The startup ecosystem is happy with Finance Minister Nirmala Sitharaman´s Union Budget for 2022, which has extended tax benefits by a year. The ecosystem has also praised the FM’s 15% cap on the surcharge on long-term capital gains (LTCG) tax as a reduction in the burden on startups in terms of ESOPs and other transactions too.
However, there are many sectors that will be impacted indirectly or directly by various policies in the budget. While some sectors are satisfied with the potential impact, many have been disappointed.
The Tech Panda gathered the reactions, both positive and negative, of various industries including F&B, hospitality, chemical industry, climate, manufacturing, and, consumer electronics and durables.
Read more: Budget 2022 reaction: FINTECH
F&B
- Emergency Credit Line Guarantee Scheme (ECLGS) announcement
Farman Beig, Co-founder & CEO, Wat-a-Burger
Some relief in terms of ITC (Input tax credit) would have further catalysed the recovery of the sector
“The government has been supportive towards the F&B sector and did announce some steps to help the sector bounce back by shifting the GST compliance onto online food delivery partners on behalf of the restaurants. However, some relief in terms of ITC (Input tax credit) would have further catalysed the recovery of the sector which otherwise is on the bleeding end. Currently, when the industry is struggling to manage the fixed cost with GST, it requires immediate boost, and cutting down ITC would have worked wonders.”
Kushang, Co-founder & CEO, SupplyNote
The Budget announcement of extension ECGL service for the sector will play a significant role to empower the vertical once again and get it up and running
“Indeed the food & beverage industry in India was bleeding, and it required a lifeline to recover. Though the government certainly announced a number of steps for its resurgence, the Budget announcement of extension ECGL service for the sector will play a significant role to empower the vertical once again and get it up and running.
“Additionally, a slight consideration on the investors front on funding the F&B startups could have further accelerated the recovery of the industry. We further expect fundamental policies to revive the vertical in the country.”
Dibyendu Bindal, Founder & CEO, MIGHTY Foods
I was hoping the government will cut down taxes on Plant based food to bring it at par with the farm and meat industry
“I was hoping the government will cut down taxes on Plant based food to bring it at par with the farm and meat industry.”
HOSPITALITY
Teja Chekuri, Managing Partner, Ironhill India
We had hoped for tax breaks and a more holistic support system to enable growth for this specific industry
“It is heartening to hear that India’s growth estimated to be at 9.2%, highest among all large economies. We are now in a strong position to withstand challenges as the Hon. Finance minister states.
“While it is a growth oriented budget, there is no big bang announcement for any sector including hospitality. This sector is still recovering and has some way to go. Although the credit guarantee scheme does provide some assurance of keeping the MSME hospitality sector afloat, we had hoped for tax breaks and a more holistic support system to enable growth for this specific industry.”
CHEMICAL INDUSTRY
- Reduction in customs duty of Methanol
- Focus on infrastructure projects under PM GatiShakti, development initiative for Northeast, etc. will positively impact specialty chemicals including construction chemicals
- INR195 billion allocated to solar PLI for manufacturing high efficiency polysilicon & photovoltaic modules
Navroz Mahudawala, Managing Director, Candle Partners
Considering this sector has been delivering very well on the export potential and can be a key export sector; it has been disappointing that no specific export boost announcement has come in this budget
“There are limited direct benefits for the chemical industry, which was on expected lines. However, there could be select intangible benefits going forward as the domestic growth of the industry has been substantially lagging behind the export growth & some of the measures would help.
“Several infrastructure spending initiatives (national highway expansion by 25000 kms) and the incremental capex spending; besides the boost given to low-cost housing should aid specific pockets of speciality chemical sectors.
“Construction chemicals & allied areas of coatings, adhesives and sealants should do better this year; recent financial results of Pidilite and even the larger coatings companies have not been very encouraging and demand has been muted in these areas. In parallel we expect the coatings industry to do better which would in turn aid several chemicals companies which supply to the coatings industry (solvents, pigments, surfactants).
“There are several chemical and API companies / groups which have used the new tax structure of 15% for new manufacturing companies incorporated; the extension of the date for start of manufacturing to March 31 2024 is a welcome long-term step as several new capex projects have lost time due to Covid.
“The one direct measure announced has been the cut in the customs duty of Methanol. This should aid several downstream intermediate companies in coatings, pharma, acetic acid as methanol is a key raw material for several downstream sectors.
“The chemical industry historically has grown at 1.25- 1.5 (x) the overall GDP growth rate for that year. With the current year GDP forecasted to grow for this year at 9%; we can expect a 12-14% growth for the larger players. However, considering this sector has been delivering very well on the export potential and can be a key export sector; it has been disappointing that no specific export boost announcement has come in this budget.”
CLIMATE
- Green Bonds to mobilise resources for green infrastructure
- Vibrant Village Program a to promote infrastructure in villages
- Inclusion of decentralized renewable energy resources for villages on the Northern border
Abhishek Pathak, Founder & CEO, Greenwear Fashion
There is not much for the traditional textile industry. However, the budget incentivizes textile exports by exempting various embellishments which might help bonafide exporters indirectly working with traditional crafts
“The budget for the year 2022-23 has provided a promising start for a greener and cleaner future of our economy. Sovereign green bonds for mobilizing resources for green infrastructure will definitely add value in reducing the carbon intensity of the economy.
“It would have been icing on the cake if the budget allocation in the clean energy sector would somehow be directly linked with livelihood generation at the local level. The announcement of the Vibrant Village Programme and the inclusion of decentralized renewable energy resources for villages located on the northern border is also a welcoming step.
“There is not much for the traditional textile industry. However, the budget incentivizes textile exports by exempting various embellishments which might help bonafide exporters indirectly working with traditional crafts.”
MANUFACTURING
- Concessional corporate tax for newly incorporated manufacturing companies
- PLI scheme in 14 sectors to create 6 million jobs
Rajesh Khosla, President & CEO, AGI glaspac
The PLI Scheme (Production Linked Incentive scheme) in 14 sectors with the aim of creating 6 million jobs can be predicted to improve the performance of the manufacturing industries in the country by 4X in the next four quarters
“The Indian government this year has presented a growth-oriented budget with a special focus on boosting manufacturing sector to create massive employment opportunities and to maintain India’s status as world’s fastest-growing economy.
“The concessional corporate tax for newly incorporated manufacturing companies is a positive move towards promoting the Make in India initiative as this will encourage new manufacturing industries as well as increase private investment in this industry.
“The PLI Scheme (Production Linked Incentive scheme) in 14 sectors with the aim of creating 6 million jobs can be predicted to improve the performance of the manufacturing industries in the country by 4X in the next four quarters. We congratulate FM, Nirmala Sitharaman for presenting a budget that has laid a roadmap for the economic revival of India – despite the pandemic crisis.”
Neha Indoria, Co-founder & CEO, Boingg!
With the focus on increasing consumption and capital expenditure that this budget has brought in, furniture manufacturers who are focused on ‘Make in India’ can expect to increase their organised market base, bring economies of scale and in turn make themselves cost competitive for the international export market as well
“The domestic furniture market has grown at a CAGR of 10-11% in the last 5 years. Yet, 80% of this market remains unorganised. With the focus on increasing consumption and capital expenditure that this budget has brought in, furniture manufacturers who are focused on ‘Make in India’ can expect to increase their organised market base, bring economies of scale and in turn make themselves cost competitive for the international export market as well.”
CONSUMER ELECTRONICS & DURABLES
- Revised customs duty on electronics and phone parts including camera modules
- Concessions in customs duty to promote electronics manufacturing, wearables & hearable devices including concessions on parts of mobile phones
Mandeep Arora, Managing Director, UBON
Revision of customs duties on components or sub-parts of consumer electronics items is a seemingly encouraging step to promote local manufacturing and increasing local sourcing of components. This may lead to reduction in cost prices of mobile phones and chargers
“The Union Budget has tweaked duty on electronics and phone parts in the Union Budget 2022. Revision of customs duties on components or sub-parts of consumer electronics items is a seemingly encouraging step to promote local manufacturing and increasing local sourcing of components. This may lead to reduction in cost prices of mobile phones and chargers.”
“Another noteworthy point was on how using smartphones to carry on transactions will bring in more transparency in the system.”
Lalit Arora, Co-founder, VingaJoy
Since mobile phones constitute a major chunk of the country’s electronics exports, the step by the Government is a positive move
“We welcome the UNION Budget 2022. Concessions in customs duty will be given to promote electronics manufacturing, wearables and hearables devices including concessions on parts of mobile phones including camera modules etc.
“This will be an encouraging step for companies operating in consumer durables manufacturing. Since mobile phones constitute a major chunk of the country’s electronics exports, the step by the Government is a positive move. The initiative to boost startups and make the market value and position of existing players more promising is well received.”
Vipin Agarwal, Co-founder, Candes
The Union Budget 2022’s focus on Atmanirbhar Bharat will definitely have a huge impact on the growth potential of the consumer durables category especially in emerging segments such as smart washing machines, dishwashers, and more
“While there was no change in the current tax structure, it was still heartening to note some relief offered for custom duty. Growing urbanization and the quest for better lifestyles and convenience are driving interest in smart home appliances while also increasing disposable income levels.
“The Union Budget 2022’s focus on Atmanirbhar Bharat will definitely have a huge impact on the growth potential of the consumer durables category especially in emerging segments such as smart washing machines, dishwashers, and more.”
