Union budget 2020-21: A balanced budget and its focus on infrastructure and MSMEs to uplift economic growth – Dr Mahesh Y Reddy

The edifice of the 2020 Union Budget rests on five pillars viz. infrastructure, technology, exports, ease of doing business and employment. Importantly, these are interconnected factors; one synergizing the other. For instance, the proposal to invest nearly Rs 1.7 trillion ininfrastructure sector covering road, rail, air and waterways can really be a force multiplier. Monetization of 12 lots of highways under the toll-operate-transfer(ToT) scheme also makes great growth sense because of the successes of similar initiatives implemented earlier.

The proposed setting up of 9000 km of economic corridor and 2000 km of coastal corridor would not only step up business and export growth in these regions but also add more jobs and promote ease of living.

The Budget also makes a bold attempt at triggering and fulfilling the future aspirations of the people. Our conventional wisdom on infrastructure has indeed, undergone a fundamental change. People are no more averse to theconcept of “user charge”. There is a positive and perceptible attitudinal change in favour of “value for money”. This change is not limited to physical infrastructure alone. Be it power, healthcare, education, etc. people are demanding quality. In the case of roads and highways, they want smooth, safe, fast moving and comfortable roads and highways; in the case of energy, consumers look forward to have uninterrupted and quality power supply. That is also true of aviation, rail, shipping and inland waterways. In all these infrastructural segments, the investment focus should be on creating high quality modern infrastructure.

The 2020 budget initiatives speak for themselves. Privatization of passenger trains, introduction of refrigerated wagons for the movement of  agricultural products from the growing areas to consuming centers, creating an ecosystem  for increasing the number  of aircrafts from 600 and odd now to over 1000 in the near future,   planned development of  waterways, introduction of high speed trains including the allocation made for the Mumbai and Ahmadabad bullet train etc., are undoubtedly aimed at taking the  development  process to the next level. The prime emphasis  now needs be on timely implementation, which can also keep the critics and skeptics at bay.

 A well laid out infrastructure will lead to ease of doing business. For instance, when the Mumbai-Delhi Expressway is complete, the movement of goods from the production centers in North to the port mouth in Mumbai can be much faster than now.

The next test for a good budget is how investment in one sector can impact the other.  The annual investment envisaged for the infrastructure at Rs 1.7 trillion will have a very salubrious impact on manufacturing, particularly in the basic industries like cement, steel, housing materials and a host of other items for which there would be significant boost in demand. As these industries make intense use of the road and rail infrastructure for moving both inputs and outputs, these would also benefit from the consequent improvement in infrastructure capacities and efficiencies. As we are already seeing India Manufacturing PMI (IHS Markit) has risen from 52.7 in December to 55.3 in January, its highest level in just under eight years. The massive investments planned in the infrastructure sector would certainly bolster this trend substantially.

The focus of the Budget on small and medium sector is clearly discernible. The tech sector of the SMEs and startups are going to be the major beneficiaries of the investments of over Rs 8000 crore proposed in the cutting-edge technology areas such the setting up of data centers in different parts of the country. These will open up significant opportunities for startups and new enterprises to use not only innovative technologies but also strategic business practices based on data mining and big data analytics. This would also boost the global prospects of our vibrant services sector. According to World Bank, the world-wide demand for services was over US$ 5 trillion in 2018. This would have grown to US$ 5.5 billion or so now. Though, India has done reasonably well in export of computer software, our share is very insignificant in the export of software products like IoTs, artificial intelligence, sensors, games etc. The new investments into data networks and technologies would certainly a boon for our ITES companies.

The brick and mortar SMEs would also be favorably impacted by the proposed investments in infrastructure sector. In the new type of infra projects, particularly in the smart cities, more than 40% of the devices would come from the IT sector for establishing security and safety systems, automation of utilities, creating digital platforms such as smart grids, etc. This is an area where the SME sector can chip in by re-orienting their operations to meet the emerging demand hi-tech devices and instrumentation components are needed by the mega projects. In fact, in the developed countries, there is a heavy concentration of SMEs in the hi-tech sector.

In conclusion, a clear emphasis of the budget on infrastructure, public private partnerships and MSMEs should lead the Industry and enterprises to become more competitive and turn accelerate pace of growth of Indian economy.
The author Mahesh Y Reddy is the Director General, Infrastructure Industry and Logistics Federation of India (ILFI). Views expressed here are his personal.