Budget 2017: Another step towards growth

With the demonetization move of the government, we are hopeful that keen attention would be paid to set in line initiatives that will bring cheer to the sector and the economy.

By Adarsh Hegde  
Friday, January 20, 2017

The International Monetary Fund (IMF), in its World Economic Outlook, has cut India's growth estimate for FY 17 to 6.6 per cent from 7.6 per cent attributing it partly to demonetization of high-value currency notes.  Whether this is just a knee jerk reaction or not, remains to be seen because things are likely to get back to normal in two quarters albeit with some changes such as digital adaptation by masses and businesses, meaning lesser cash transactions.

But growth certainly seems to be on the country's side. India has climbed up 16 ranks to be at the 39th place among 138 countries as per the World Economic Forum's Global Competitive Report 2016-17. A sign that the present governance is bearing good results.

To add to it, the Union budget will be presented along with the Railway budget, setting the tone for positive expectation in 2017. Besides, with the demonetization move of the government, we are hopeful that keen attention would be paid to set in line initiatives that will bring cheer to the sector and the economy. The government is likely to plough back the accumulated reserves into infrastructure and development.

Let's take a look at what corporate India is hoping from the union budget.

Corporate Taxation:

Sectors like FMCG, auto, transport, agriculture and other seasonal export businesses have been impacted due to the demonetization. We are hopeful that the government will offer some ease by offering corporate tax sops and simplifying tax procedures for the logistics sector.

Investment in infrastructure:

We have seen a lot of push to develop port infrastructure and port automation in the recent past to ensure reduction in delays, cost effectiveness and operational efficiencies.

The Sagarmala project will see more focus. An area that needs to be addressed is development of industries in and around the ports. Development of industrial corridors will ensure there is cargo both ways and customers enjoy the benefits of reduced costs. Subsidies, low tax zones, and other incentives could be of great help.

Also, the budget should focus on investments to ensure connectivity to and from ports for first mile and last mile delivery.

These factors play a significant role in reaping the actual benefits of coastal and inland shipping.

The plan for development has been chalked down by the government with initiatives like smart cities, the Delhi Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridors (DFCs), but the beauty of a project lies in its implementation. We are hopeful to reap the benefits.The Goods and Service Tax (GST) implementation:

GST would bring about consolidation of warehouses which would now be set up closer to the area of consumption. This also calls for greater negotiation power in the hands of logistics players. Eg: The cost to set up 2 warehouses of 30,000 sq m is far lesser than having 6 warehouses of 10,000 sq m each.

Besides, GST would ensure free movement of goods across borders, eliminating delays at various checkpoints. This ensures optimum utilization of transportation, shorter lead time, cost and operational effectiveness, which will directly benefit customers.

Post the successful rollout on 1 July 2017, the centre and states will have to work in great sync to make the most of GST and derive mutual benefits.

Digitalization:

The budget 2017 is sure to witness incentives and schemes for a cashless economy.

Pertaining to the logistics sector, the government should invest in technology for information and data sharing as this will lead to quicker delivery time and efficient data management.

Overall, the budget is expected to be in favour of corporate India and to restore positive sentiments in the economy.

(Author is Joint Managing Director, Allcargo Logistics Limited)

 

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