When it comes to trade or business, India has been a centre of attraction since ancient times. In the past, India was known for its trading in spices, rare metals, and others, but today, India is being looked at as an investment hub worldwide because of its growing economy, and trade is just one example of the business opportunities.
India has one of the world’s largest stock exchanges; one of the major and biggest stock exchanges in India is the NSE (National Stock Exchange), based out of Mumbai. The NSE is owned by some of the leading financial institutions, banks, and insurance companies. It was founded in 1992 and had a market capitalization of approximately US$3.4 trillion as of August 2022. In terms of the largest stock exchange, it ranks sixth in the world.
The largest companies, or better described as an Adani Group group of companies, are also listed on the NSE.It has been under the spotlight for around three years because it has almost added around $100 billion (about $310 per person in the US) to the net worth of the founder and chairman of Adani Group, which is mainly because of the price spike in his seven companies listed on the NSE, which have spiked by almost 819% over the period. It caught the eye of the whole country, and Adani was well-appreciated for his business management, tactics, and vision, as his companies, or better yet, group of companies, have made him one of the richest men in India.
The rapidly expanding economy and equity market have persuaded Morgan Stanley Investment Management to name it the top investment destination.
Indian stocks make up 14% of MCI’s emerging equities, trailing only China after surpassing Taiwan and South Korea. Then came the $50 billion selloff in billionaire Gautam Adani’s corporate empire.
It’s a shock that forces Wall Street to reexamine its confidence in India’s expansion and its pro-business government, which helped the benchmark Sensex index trade last quarter at the highest in a decade versus the S&P 500.
Those already-lofty valuations, combined with a scathing New York short-seller report attacking Adani Group, spotlight the contradictions within India’s runway for growth. On January 25, Hindenburg released a report that alleged the Adani Group had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” Adani Group’s stock fell as a result.
This report created havoc in the Indian stock market and pointed a lot of fingers at Gautam Adani, which also led to the crash of his stocks in the Indian stock market in response to the Hindenburg report. The Adani Group also released a 413-page rebuttal. Adani Group said Hindenburg’s conduct was “nothing short of calculated securities fraud” and stated that the research company was attacking India as a whole.
Well, this is something fishy, scam or not, and we’ll have to wait and see while the professionals investigate. Also, in the past, India has suffered a lot of scams that resulted in the loss of a lot of money from people’s pockets when they invested in a certain company. To be protected from these scams, digital payments were introduced, which took off when the whole world was suffering from the dangers of COVID-19, the banks were closed, and everyone was advised to exercise social distancing. So digital payments took off, as they have a lot of perks such as minimal bank visits, proper social distancing, etc.
But another major feature is that digital payments are easy to track for the government, which may lead to fewer scams and people collecting black money. The Indian government also issued its own digital currency, the e-rupee. The retail issuance of this currency went live on December 1, 2022. The RBI’s central bank digital currency (CBDC) is an electronic form of sovereign currency.
According to the concept note, the retail digital rupee is proposed to be distributed through a two-tier model. The Reserve Bank of India will issue and redeem e-R, while the distribution and payment services will be delegated to the banks.
The model is similar to the current physical currency management system in which banks manage activities such as note distribution to the public, account-keeping, adherence to know-your-customer (KYC) and anti-money laundering and counter-terrorism financing (AML/CFT) checks, transaction verification, and so on.
“Affordable, safer, and easier payments for all” It may encourage investors to invest in digital currencies as a more reliable method.
“RBI CBDC aims to fulfil the promise of affordable, safer, and easier payments for all. Since it provides a regulated alternative to cryptocurrencies on the market, the CBDC would lead to more robust and reliable payments, lowering the dependency on cash. The underlying technology would make transaction costs low. “Being interoperable with other payment systems, it will complement existing techniques like UPI, thus completing the mobile payments ecosystem,” said Jaya Vaidhyanathan, CEO, BCT Digital, a RegTech company.
As we all progress digitally, people are hoping that the upcoming budget will surely have something for cryptocurrency too. It was put in the highest tax bracket last year, and it is being hoped that this year it will get some relief, but it has very little place in the budget. To tax cryptocurrency in India, the finance ministry introduced a new section 115 BWH in the 2022 budget.
This section imposes a 30% tax plus any applicable surcharge and a 4% levy on profits made from crypto trading starting April 1, 2022. This rate is the same as India’s highest income tax bracket.
Allocation of Funds for Cybersecurity:
For 2022–203, the government has allocated INR 1.85 lakh crores to the Ministry of Home Affairs, with a significant portion of the fund earmarked for cybersecurity and intelligence equipment. This year, 2023, the numbers might touch 2 lakh crore rupees.
Previously, INR 1.66 lakh crore was set aside for this purpose in the Union Budget 2021-22.
With the allocated budget, the Ministry of Home Affairs has taken several initiatives, such as setting up a state-of-the-art national cybercrime laboratory and the Cybercrime Coordination Center of India, which will tackle citizens who will combat cybercrime in the country through an online fraud reporting and management system for instant financial fraud reporting and anti-fraud and tracking devices installed.
E-currency updates for Digital Companies
- The e-currency might be a boon for retailers and institutional investors, but it might hamper digital companies as the licence distribution for regulation, distribution rights, and acquisition costs for e-currency are going to be high initially.
- The number of licences that must be distributed by the government would be limited.
- Cybersecurity is still a challenge big challenge
Expectations for Corporate Tax Norms for Union Budget 2023
- Rationalization of Taxes
The reduced tax rate of 15 percent is also applicable to existing companies operating in priority sectors for which production-linked incentives (PLI) have been notified.
The statute of limitations for starting production activities for companies using the 15 percent preferential tax can be extended by two years from March 31, 2024.
- Ensuring tax certainty
The government can give instructions on the methods to be followed in computing the profits of non-residents having a large financial position in India.
In the first pillar of the OECD/G20 Inclusive Framework, several building blocks must be completed. However, the OECD has made rapid progress in issuing rules and commentaries on the second pillar. We may see some announcements related to India’s plan to implement the second pillar of this budget.
A new mechanism can be introduced to resolve disputes more quickly, such as mediation.
- Stimulation of investment and demand
A reduced tax or tax credit can be introduced for electric vehicles, green technology, clean energy, and semiconductors, increase in deduction and mortgage interest under section 80C of the Income-tax Act, 1961 (Act)
Rationalization of the capital gains tax system by bringing equity mutual funds and listed bonds into parity with their equity counterparts
- Ease of Doing Business
Section 194 O: Some provisions of the Export Act may be excluded from the scope of the Act to increase Indian exports and support working capital requirements.
Relaxation of dividend default provisions under Section 2 (22) (e) by excluding transactions under Section 186 of the Limited Liability Companies Act 2013 where certain guarantees can be exercised, such as repayment of a loan within certain limits of time and payment of interest at the market rate
- Other important budget expectations in relation to corporation tax
Extension of the sunset clause in Sections 194LC and 194LD of the Act
eligibility under Section 194R of the Act to obtain a certificate of lesser deduction under Section 197 of the Act.
A tax-deductible tax source can be introduced for the online gaming industry to provide the necessary transaction trail for the government.
Payments
The government should increase UPI’s Merchant Rebate (MDR) benefit allocation to INR 6,000–7,000 to promote the adoption of digital payments in rural areas. Fund to improve the acceptance of digital payments in rural areas
RuPay credit cards can now be linked to UPI; allowing the use of other card systems in UPI would increase customer convenience. Credit card MDR should be extended for credit card transactions through UPI to increase acceptability.
Budget Expectations for the Consumer Industry in 2023
Low consumption in rural areas continues to be a problem in the fast-moving consumer goods (FMCG) sector.
On the demand side, any increase in disposable income, especially in rural areas, would increase consumption. Inflation and a lack of supply in
FMCG sales were reduced to some extent in rural areas. Incentive packages for rural support programmes such as the Mahatma Gandhi National Rural Employment Guarantee Act of 2005 (MGNREGA) can provide a boost. Incentive packages and initiatives would help FMCG companies reach and expand their rural footprint. The government is advised to emphasise agricultural sectors in the budget to increase land consumption. A decline in raw material prices is also expected from this budget.
Rural FMCG markets in India could reach $100 billion by 2025. It is important to invest in strong infrastructure to serve rural markets and realise growth potential. Government initiatives such as increased spending and manufacturing-linked
(PLI) and the creation of Special Economic Zones (SEZs) can provide the much-needed impetus to build warehouses and improve transport and road connectivity. Initiatives like Pradhan Mantri Grami Digital Saksharta Under Abhiyan, Digital India can integrate rural markets into the digital ecosystem.
What can we expect from the Technology Alliance budget for 2023?
Worried by global recession and high inflation, India’s Budget 2023 is expected to support the Indian economy and boost growth while keeping a tight rein on the fiscal deficit.
Key focus on infrastructure: In the technology, media, and telecommunications (TMT) sector, industries and businesses expect a strong focus on infrastructure (both physical and digital) in the upcoming federal budget.
The government has aggressively invested in the development of the country’s infrastructure in recent years, and this momentum is expected to continue.
The increased efforts of the government to make India the centre of the world’s digital economy and manufacturing are expected to be funded through budgetary allocations in this area.
This will bring long-term benefits to the country in terms of industrial growth, new job opportunities, global supply chain improvement and integration, and investment flows, helping to achieve the goal of a $5 trillion economy.
To support the development of infrastructure, we expect the media and telecommunications budget to include measures such as encouraging public-private partnerships in large projects—both physical and digital—and encouraging companies and businesses to invest more in this area with the hidden trends of 5G, Web 3, and new technologies.
Simplifying the APA: TMT companies are subject to various regulations, including those related to data protection, cyber security, and pricing arrangements arising from cross-border transactions and revenues. These companies often face transfer pricing related to complex and ever-changing regulations.
Harmonization and simplification of the Advance Pricing Agreement (APA), the Mutual Agreement Procedure (MAP), and other regulations and benchmarking rules are expected throughout the industry.
Review of SHR Rules: The TMT sector expects the government to review the existing Safe Harbor Rules (SHR). Current “Safe Harbor” margins are provided only for companies with a turnover of up to INR 200. So SHR can be selected by a very limited number of companies.
The industry hopes to expand the scope of this incentive and raise the applicability threshold. NASSCOM has asked the government to review the SHR and notify safe harbour margins for units with a turnover of up to INR 1000.
Expanding the scope of PLI schemes: Production-linked incentive (PLI) schemes have been beneficial for the growth of the manufacturing sector. These PLI schemes can drive strong domestic demand and take the diversified export portfolio of Indian exports to new heights.
The current PLI systems are limited to companies in certain industries and large enterprises. In order to increase exports and facilitate and increase production capacity in this sector, the PLI schemes are expected to be expanded in the 2023 budget to include specific industries and industrial SMEs.
Encourage R&D: There is a need to encourage R&D and idea incubation to develop new ideas and emerging technologies at an early stage. In this space, further investment is expected from the Union budget to create national R&D and idea incubators owned by industry and academia, along with other scientific experts.
Budget Expectations for Agriculture sector 2023
Digital technologies such as artificial intelligence (AI), machine learning (ML), remote sensing, big data, blockchain, Internet of Things (IoT), and geographic information systems
- Technology and the use of drones and robots are changing agricultural value chains and modernising operations. Currently, their adoption in India is nascent due to the limited penetration of machine tools, a lack of awareness, and the presence of isolated small farms.
To support and accelerate the development and adoption of new technologies, the government launched the Digital Agriculture Mission (2020–2025). In addition, the government can support it through the acceleration of digital infrastructure, the affordability of technology, the ease of access and operation, the easy maintenance of systems, the training of stakeholders, and the provision of government support policies. In addition, it should focus on the development of the ecosystem to facilitate the provision of digital services to farmers, such as “Agristack,” which provides real-time and accurate information on the market, systems, logistics, and storage; and market access (e.g., NAM and marketing channels). This ecosystem functions as a database of farmers in different states (soil condition data, yield data, land records, etc.).
Policies focused on strengthening farmer-producer organizations (FPOs) have a crucial role to play in promoting the adoption of best practices.
Digital technology enables better and faster member management, financial management, and information transparency between stakeholders. In addition, public-private partnerships are crucial to the adoption of digital technologies in agriculture and related
sectors. The government can further encourage organised players to modernise the industry. In addition, the government can offer low-interest loans, tax incentives, etc., to encourage start-ups to develop innovative solutions to modernise the industry.
These startups can create a more sustainable agricultural ecosystem, improve accessibility for smallholders, and train them faster on best practises and sustainable solutions. Operating models must become more adaptable and flexible.
Effective food management through the creation of a network of improved primary processing, storage, and distribution facilities can increase the value of products, reduce losses, and increase the income of key stakeholders. The government should create policies that provide attractive incentives to build facilities such as micro-coolers to address supply chain problems (lack of proper storage infrastructure, inadequate logistics, high waste, etc.). It is expected to provide financial incentives, training, infrastructure, and marketing opportunities to entrepreneurs who can set up businesses such as food and milk processing plants. In addition, the government is expected to increase investments to improve infrastructure, including irrigation facilities, logistics, storage, and silos in various states.
Budget Expectations for Oil and gas sector 2023
Oil and Gas Framework: In the next Union Budget, policies should focus on carbon credits, carbon reduction targets, new commitments to renewable energy, infrastructure regulations, etc.
The O&G sector is responsible for meeting the needs of its customers and must also work to ensure a future world of new energies. In the upcoming budget, customers expect relatively cheaper sources of gas and liquefied natural gas from the state.
The industry expects the government to support small and medium enterprises (SMEs) in developing infrastructure for molecules such as hydrogen, ethanol, biodiesel, biomass, biogas, etc.
Many oil companies and fossil fuel-dependent industries are seeking clarity on rising carbon dioxide emissions to plan their future investments.
The wish list includes biofertilizer support for fertiliser companies and the development of large petrochemical and chemical zones for investors. This helps avoid scrambling for land, facilities, and the supply chain.
Budget Expectations for Manufacturing sector 2023
India’s manufacturing industry has been able to generate favourable growth despite global economic uncertainty and pressure on input costs. In the next budget, the government can focus on expanding the PLI (production-linked incentive) system, enabling efficient logistics, and encouraging environmental sustainability to achieve inclusive long-term growth. Producers expect the government to take steps to make the PLI system a success by simplifying the application process and providing greater flexibility in evaluating performance achievement to increase participation.
Supply chain slowdowns and logistics constraints have emerged as key issues for the government in the upcoming budget. The development of multi-modal logistics parks and the promotion of intelligent warehousing, focusing more on road and rail infrastructure to reduce logistics costs and improve competitiveness, will benefit.
Since cyber risk is the biggest challenge for automation-driven industries that are closely related to digital transformation, the government must take decisive steps to address this problem. In addition, developing digital skills and democratizing technology can help accelerate adoption and increase productivity.
Budget Expectations for Healthcare 2023
In the Union Budget 2023, the government should strengthen apex/national institutions responsible for investigating, monitoring, and managing health crises and their regional affiliates, taking into account the need to address gaps in preparedness and response to existing, new, and/or emerging health emergencies, further increasing local or regional capacity for integrated surveillance and response by exploiting and creating interoperable digital platforms for evidence-based decision-making.
The government must also strengthen primary and secondary health networks and infrastructure, develop primary health workers, and equip them with technology-based tools to improve efficiency. In addition, we will continue to increase support for current national programmes to bring total health spending to at least 3% of GDP.
Initiatives like Pradhan Mantri-Ayushman Bharat Infrastructure Mission (PM-ABHIM), the National Digital Health Mission (NDHM), the One Health Consortium, and the Integrated Health Information Platform (IHIP) are initiatives to strengthen the necessary capacity at national, regional, and global levels. levels
PM-ABHIM focuses on strengthening health systems, while the One Health Consortium plans to initiate multidisciplinary collaboration between animal, human, and environmental health. India is also a signatory to the WHO’s three-billion-person target by 2023, which aims to ensure that an additional billion people worldwide benefit from universal healthcare.
