Budget: Growth-oriented, protectionist

The Budget aims to boost economic growth and create more employment and entrepreneurial opportunities through substantial increase in capital expenditure for building infrastructure and increased protection to domestic producers, besides many other initiatives such as improved governance through extensive use of information technology.

The exporters have reasons to be happy with the plans for enhancing seamless multimodal connectivity that will improve logistics efficiency. ‘The seven engines of growth under the PM Gati Shakti project will help to reduce the logistics cost and time of Indian exports significantly thereby imparting added competitiveness to exports. The setting up of 100 Cargo Terminals will facilitate Exim trade a lot as logistics challenges today are the biggest stumbling blocks’, says the President of Federation of Indian Export Organisations.

The government says that it intends to bring in a new Special Economic Zone law that will cover all large existing and new industrial enclaves to optimally utilise available infrastructure and enable the states to become partners in ‘Development of Enterprise and Service Hubs’. It is unclear whether something useful will be achieved through this exercise.

The government has raised the import duties on many items and removed several exemptions with a view to help the domestic industries. That may breed inefficiencies and be counterproductive. As it is, many primary and intermediate items attract anti-dumping, safeguard and countervailing duties that make the final products more costly.

Last year, the government said that it will put in place a revised customs duty structure, free of distortions. This year the government has removed many outdated exemptions or exemptions that are not widely used and moved the effective rates on many items to the Customs tariff schedule. The tangible steps taken to simplify the Customs tariff and rationalize import duty rate structure are laudable. The changes in the Customs (Import of Goods at Concessional Rate of Duty Rules, 2017 will help ease of doing business.

The Supreme Court, in the case of Canon India Pvt. Ltd. [2021(376) ELT 3 (SC)] had held that officers of Directorate of Revenue (DRI) have no jurisdiction to issue show cause notices in import duty assessment matters. The government now proposes to amend the Customs laws giving the officers of DRI, Customs audit department and preventive formations the powers to initiate quasi-judicial proceedings. The government wants to amend the laws retrospectively so that all the proceedings initiated earlier that had gone dormant after the Supreme Court judgment will get revived.

In a welcome move, the government proposes publishing of any information relating to the value or quantity or details of importer or exporter punishable with imprisonment up to six months or fine up to Rs. 50,000 or both. It will help address the issue of revealing sensitive commercial information such as name of the buyer for a particular item and the price at which an exporter sells his goods.

Under the Goods and Services Tax (GST) laws, the government proposes many stringent curbs on availment of input tax credit, stronger disciplines for furnishing the returns, ending the two-way communication that gave the taxpayers the right to furnish additional data over and above what they got from the GST portal.

Overall, the Budget is growth oriented but protectionist and inflationary. Much depends how well the government calibrates its spending, executes its plans and controls inflation.