-CB News Desk (cbedit@imaws.org)
Union Budget 2022 will be presented at a time when India’s economic recovery from the pandemic blow is firming up.This is the 4th Budget of the PM Narendra Modi-led NDA government in its second tenure. The Budget 2022 will be presented around 11 am on 1st February 2022. Infrastructure spending is likely to remain the top focus along with additional allocation for ramping up India’s healthcare facilities. The finance minister is expected to make announcements to clear the cobwebs for making India more business-friendly in line with recent moves like scrapping retrospective taxation. This despite the fact that the F&B industry has been one of the fastest growing in the country and is one of the largest employment providers. It is always the first to get impacted when the lockdown sets in and also the last to get recovered when lockdown is eased. Roughly the industry adds around 2-3% to the GDP and it is high time we have a dedicated ministry for the F&B sector.’
The long pending demand for Hospitality to be granted an infrastructure status remains unheard. The voices are around hospitality to be recognized as an industry that contributes strongly to the country’s economy. Most of the industry stake holders would also like a review of GST. A lower GST and taxation on hospitality, food and beverage services is much needed. Also, a uniform tax structure across the board is the need of the hour. Liquidity to be made available for upcoming hospitality projects. Increased international investment in hospitality should be allowed to achieve this.
With a revival in demand and consumption, food manufacturers are looking forward to 2022 with hopes of sustaining a healthy growth trend while catering to the increasing online consumers. While many are investing in building capability for e-commerce and Direct-to-Consumer channels, since these are the key factors of future growth. “Hopefully, 2022’s budget will focus on investments in rural infrastructure development, an extension of farm credit provisions, and job creation. With the pandemic, the cost of raw and packaging material has risen, resulting in many industries being forced to hike prices. We need help in tackling high inflation levels, as also in digitalisation of rural areas. Online is the way ahead and for industries to be able to leverage that opportunity, digitalization is key. Even after two lockdowns, the virus continues to present newer challenges every day. By setting up necessary medical facilities to deal with this ongoing situation, the government will take an important step in rekindling hope. “said Manish Aggarwal, Director, Bikano, Bikanervala Foods.
Shrenik Ghodawat, Managing Director, Ghodawat Consumers (GCL) seeks the Union Government’s intervention to increase the outlay under MGNREGS and tax reduction for the salaried class that will help in demand regeneration and boost consumption. The government also needs to continue with its other schemes such as direct cash transfer, food subsidies which have supported the rural areas of the country even as COVID-19 wreaked havoc in urban areas. ” Interest subvention scheme in respect of term loan for setting up of Edible Oil, Rice and Flour Industry and other agro-commodity industry and working capital requirements to be considered under priority sector lending to encourage setting up of industries in agro-commodities. This will help in sustainable development of farmers, local community, generation of local employment and creation of vibrant rural economy. “
As we witnessed during the COVID-19 pandemic, the growth was brought about by channeling the unorganised players to mainstream business, with Offline to Online or O2O being the key theme. O2O will lead to transparency in payments, transactions, compliance with taxes, labour laws and larger employment opportunities for the youth. Specific to e-commerce and e-grocery, this budget will also be a great time for the government to rationalise GST rates, compliance processes, FDI policies and ride the buoyancy revenue curves. According to most of them PLI scheme for edible oil industry which will boost Atmanirbhar Bharat Scheme, reduce huge dependency on imports and will boost domestic manufacturing, local employment and valuable foreign exchange savings.
Same like the food sector, Bevarages sector too has its own challenges. Reduction in GST rate to 12% from current 28% and removal of 12% compensation cess in respect of ‘Carbonated fruit juice beverages’ as GST tax alongwith compensation cess is at highest slab of 40% which is making the entire carbonated fruit juice industry non-viable as industry is already in a deep stress from pandemic and rising input costs. The revised GST structure has affected the regional industry players which were trying to build a heathy competition with international players. Prabhu Gandhikumar Co-founder TABP Snacks and Beverages, a Coimbatore based start-up feels, “The Indian beverage industry is going through a very tough time. The peak season for the industry which is summer has been lost due to Covid19 for the past two years. The commodity cycle is also at its peak which has affected our gross margins significantly. In October the GST on added fruit carbonated drinks was also increased from 12% to 40% effectively. The beverage industry is a big employment generator in India. When the nascent beverage industry has to compete with MNC giants we need government support.” Ekta Jain, Chief Marketing Officer, Octavius Tea, calls for a reduction of long term capital gains tax on private business and some subsidisation on importing manufacturing machines to improvise the production process.
On the other side, the hospitality sector echoes different view. Dawn Thomas, Co-founder, VRO Hospitality feels that every budget, restaurateurs pray for just one thing, application of input GST. “For some time, we have been charging on a very small part of i GST, 5%, to our customers. The government has not allowed restaurants to avail the input GST which can be set off against rent, consultancy and more. Also, it is high time for the sector to come under a dedicated ministry. Over the last two years ever since the onset of the pandemic, the F&B sectors has been worst hit. “
With the pandemic in place, the food sector was heavily affected and the industry seriously needs a better uplift. D.R.E Reddy, CEO and Managing Partner, CRCL, Chennai says “We hope that the government takes a comprehensive view of the sector and, as part of the farm reforms, reinstates the input tax credit for food sales, which will assist to streamline the entire agriculture commodities supply chain. In addition, we hope that the industry will receive the necessary support as it is one of the main employers of semi-skilled and unskilled labor. Furthermore, given the food sector’s huge ability to produce employment and contribute to GDP growth, favorable policies will go a long way towards stabilizing the economy and injecting cash into the system. We expect that the government would now simplify the foodservice industry’s regulatory governance so that it becomes more appealing for participants to be compliant and follow established safety measures, especially in the post-pandemic times.”
Mehul Sharma, Founder & CEO, Signum Hotels & Resorts says “For the revival of India’s hospitality industry, domestic tourism must flourish. Measures to promote and facilitate domestic tourism must be put in place. Government must consider steps to promote local destinations from within the country and encourage travelers to explore their own country. LTA should be increased to incentivize people to travel.” He says India must target to achieve 15-18mn domestic tourist numbers. Government must create a pool of funds to improve infrastructure and tourism focused development. “Tokenization as a process and use of blockchain technology to raise funds should be implemented. Low credit rates on loans extended to hospitality projects must be considered to sustain development in this sector. “
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