US-India Strategic Partnership Forum (USISPF) has provided an extensive set of recommendations to the Government of India for the upcoming Union Budget 2021-22.
Speaking about the recommendations for the Union Budget, USISPF President Mukesh Aghi said, “In India, the pandemic has severely constrained domestic investment and consumption, but there are hopeful signs of a recovery to come. We look forward to the 2021-2022 Union Budget providing the blueprint for that recovery, one that goes beyond a restoration of the pre-pandemic levels to achieve an even higher baseline level of growth.”
USISPF has developed specific policy recommendations to unleash the full potential of the Indian economy through extensive consultation with its member companies. Some of these include:
- Improving the efficiency and reach of the financial sector, which is the lifeblood of any successful economy. For example, we strongly endorse current efforts to strengthen the banking sector and recommend privatizing mid-sized public sector banks, including through direct acquisition or sale to private and foreign banks in India. Similarly, we recommend urgent action to address the unsustainable asset-liability mismatch inherent in the funding model of non-bank financial companies.
- In the insurance sector, we recommend steps intended to deepen domestic insurance markets, promote risk mitigation and diversification, and provide access to long-term capital for infrastructure investment, by lifting the cap on foreign direct investment in the sector, eliminating management control restrictions, and removing the mandatory cessation of business to the state-owned reinsurer. We also recommend the government expand the number of pension funds in India to provide increased security to citizens and a larger pool of investment capital for businesses.
- To promote digital payments, we recommend specific steps to make it easier for customers and merchants to use digital solutions, including measures to increase the use of contactless payments in person and online, develop QR and tokenization technologies, digitize B2B payments, and expand the digital payments backbone to underserved areas of the country.
- To increase MSME access to finance in India, we recommend specific steps to promote supply-chain financing, subsidize the insurance of MSME loans, improve the assessment of MSME credit risk and loan disbursement, and facilitate faster settlement of claims between healthcare providers and insurers.
- To ensure efficiency and continued competitiveness of India’s critical business process outsourcing (BPO) sector, we recommend updating the relevant telecommunications regulations to account for the rapid expansion of tele-working brought on by the COVID-19 pandemic, in particular by removing the burdensome registration and scrutiny formalities on data-based service providers.
- At the same time, recognizing that the pandemic has accelerated digitization of large swathes of the economy, we recommend the government ensure Digital India can transact securely by expanding the use of digital signatures in negotiable instruments, powers of attorney, deeds, contracts, and other legal documents.
- Finally, we recommend creating permanent tax incentives for Special Economic Zones based on performance indicators such as employment generation, investment in research and development, and the use of green technology, to increase investment and remove uncertainties created by the pending expiration of the current incentives.
- In addition to these financial sector policy recommendations, we also recommend specific measures to improve direct and indirect tax collection, which will promote private investment and ensure fiscal and monetary stability.
- On the direct taxation side, we recommend specific amendments to facilitate activity in the digital economy, reduce tax and depreciation rates to boost investment, clarify carry-forward and loss-offset rules, and streamline regulations related to withholding tax, indirect transfer, and dispute resolution. For indirect taxes, we recommend amendments to address challenges with deferred duty payments, simplify various processes and procedures, and align customs regulations more closely with actual industry practices. Together, these changes will free up much-needed investment capital, make it easier for companies to manage their tax liabilities, and provide a needed boost to the economic activity during the next fiscal year.