Budget 2020: After the Union Budget 2019, India Inc witnessed a slew of reforms in September last year. Even as those measures have positively impacted the corporate sector, the government needs to undertake substantial steps to address the current economic slowdown and continue on its path towards becoming a $5 trillion economy in the next five years.
Union Budget 2020 presents a tremendous opportunity to strengthen the twin engines of economic growth -- consumption and investment. The key focus should be on ushering in policies to boost consumer spending. Reduction in personal income tax will positively impact disposable income and strengthen the spending power of consumers.
The government must also focus on policies that will encourage businesses to step up investments and create jobs. It is important to look at sectors such as infrastructure and manufacturing, which have multiplier effects and a strong potential to generate jobs for the country's workforce.
The Indian FMCG industry, also considered an evergreen sector by experts, has registered slower growth last year because of dampened demand in the rural markets and inflation. The sales of branded daily need products have been increasingly led by the growth in rural hinterlands.
Given their purchase behaviour is largely linked to the farm output, the market has seen a historical dip in rural consumption due to lower farm incomes and liquidity constraints.
We also hope the government acknowledges the unique positioning of the direct selling (DS) industry in aiding employment and entrepreneurship opportunities for individuals. Currently, India contributes less than 1% to the global DS industry at $193 Billion* as compared to China, which contributes 18.5%*.
With a total of 5.7 million direct sellers* in India, of which almost 69%* are women, a conducive environment for the DS industry can provide the right impetus for the industry to realise its full potential, further contributing to the growth of the economy and entrepreneurship.
With the upcoming Budget, the government must also look at creating confidence in business and relevant tax policies. With a clearer picture of different taxes - direct, indirect, GST - both producers and consumers will be able to plan their spending for the next couple of years.
While the reduction in corporate tax rates last year was a welcome move, we believe that the personal income tax cuts may help stimulate demand, and further reduction of indirect taxes will have more significant benefits.
Reducing GST rates would help in boosting demand, as the benefits of GST rate reduction would be passed on to the end consumers. Furthermore, rationalising GST on healthcare supplements to 5% from 18% will be a welcome move considering a holistic smart healthcare system combined with nutraceuticals and health supplements provide significant economic value.
Further, we hope to see continued efforts to boost the growth of MSMEs, which remain the second largest employment generator and are truly the growth engine of the Indian economy. With an endeavour to encourage micro-entrepreneurs, we urge the government to bring DS services under the reverse charge mechanism (RCM). This move will significantly reduce the burden of GST compliances from the small businesses (run by direct sellers), bolstering productivity, and fueling the growth of the DS industry.
The central government's move to include the DS industry and its activities under the Consumer Protection Act 2019 was indeed a positive step towards the growth of the DS industry. It is encouraging to witness the government's focus on the DS industry to safeguard the interest of both the direct sellers and consumers.
Overall, we believe Budget 2020 should look at driving economic growth through increased spending in infrastructure, stimulating consumption while also focusing on employment and skill development along with MSME growth and farmer productivity improvement.
With focused interventions in these areas, we hope Union Budget 2020 will provide the much-needed impetus to direct the economy on a sustained growth trajectory and achieve inclusive economic development.
* Source: Indian Direct Selling Association's (IDSA) Annual Survey 2018-19.
(The author is CEO, Amway India)