by 2047, we need to have growth across various sectors by promoting manufacturing, sustainable urbanisation, enhancing agricultural productivity thereby reducing dependency on agriculture, boosting manufacturing and enhancing the services sectors growth. Indian economy needs to have additional corporate houses of international standard which facilitate creating ecosystems that support small businesses. This will generate employment opportunities including fostering the growth of start-ups and allowing greater capital inflow into the start-up ecosystem. Need to have an enabling policy to help create big corporate houses as a part of next generation reforms based on inputs from various stakeholders.

INEQUALITY AND INHERITANCE TAX
6. India’s level of inequality is the highest at present and is now among the most unequal country in the world. However, economic inequality is inevitable just like inequality in other dimensions, such as intelligence and ability and this should be accepted.

7. Poverty reduction is more important than addressing inequality. It is seen that periods of rapid growth, are associated with increased inequality.

8. Issue of income inequality should be addressed by giving access to quality education and healthcare to children from poor families. Developed Countries which impose inheritance tax have a structured social security system and retirement plans unlike in India. At present we need to keep incentivising entrepreneurial spirit which encourages more private investment. Inheritance tax is a retrograde tax.

ECONOMIC FREEDOM
9. The top one percent of India’s population owns 40.1% of the total wealth and earns 22.6% of total income, while the bottom 50% owns 6.4% of total wealth and earns 15% of total income. What is therefore required is greater economic freedom for the poor. i.e. enhance the ability of the poor to compete in the market for the share of the total national income.

Education, Skilling and Health infrastructure will result in higher economic freedom and also result in a higher degree of competition in the market to enhance the opportunity to earn more as this (Free Competition) will increase the size of the overall economic pie in the process.

MANAGE UNEMPLOYMENT – LABOUR INTENSIVE MANUFACTURING AND BEYOND
10. There is no alternative for India except to have a growth led by labourintensive manufacturing at least for the next 10 years to absorb a seven to eight million youth who will join the labour force annually. Need to manage increasing uncertainties due to fast changing technologies including Artificial Intelligence (AI). AI offers opportunities to enhance labour productivity and incomes of even unskilled and semi-skilled workers. By providing training to youth in improving their education and skills. This is a must to reap the benefits of a young India. We need to make the workforce employable and create more jobs. Employment intensity in manufacturing is declining and this will need to be buttressed by services where India has an advantage over many countries. Services also have a bigger impact than manufacturing on reducing job market inequity such as gender, age and social bias. There is an imperative need to introduce job linked schemes under manufacturing and service sector.

MAHATMA GANDHI NATIONAL RURAL EMPLOYMENT GUARANTEE ACT (MGNREGA)
11. MGNREGA needs to be streamlined by having:-
(a) Greater diversification for permissible work;
(b) Decentralise fund management;
(c) Review wage structure;
(d) Adequate budget to ensure sufficient and continuous flow of funds;
(e) Necessary checks and balances with the support of States to address leakages in Fund Management.
PRODUCTION LINKED INCENTIVES (PLI) SCHEME
12. The experience of PLI scheme suggests that it has limited success so far. Overall investment remains far from what was initially expected in terms of production, employment and exports. Before including new sectors in the PLI scheme, the government should revisit the scheme abinitio to streamline it.

NEW AGE MANUFACTURING & FUNDING
13. Government should consider establishing a fund to support new age manufacturing similar to the innovation fund. This will play a crucial role in scaling up capacity and capability which will a larger scale Indian manufacturing businesses.

INFRASTRUCTURE THEME
14. Infrastructure theme will continue to gain focus. Speed in implementation of infrastructure projects will have to be accelerated by usage of Harmonised Master List of infrastructure sectors. Recently the foundation of projects worth Rs 10 lakh crore have been laid. Continue with front loading of Capex.

15. Encourage domestic and foreign companies through fiscal benefits to plough back their profits in expansion, diversification and modernisation.

16. An amount of Rupees 2.11 lakh crores on account of surplus dividend transferred by RBI should be used for capital spending and managing fiscal deficit.

INFRASTRUCTURE DEVELOPMENT LEVY
17. Infrastructure Development Duty/ Betterment Levy (Land Value Capture) is an established way of capturing the increase in the market value of land on account of government spending on public infrastructure like roads and Metro network. Land Value Capture is a tool which should be used by government to generate revenue for public services.

HIGHER PROVISIONING FOR INFRASTRUCTURE PROJECTS
18. RBI draft guidelines have proposed increased provisioning to 5% from the current 0.4% for infrastructure projects under construction. This will be impacting India’s capital expenditure momentum. This move could impede the capex drive, which has invigorated private sector activity. Government may impress upon RBI to increase the provisioning in a phased manner.

FOREIGN DIRECT INVESTMENT (FDI)
19. The narrative to convert Red Tape culture to Red Carpet culture needs to continue to have unfettered foreign direct investment inflows and to give push to manufacturing. We must continue to focus on “Make in India” and “Aatmnirbhar Bharat”.

20. Easing of foreign investment rules across sectors without any caveats should be the way to go. The idea should be to usher in multinationals like Apple, without getting into complicated domestic sourcing.

FREE TRADE AGREEMENTS (FTAs)
21. FTAs with richer countries namely with the UK and EU should have clause for investment in India. The trade deal ties, non sovereign fund investment of USD 100 billion by the European Free Trade Association (EFTA) nations to tariff concession to be granted to a chunk of their exports to India. This is expected to create a million new jobs in the country.

22. For modelling FTAs, the concept of flexible and comprehensive Standard Operating Procedure (SOP) could be introduced to avail best possible results. Interalia, it could include issues relating to labour, environment, gender, indigenous people services and digital trade, Carbon Border Adjustment Mechanism (CBAM), supply chain disruption, critical minerals and Artificial Intelligence and capacity building and inverted duty structure issues.

EXPORT PROMOTION MEASURES
23. India’s merchandise exports in per capita terms were USD 320; China USD 2545; Vietnam USD 3782. This state of play must change if we have to accelerate employment generation and achieve global competitiveness and scale. Suggestions to spur exports are:
(a) Exchange Rate. Our exports have been impacted by an overvalued exchange rate. This has been highlighted by RBI that Real Effective Exchange Rate is lower than the Exchange Rate. Need to manage Exchange Rate and make it stronger based on fundamentals and not through monetary policy tool.
(b) Revive the Export Promotion Councils.
(c) Streamline the procedure for reimbursement of Duty Drawback Scheme.
(d) Lower the high import duties and import barriers on the inputs used for exports to improve their competitiveness namely textiles, leather, engineering goods & others. High import duties on export inputs is tax on exports.
(e) State Specific export promotion policies need to be designed with significant participation of States. This will enhance their competitive advantage and ensure greater ownership in their export efforts.
(f) Have sector specific export promotion measures.
(g) Form a working group, comprising experts, exporters and representatives from Central and State governments to monitor and recommend changes in export promotion policy.

24. India’s share in agri products is low. To promote agri exports, government needs to identify certain items & promote their exports. Items could be Mangoes, bananas, Grapes, Baby Corn, Lady Finger, Potato & others.

SERVICES EXPORTS
25. India needs a calibrated approach to sustain the services success story. That should include a hard push for global market access and opportunities for all professional Services, training graduates to be job ready, infrastructural services where growth is concentrated.

IMEC ALTERNATIVE TO RED SEA
26. The India-Middle East Europe Economic Corridor (IMEC) which was announced during the G20 Summit in 2023 is an effective alternative to Red Sea crisis. Implementation of IMEC needs to be done in a mission mode.

27. Consider inclusion of Oman to the east and Egypt to the west to plug the critical missing links.

FUTURE REFORMS
28. Have a road map for next wave of reforms.

29. Reforms are required in all factors of production including land & labour. Similarly, labour laws have been passed but not yet implemented, needs to be done on collaborative and priority basis. This will make it easier for industry to hire people and create more jobs.

30. Recently Supreme Court has reiterated 7 sub rules for land acquisition to be followed by the States and Industry to ensure time bound acquisition. These could be part of land acquisition Standard Operating Procedure (SOP).

31. Need to have a GST council like structure to facilitate coordination between Centre and States on big ticket reforms namely for factors of production i.e. land, labour, agriculture and others including ease of doing business especially under the present political system of coalition government.

ROLE OF REGULATORY AGENCIES
32. Contamination in packaged spices, eye drops, and children’s cough syrups, misinformation in advertisements for an Ayurvedic medicine, revelations of high sugar content in baby food, and the mislabeling of sugared food products as “health drinks”, impacts the economic reputation in the global market. The Regulatory agencies need to alert and equipped to deal with such situation in a proactive manner.

DECENTRALISATION OF FISCAL POWER
33. A recent RBI study shows revenue expenditure of Panchayats was less than 0.6% of the Gross State Domestic Product of all States. Further local government expenditure as a percentage of total public expenditure is 3% compared to 51% in our neighbouring country. Empower Local Bodies to undertake certain tasks to improve overall State capacity and outcomes. India thus needs to improve the capacity of Local Bodies and leverage it to improve development outcomes. An effective and implementable reform under coalition govt.
REVISIT IMPORT DUTY STRUCTURE
34. To make Indian industry more competitive and encourage local manufacturing, there is an urgent need for comprehensive review of the import duty structure to address the issue of inverted duty structure. This exercise must be done on the basis of inputs from industry and other stakeholders. Also consider raising import duties to give due protection to domestic industry.

LABOUR CODES
35. A Road map needs to be announced regarding the implementation of the codes taking the States on board as it falls under Concurrent List and is pending for implementation since 2019/2020. The labour reforms through implementation of labour codes will play a significant role in attracting investments in manufacturing and achieving the vision of Aatmanirbhar Bharat.
GLOBALISATION OF RUPEE
36. A roadmap with the help of RBI should be rolled out for internationalisation of Rupee. Following factors have to be considered for its globalisation:
(a) Get the Rupee included in Special Drawing Rights (SDR) - an artificial currency instrument managed by the International Monetary Fund. Our neighbouring country included its currency in SDR since 2016.
(b) Enhancing acceptability of rupee by international community as their Reserves.
(c) Make usage of rupee for payment for international transactions.
(d) Convert trade deficit to surplus;
INFLATION MANAGEMENT
37. RBI expects inflation to cool to 4.5% this year. Need to continue the balance between economic growth & inflation management through monetary and fiscal policies. Other measures to contain inflation are:
(a) Pro active strategy for exports and imports of scare items and management of export and import duties;
(b) Monitoring of fuel prices at international and domestic levels;
(c) Revenue expenditure management;
DEMONETISATION OF ELECTORAL BONDS / FISCAL POPULISM
38. The system of electoral bonds should have been streamlined to make it more transparent and accordingly consequential changes in the allied laws. Scraping of electoral bonds amounts to throwing the baby with the bath water. A system for funding of election needs to be evolved through parliamentary debate.

39. A new trend has emerged towards competitive promises of freebies which in effect do not build capacity. This needs to be debated in parliament as it impacts the fiscal consolidation and economic growth.

DISINVESTMENT POLICY
40. Need to revisit disinvestment policy to look into the reasons for poor response. Under the policy, a disinvestment road map has to be provided for all non strategic and strategic sectors.

MONETISATION OF ASSETS
41. Monetisation of Idle assets and land holdings of Public Sector Enterprises (PSEs) and cantonments, many in prime areas, combined with partial and complete privatisation of PSE is the one way to reduce public debt; funding infrastructure; drive economic growth and reinforce the growth of social sectors like education, skills, health and urban renewal.

CRITICAL MINERALS POLICY
42. An enhanced support framework is required to promote exploration and processing of critical minerals in the country by offering incentives at each stage of the production process. The policy for exploration of critical mineral should aim for enhancing exploration activity, putting more mines on auction, research and development and recycling of critical minerals.

CARBON CAPTURE UTILISATION AND STORAGE (CCUS)
43. As India has to dependent on coal overtime, therefore India’s Decarbonisation journey must embrace technologies like CCUS, that will help in tackle emissions. Captured CO2 can be used for making value added products and contribute to the circular economy. It can be used to make green urea and green hydrogen, building materials and enhance oil or gas recovery from matured fields.

44. A 5 year roadmap is required to transform our environment to have clean air and for 100% treatment of sewage and urban waste.

CLIMATE FUNDING
45. The refusal of the developed nations to shoulder their fair share of responsibility in the climate financing will imperils global climate action. In the run up to the actual negotiations at the Conference of Parties (CoP) - the United States and other Western Countries have reportedly pushed to make contributions voluntary. Further they plan to include developing nations to contribute based on their economic realities and current emission share. The developing and least developed economies must strongly take up with developed nations for course correction immediately and chalk out strategy.

HEALTHCARE INFRASTRUCUTRE
46. To achieve a healthier and more sustainable future, it is essential to invest in the development of robust healthcare infrastructure and ensuring that healthcare services are accessible to all citizens, regardless of their socio economic status.

47. India’s public expenditure on healthcare is only 2.1% of GDP while Japan, Canada and France spend about 10% of their GDP on public healthcare. Even neighbouring countries like Bangladesh and Pakistan have over 3% of their GDP going towards Public Healthcare systems. Government should encourage private hospitals as they make a significant contribution to our Healthcare programmes. Target should be to make available small hospitals within a radius of 10 km.

EDUCATION POLICY
48. New Education Policy (NEP) suggest that our investment on Education should be at least 6% of our GDP. At present it is around 3% of our GDP. Enhance it to 6% gradually and implement NEP.

49. Indian universities should be encouraged to tie up with top foreign universities so that our own higher education not only becomes world class but also attracts students from across the world. Education should be a revenue earner for India, not an outflow.

RAILWAY REFORMS:
50. Reduce the dependence on gross budgetary support or borrowings from the Central govt.

51. Encourage corporates to use railways instead of road transport. Introduce the system of rail green points.

52. Explore the possibility of clubbing real estate monetization with redevelopment of railway stations.

53. The freight segment is profitable whereas the passenger segment makes huge losses. Recent data shows that there was a loss of Rs.68269 crore in passenger services, with all the profit from freight tariff nullified in cross subsidizing. The annual growth in freight volume and revenue stands at 1% and 3% respectively while the economy grew at 7%. Rationalise the fare and freight structure:-

(a) Railways need to reduce overall logistics costs and schemes to improve green mobility;
(b) Railways should partner with freight operators encouraging them to invest in wagons for movement of their cargo i.e. specialized traffic like automobiles and fly ash;
(c) Proactively correct power plant sidings to have fully ash loading facilities;
(d) Environmental clearances for rail loading / unloading facilities have been made mandatory but the same has not been imposed on road loading / unloading facilities. Such instructions should be made agnostic based on the quantity of cargo loaded and potential for environmental degradation;
(e) Develop common user facilities at cargo aggregation and dispersal points in mining clusters, industrial clusters and large cities;
(f) Shipper should be permitted to book individual wagons with provision to run a train as per schedule even if the train is not fully loaded; Inadequacies in railway safety system should be addressed on priority basis. Importance has not been given to upgrading the signalling and telecommunications network as well as human resources development.

MICRO, SMALL, AND MEDIUM ENTERPRISES (MSME)
54. High cost of credit is the single biggest roadblock in the growth of 6.5 crore MSMEs which could range between 15% and 28% depending on the nature of financial institutions. Further policy measures to enhance their competitiveness could include steps to integrate them with international markets, digital support for global competitiveness, ease of compliance on Goods and Services Tax laws and easy availability of credit at affordable cost.

DIGITAL TECHNOLOGIES
55. Strong Foundation have been set for India to technologically leapfrog. The Artificial Intelligence (AI) mission with Rs 10372 crore allocation and Rs 76000 crore outlay for semiconductors mission is huge step in this direction (Technologically Leapfrog). In view of this enhance the Research and Development expenditure as a percentage of Gross Domestic Product. Corporate and Startups must partner with academic and research institute to drive the R&D agenda. Recognising the need for long term funding, Rs 1 lakh crore for R&D has been budgeted in the interim budget (2024-25), India’s Startup, Corporate and research Institute must be encouraged to come forward to leverage that funds. ARTIFICAL INTELLIGENCE (AI) LANDSCAPE
56. India can potentially add USD 359-438 Billion to its GDP on account of Generative AI adoption in 2029-30 over and above its baseline estimates. AI index 2023 ranks India as a global leader in driving the AI ecosystem. India startup ecosystem consists of 31,000 tech startups, and 70% of these startups have embraced AI to faster growth and augment their value proposition. Focus on developing AI solutions to meet developmental challenges.

57. The Govt must do the Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis of AI to have optimum advantage of the same.

MINIMUM SUPPORT PRICE (MSP)
58. At present the centre has fixed MSP for 23 farms commodities. However, it is implemented mostly for rice and wheat mainly because, India has vast storage facilities for these grains and uses the produce for its Public Distribution System (PDS). To ensure a remunerative price to farmers, it has to be done State by State policy. The States, Centre should formulate policies for fair and remunerative price. Government may consider the involvement of Cooperatives and Farmer Producer Organisations (FPOs) for storage structures. Accordingly, a legal framework is required within which they can flourish.

59. Have an higher allocation for rural economy and to focus on agriculture and farm sector reforms especially to focus on rural infrastructure, investments in supply chain, technology, crop diversification and issues related to climate crisis.

WELFARE SCHEMES VIA ARTIFICIAL INTELLEGENCE (AI)
60. Various welfare schemes are run by different Ministries and it is cumbersome for citizens to go to them and figure out which one they can avail themselves. To have ease of working and living, introduce the concept of AI-powered platform and search for the schemes under various Ministries. Further the platform itself could help the citizen find out what other schemes the person maybe entitled to. However, it should be ensured that every AI model and AI powered platform should be safe and trustworthy for users.

GOODS AND SERVICES TAX (GST) REFORMS
61. The overall GST trajectory should give the comfort to focus on much needed reforms to tax. This must include a rationalising its multiple rates; bringing electricity and petroleum products under GST net, reducing high rates on key products such as cement and insurance and addressing inverted duty issues.

CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE
62. The scope and coverage of activities of Corporate Social Responsibility expenditure should be widened. The ambiguity regarding CSR spending performance between local area and national priorities should be looked into. The CSR expenditure should be treated as business expenditure under Income Tax Act.

WAY FORWARD
63. There has been a significant reduction in chronic Poverty, but India has a long way to go to ensure opportunities for all to realise their potential and live with a basic quality of life.

64. Growing at a higher sustainable rate for an extended period on equitable basis will not be easy, particularly given the subdued global conditions. India will have to adopt the next generation of bold reforms to improve it chances, taking coalition partners on board.

65. Despite the global challenges, India stands out with its strong economic performance, highlighting broad based growth across sectors and asserting its pivotal role in supporting the global growth trajectory. The forecast of above normal rain in the June-September 2024 monsoon bodes well for a good harvest, easing inflation concerns including food inflation. Utilise this opportunity for high growth measures.