25 FEBRUARY 2023 BW BUSINESSWORLD

25 February 2023 | B W BUSINESSWORLD | 43 misleading narrative by Hindenburg Research in a 400-plus-page response. It questioned the ulterior motives of Hindenburg saying the group ‘has conveniently ignored the Indian judiciary and regulatory framework’. The group in its response said that it is fully compliant with all regulatory and legal requirements, and that it is fully committed to the highest standards of corporate governance and ethical practices. Cautious Approach Needed A number of tax experts that we spoke to highlighted one common theme. A veteran chartered accountant said: “It is worth noting that Hindenburg Research is a short-selling research firm and its reports are often critical of the companies it covers. This means that the firm has a vested interest in the Adani Group’s stock price declining, as it has shorted the stock. This implies that the firm stands to profit if the stock price drops. Thus, the allegations in the report should be cautiously considered, and it is necessary to request independent confirmation of the claims made.” And this fact has been declared upfront by the report itself. In the initial LIC, SBI say they are not “over-exposed” to Adani shares Jan 29: Adani Group’s response calls the report “nothing but a lie” Feb 3: Over Rs 10 lakh cr wiped off from the group’s market capitalisation FPO is fully subscribed despite the sharp fall in share price of group companies Feb 1: The group withdraws its Rs 20,000 cr FPO Photograph by Sanjay Sakaria

44 | B W BUSINESSWORLD | 25 February 2023 disclosure, the report states: “After extensive research, we have taken a short position in Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments. This report relates solely to the valuation of securities traded outside of India. This report does not constitute a recommendation on securities. This report represents our opinion and investigative commentary, and we encourage every reader to do their own due diligence.” Why did this happen? The Hindenburg Research report alleged that Adani Group had inflated its profits to attract investors. This has been denied by the Adani Group response. The report also alleged that the group had misrepresented the size of its business, its relationships with government entities, and its ties to businesses owned by the Adani family. Besides, it also said that Adani Group was in violation of Indian laws and regulations. Again, the group in its response denied these allegations calling them ‘lies’ and ‘baseless/motivated’. In addition, the report questioned the company’s environmental and social practices. All of these allegations caused investors to lose confidence in the company, leading to a crash in Adani Group companies’ stock prices, experts said. But a larger outcry is related to the loans taken by the group companies over the past several years. Opposition parties are alleging that the fallout will impact the common citizens of India who have invested in State Bank of India (SBI), Life Insurance Corporation of India (LIC), and other banks. In response, SBI said on February 3 that its overall exposure to the Adani Group stood at 0.88 per cent of the loan book. In actual terms, this is estimated to be around Rs 27,000 crore. SBI Chairman Dinesh Khara said the bank did not envisage the Adani Group facing any challenge to service its debt obligations. He, in fact, stressed that SBI had not given any loans against shares to the group. “Lending to Adani Group projects is with regard to ones having tangible assets and adequate cash flows,” Khara said, adding that the group has an excellent repayment record. He also said there has not been any refinance request from the Adani Group. When asked if the bank is changing its diligence practices with regard to the Adani Group, given the ongoing events, Khara said the lender always insists on adequate equity to be brought in before releasing any amount. “Unless the equity is seen, the amount is not released… It is not so that we are waiting for any equity. Going forward as well, each such proposal will be evaluated on its own merit. It is a decision (that vests) with credit committees,” he said. In a television interaction, Finance Secretary T.V. Somanathan said the risk to LIC and SBI from the Adani HINDENBURG’S ALLEGATIONS n Brazen stock manipulation and accounting fraud over the course of decades n Share price of the group’s 7 key listed companies spiked 819 per cent in the last three years n 5 of 7 key listed companies: ‘Current ratios’ below 1, indicating near-term liquidity pressure n Family members allegedly cooperated to create offshore shell entities in tax haven jurisdictions n Report seeks answers to 88 questions ADANI GROUP'S RESPONSE n Shocked and deeply disturbed to read the report which is nothing but a lie n Document is a malicious combination of selective misinformation and concealed facts n Intended only to create a false market in securities n Intended to enable Hindenburg, an admitted short seller, to book massive financial gain through wrongful means n Not one of 88 questions is based on independent or journalistic fact finding IN DEPTH ADANI SAGA

25 February 2023 | B W BUSINESSWORLD | 45 Group’s stock plunge is limited. “SBI and LIC’s exposure to any given company is far below the level where it should be a concern to any investor in the bank’s or in the insurance company’s policies. It is tiny. The fate of one company will not affect any of these institutions significantly and therefore there is absolutely no cause for concern for either depositors or policyholders or investors in any of the nationalised banks or insurance companies,” he said. On its part, LIC said it had invested about 1 per cent of its assets under management in the Adani Group. It added that Adani debt securities held by LIC were rated AA and above, which was in compliance with India’s investment regulations for life insurance companies. For the record, LIC holds a 4.23 per cent stake in the flagship Adani Enterprises, 9.14 per cent stake in Adani Ports and 5.96 per cent in Adani Total Gas. Action Thus Far The National Stock Exchange (NSE) was among the first institution to take any sort of action in response to the sharply falling share prices of Adani Group companies. In fact, on February 2, NSE placed Adani Enterprises, Adani Ports, and Ambuja Cements under the additional surveillance mechanism (ASM), a measure to safeguard investors from any potential market volatility and sharp changes in share prices. ASM was introduced on March 26, 2018 after the Securities and Exchange Board of India (SEBI) and the exchanges decided to applied it to securities that have surveillance concerns based on objective parameters such as price/volume variation, volatility etc. The shortlisting of securities to be placed under ASM is done on the basis of criteria such as high/low variation, client concentration, PE, close-to-close price variation, market capitalisation, volume variation, delivery percentage, and number of unique PANs. The Reserve Bank of India (RBI) has taken action in light of the sustained fall in the share prices of Adani Group companies and the withdrawal by the group its Rs 20,000 crore follow-on public offer. On February 2, the RBI asked banks for detailed information about their exposure to the Adani Group companies. On its part, SEBI stated on February 4 that it is committed to preserving the integrity of the stock market and has implemented necessary surveillance measures to address any excessive volatility in individual shares. Without specifically mentioning the Adani Group, SEBI noted that unusual price movements in the shares of a business conglomerate had been observed in the preceding week. The capital markets watchdog noted that its surveillance measures, such as the ASM framework, are triggered automatically under certain conditions of price volatility in any stock. SEBI further said that if any information regarding specific entities comes to its attention, then appropriate action is taken after due examination. It reiterated that it has consistently followed this approach and will continue to do so in the future. It’s unclear how the saga is going to unfold in the days and weeks ahead, whether there be any official investigation into the accusations, and if there is one, whether it will be carried out by SEBI, RBI, tax agencies or through an apex-court monitored body, as demanded by the opposition parties. Watch this space for new developments. “Lending to Adani Group projects is with regard to ones having tangible assets and adequate cash flows” Photograph by Umesh Goswami

46 | BW BUSINESSWORLD | 25 February 2023 INTERVIEW Give us a sense of the revival seen in the tourism/ hospitality industry from the Covid slump and what are the support measures that are continuing or are in the pipeline to sustain it? The inevitable restrictions on international and domestic travel during the Covid-19 pandemic severely impacted the entire value chain of travel, hospitality and tourism industry. This had a cascading effect on the jobs and livelihood of people associated with the “Today the discerning tourist supports more sustainable and low impact tourism” permit fees etc. The Ministry was in regular touch with the industry stakeholders through several rounds of discussions regarding these demands. All such proposals were taken up with the Ministry of Finance and other concerned ministries of Government of India. Similarly, the issues pertaining to the relief measures expected from the states were taken up with the state governments. What has been the feedback of the industry on the Draft National Tourism Policy 2022? All the industry stakeholders have supported the Draft National Tourism Policy. The feedback/suggestions given by the industry have suitably been incorporated in the draft policy, wherever required. A Draft Cabinet Note was prepared on the Draft National Tourism Policy and circulated to concerned Central Government Ministries/Departments with the request to give their comments. The comments of almost all the tourism sector. The consistent efforts of the Central and the state governments have helped the tourism industry to recover from the Covid-19 pandemic shock and operate at the pre-pandemic level. The Ministry of Tourism received several requests from tourism and hospitality industry stakeholders for relief in the wake of severe impact of the pandemic. The demands related to relief on account of term loans, working capital, tax relief, employee salary support, waiving of licence and U nion Tourism Secretary Arvind Singh recently spoke to BW Businessworld about the phenomenal growth in domestic tourism post pandemic and how the government is introducing new measures to make this sector a big contributor to the GDP By RUHAIL AMIN Photographs by Suresh Gola

25 February 2023 | B W BUSINESSWORLD | 47

48 | BW BUSINESSWORLD | 25 February 2023 Central Ministries/Departments have been received which are being incorporated in the draft policy. Thereafter, with the approval of Union Tourism Minister, G. Kishan Reddy, the Cabinet Note will be sent to the Cabinet Secretariat for approval. After the Cabinet Secretariat’s approval, the National Tourism Policy 2022 will be issued. The hospitality sector has had this demand of change in infrastructure status. How is your Ministry looking to change that? What are some other initiatives/policies that the Ministry has planned to streamline other such concerns of this sector? The Ministry of Tourism has been vigorously pursuing proposals for grant of infrastructure status to and domestic tourism have been revised to increase its scope and reach to benefit a larger number of stakeholders for promoting both inbound a n d d o m e s t i c tourism. U n d e r R C S UDAN-3 Tour - ism, the Ministr y of Tourism approached the Ministry of Civil Aviation, with the purpose of further improving connectivity and got 59 tourism routes included for better connectivity of important tourist places. Currently 51 tourism routes have been operationalised. The Ministry of Tourism has launched the Incredible India Tourist Facilitator (IITF) Certification Programme, a pan-India online learning programme accessible from different digital devices. The programme has gone online since January 2020. It aims at enhancing the overall experience of tourists by making available a pool of local, trained professionals at tourist sites across the country. Recently the Ministry came out with the National Strategy for Promotion of Rural Homestays. An interesting observation that was made in the document was ‘experiential tourism’, how is rural India seen in this context and strategy? Experiential tourism is an increasingly influential trend in global tourism. Today the discerning tourist is looking for a deeper emotional connection for visitors and supports more sustainable and low impact tourism. Rural tourism focuses on the visitor actively participating in a rural lifestyle. The tourist travels to a rural location and experiences life while taking part in the daily activities of the village. The tourist also gets a chance to imbibe the traditions and culture of the area. Indian villages have unparalleled culture, craft, music, dance and heritage to offer to the visitors. The strategy envisions developing rural homestays as an experiential tourism product, which can give a boost to rural tourism, provide entrepreneurial opportunities to rural people and lead to community development. Lately, non-traditional the hotel industry with the Department of Economic Affairs (DEA), Ministry of Finance from time to time. The Ministry has formulated National Strategies and Roadmaps for rural tourism, medical and wellness tourism, adventure tourism, eco-tourism, MICE and sustainable tourism to realise the full potential of tourism in a holistic manner. The Ministry of Tourism has prepared a Draft National Tourism Policy 2022 with the aim of improving framework conditions for tourism development in the country, supporting tourism industries, strengthening tourism support functions and developing tourism sub-sectors. Market Development Assistance (MDA) guidelines for promotion of inbound INTERVIEW

25 February 2023 | B W BUSINESSWORLD | 49 areas of tourism such as trekking, winter sports, wildlife tourism, and beach resorts are also gaining traction. What is the opportunity that the government is seeing in states which support these activities? Is there an action plan in progress to further promote it? The Ministry of Tourism has formulated a National Strategy for Adventure Tourism in consultation with concerned Central ministries, states/UTs and industry stakeholders. The following strategic pillars have been identified for development of adventure tourism: state assessment, ranking and strategy, skills, capacity building and certification, marketing and promotion, strengthening adventure tourism safety management framework, national and state-level rescue and communication grid, destination and product development, governance and institutional framework. The Indian Institute of Tourism & Travel Management (IITTM) has been designated as the Central Nodal Agency to assist the Ministry for promotion and development of adventure tourism in the country. In order to guide the operationalisation and implementation of the Strategy document for Adventure Tourism, the Ministry of Tourism has also constituted a National Board for Adventure Tourism under the Chairmanship of Secretary has been a focus on rejuvenation of pilgrimage and religious tourism destinations across the country. The new generation of travellers look for experiential tourism and thus there is a need for improving the infrastructure at religious places, which traditionally are known for being overcrowded with deteriorating public infra- (Tourism) with representatives from concerned Central Ministries/Departments, state governments and industry stakeholders as members. Prime Minister Narendra Modi has emphasised “Vikas Bhi aur Virasat Bhi” for the tourism sector. Could you elaborate crowd management, improved security and safety, improvement in pilgrimage experience with focus on long-term sustain - ability and use of digital technologies. Some of the markup projects of the scheme have been development at Somnath temple in Gujarat, development of ghats, river cruise and other religious infrastructure at Varanasi-Uttar Pradesh, development of Kamakhya Devi temple in Assam, development of Patna Sahib in Bihar, development of Omkareshwar in Madhya Pradesh and development of Kedarnath in Uttarakhand. Many new destinations are in various stages of identification and sanction with a new sub-scheme focusing on smaller destinations which have a low level of pilgrimage infrastructure but a high footfall. Brief us about India’s p r e p a rat i o n f o r t h e G-20 Presidency in the context of presenting itself as a major tourism destination. The G-20 Presidency will give India’s tourism sector an unparalleled opportunity to highlight India’s tourism offerings and share India’s tourism success stories on a global stage. After the world’s largest vaccination drive, India is ready for international tourists. G-20 Presidency will boost hope and opportunity for the Indian tourism industry all over the country. structure. Started in 2014- 15, the PRASHAD scheme of Ministry of Tourism focuses on development of basic infrastructure at pilgrimage destinations. As on date 40 projects in 24 states have been sanctioned worth Rs 1368.22 crore out of which 19 projects have been completed and other projects are progressing at a fast pace. The scheme has been able to create an impact by improving pilgrimage amenities like improved on the developments in specialised circuits promoting Indian culture and religious tourism? The new India is developing at a faster pace with focus on its culture and heritage. PM Narendra Modi has given the slogan of “Vikas Bhi aur Virasat Bhi” which gives the guiding principle for promoting Indian culture and religious tourism. Two out of every three trips in India are related to religious or spiritual tourism and there

50 | B W BUSINESSWORLD | 25 February 2023 “INSULATING BUILDINGS IN A RESPONSIBLE AND COMMITTED WAY”

25 February 2023 | B W BUSINESSWORLD | 51 How ROXUL ROCKWOOL is assisting customers in their sustainability journey? By many estimates, the construction industry is both one of the world’s biggest consumers of raw materials as well as generators of waste. And with a growing demand in society and among our customers to reduce consumption and waste, our ability to recycle our materials and products is increasingly important. Rockcycle® is the name of our recycling programme, through which we take back stone wool from the market. It is now available in 19 countries with a goal to reach 30 countries by 2030. Many companies promote the recyclability of their OCKWOOL stone wool insulation is made from one of nature’s most abundant resources –volcanic rock. Not only is it a natural material, it also boasts a unique combination of benefits and lays the foundation for our business. Over its lifetime, ROCKWOOL building insulation sold in 2022 will save 100 times the carbon emitted and energy consumed in its production which make ROCKWOOL group a net carbon negative company. Through our insulation products, we have a truly significant positive impact on climate change and create opportunities to support communities to build climate change resilience. We calculate and document the positive impact (We call this the handprint of our business) and its contribution to the UN SDGs. There are currently no standard methodologies for calculation the avoided emissions of products, but we have collaborated with a third-party to develop such methodologies. R products, but the meaning and extent to which this happens varies a lot. For ROCKWOOL, the meaning is clear. Our stone wool can be fully recycled into new products. We can use old stone wool collected from construction, renovation and demolition sites and (after some additional steps such as cleaning) use it to make new products by adding them back into our production process. Importantly, we can recycle our stone wool infinitely with no loss in its original performance. All our insulation products possess outstanding fire, acoustic and thermal insulation properties as well as a lifelong durability, making it the sustainable and cost-effective choice. And this is what really sets us apart from many other companies. Vinay Pratap Singh, Business Unit Director - India & SAARC Countries, ROXUL ROCKWOOL Technical Insulation India Pvt. Ltd.

52 | B W BUSINESSWORLD | 25 February 2023 What are the benefit of the Rockcycle® program? With Rockcycle®, we a r e of fer i ng a t r u ly c i rc u la r closed loop recycling system that ensures less of our (fully recyclable) stone wool ends up in a landfill. And with architects and construction companies increasingly asking for ways to reduce waste at building sites, we have a competitive advantage over many competitors. Also in India, landfill of insulation material is not an easy task. Our Rockcycle® program give piece of mind to our customers as they are sending the unused or used waste directly to the ROCKWOOL factory to be made into new insulation products. Rockcycle® also provides extra edge for gaining green points for our stakeholders. It is good to know that, ROCKWOOL Stone Wool scraps not soiled and not dangerous. Their sorting, collection and transport do not require any special conditions. That’s what make it easier for us to manage the waste by taking them back. Do you face any challenges in bringing back the waste material to the factory? One of the main challenges we have is the need to continually educate customers about the basic requirements of the programme -- for example, ensuring the wool is ‘clean’ without other materials mixed in it. Sorting is the first step of recycling while respecting the following steps: l Immediate sorting to avoid dispersal of waste on the shop floor l Source sorting of materials to limit control operations. l Efficient sorting in accordance with the storage to prevent deterioration of sorted materials. l Wet waste and any other waste like plastic, metal parts etc to be sorted out. How do you see the future with this particular initiative? In a circular economy, waste is not waste, but a valuable resource that can be turned into something new. Circular businesses design out waste and keep products and materials in use, driving greater resource efficiency and cutting down on virgin materials. Also, collaboration is key for a robust and effective recycling infrastructure. We depend heavily on finding strong partners in the building sector value chain. This enables us to develop specific solutions, including combining takeback with product delivery to building sites and promoting the benefits of our service as part of sustainable building rating schemes. On the other hand, a circular economy is a business model that decouples economic growth from resource constraints by reducing reliance on virgin materials. Instead, the goal is to keep materials functioning at their highest utility at all times, preventing would-be waste from reaching landfills. n Vinay Pratap Singh with Prasar Sharma, Director, BW Businessworld

25 February 2023 | B W BUSINESSWORLD | 53 IN CONVERSATION I n an interaction, Deepak Anand, Co-founder & CEO of Housr, one of the leading managed accommodation platforms in India, talks about how Housr is redefining the concept of co-living How is Housr reimaging co-living? At Housr, we are bridging the gap between hospitality and residential accommodation. Our prime focus has always been on enhancing the living experience of our residents by offering them fully managed premium accommodation options with enhanced safety, best hygiene protocols and technologydriven innovations along with all the modern amenities under one roof for a completely hassle-free lifestyle. We extend all the services akin to a business-class hotel at all our properties in addition to regular community-building activities. A s a c o m p a n y, what are your differentiators and “WE ARE SYNONYMOUS WITH BEING THE BUSINESS CLASS OF CO-LIVING” fort. All of Housr’s properties are located at prime locations of the city with an array of amenities included in the monthly rent -- doorstep laundry, daily professional housekeeping, high-speed internet, in-house gourmet meals, gyming zone, sprawling terrace gardens, barbeque stations, mini-golf courses, theatre rooms, and breakout rooms with video game consoles. Is co-living the new way to live? The ease of living and comfort that Housr’s properties provide, has redefined luxury living. It has come up with the most attractive solution to the challenges faced by young working professionals especially when they move to a new city. Today millennials prefer investing in experiences and a lifestyle that gratifies them. Finding a place with all the modern conveniences and services u n d e r o n e roof makes one’s life easier and helps in maintaining a healthy work-life balance. Apart from that, co-living places offer the best community experience along with extending state-of-the-art techenabled shared spaces equipped with all the facilities for the millennials. Also, youngsters these days do not prefer to deal with brokers, interfering property owners, and factors like a rigid lock-in period which has made coliving the most preferred way of living and has led to demand going northwards. What are your growth plans? We aim to double the number of beds to 10,000 by the end of this financial year by launching more properties in the existing cities and venturing into new ones. While our prime focus will be on tier-1 cities, we will also assess our entry into tier-2 cities like Chandigarh, Jaipur, Lucknow, etc. in the next few months. What trends do you see in the co-living space? Identifying the growing needs of millennials and Gen Z, co-living players are continuously working towards creating an ecosystem that resonates with their evolving lifestyles. The introduction of the latest technologies is already a trend and will continue to be so, and not just in the area of accommodation but in every aspect of life. strengths? The lifestyle and quality of life we offer to our residents make us stand out. We are known for providing a seamless living experience and the factors that create differentiation for us include the quality of spaces, services and amenities, rent, location etc. With the touch and feel of luxury, all our properties have fully furnished rooms and are designed by top-notch interior experts in the country to ensure maximum style and com53 | B W BUSINESSWORLD | 25 February 2023

54 | B W BUSINESSWORLD | 25 February 2023 LAYOFFS? YEAR OF The mega layoffs announced by the US tech giants since the beginning of the year as well as the 22,000-plus job cuts effected through 2022 by our very own tech startups may not be the last time the world is hearing this sordid story this year IN DEPTH LAYOFFS

I n early 2021, North America witnessed the ‘great resignation’. Employees in the US and across Europe were voluntarily quitting en masse in the wake of the pandemic, rising cost of living, inflexible remoteworking policies or an overall change in the thinking process. Maintaining a greater work-life balance was cited as among the key reasons for mass quitting. Fast-forward to 2023, the Silicon Valley, once considered the ‘dream destination’ especially for the Indian IT professionals, was jolted almost overnight. The year started with the announcement of the ‘biggest layoff’ in the history of tech-giant Google’s parent firm Alphabet. It announced layoffs of 12,000 people or 6 per cent of the total workforce. Alphabet CEO Sundar Pichai said senior executives would also be taking significant pay cuts. Global slowdown, funding winter, fear of recession, among others, were cited as the top reasons for this measure. Ecommerce giant Amazon also announced in early January its plan to lay off more than 18,000 people or around one per cent of its total workforce (around 1,000 in India). This was the biggest job cut in the 28-year history of Amazon. Since November 2022, like Amazon, Meta, the parent firm of social media giant Facebook has been trimming its workforce. Facebook has let go of nearly 11,000 employees, mostly from Instagram, Facebook and WhatsApp. This would amount to a 13 per cent cut in the overall workforce. Google’s rival Microsoft is set to fire 10,000 people by the end of March. Microsoft is also led by an Indian origin CEO Satya Nadella and employs thousands of Indians on work visa. Experts say Indians on H1-B visa need not panic despite the fact that foreign nationals with H-1B visas have only 60 days following termination to find another job or leave the country. “The ideal option is to find a new employer for such employees or getting hired with a different work visa, such as the H-4 dependent visa for spouses of H-1B holders, the O-1 visa for anyone at the top of their field, or the E-1 or E-2 visa for citiACHAL KHANNA CEO, SHRM India, APAC & MENA. “... the layoffs will stay for a while. Recruitment plans will take a slower approach as we proceed in 2023” By Ashish Sinha 25 February 2023 | B W BUSINESSWORLD | 55

56 | B W BUSINESSWORLD | 25 February 2023 LAYOFFS zens of certain treaty countries,” says Achal Khanna, CEO, SHRM India, APAC & MENA. Society for Human Resource Management (SHRM) is the world’s largest HR association. There are alternate solutions as well. “If you’ve got some savings and can buy some time to find a new job, you can stay in the United States by doing ‘non-work activities’ on visas that allow you to be in the country and not be employed. These options include changing to a ‘non-work status’ such as the visitor B-1 or B-2 visas or the F-1 visa for students,” says Khanna. These big layoffs have made it to the headlines back home. But in India, the startup sector has let go of nearly 22,000- 23,000 employees all through 2022 and early 2023 without much hoopla. In January, once again, Mohalla Tech, which runs social media platform ShareChat and short video platform Moj, laid off around 20 per cent of its employees (around 500 people) due to ‘external macro factors’ that were impacting its cost-revenue structure. “In hindsight, we overestimated the market growth in the highs of 2021 and underestimated the duration and intensity of the global liquidity squeeze,” Mohalla Tech’s India CEO had said in an internal email to the employees, that was later widely reported. The Churn at Home Various reports claim an estimated 22,000-plus layoffs in the past 12-13 months, with the worst-hit being the edtech, fintech, ecommerce and affiliated tech platforms. TeamLease, one of India’s leading employment services providers, in its latest Employment Outlook Report for Q4 (2023) delves into attrition trends which are just the continuance of the ‘Great Churn’. It says the attrition across industries witnessed a 0.46 per cent increase, from an average of 7.81 per cent in Q2 to 8.27 per cent in Q3. In the report, a comparison between manufacturing and services sectors shows that the IT services sector had higher average attrition (+27.19 per cent) as compared to the healthcare & pharmaceuticals industry in the manufacturing sector (+15.67 per cent). “Among startups in manufacturing, attrition rates were alarmingly high (26 per cent). From a services sector perspective, key industries which witnessed higher attrition were information technology (27.19 per cent), educational services (18.02 per cent), ecommerce & allied startups (15.13 per cent), knowledge process outsourcing (13.79 per cent) and telecommunications (12.05 per cent),” the report said. But why? Explains Ajoy Thomas, Vice President & Business Head, TeamLease Services: “Influenced by upcoming appraisals, economic turmoil in the ecosystem, and increased migration between allied industries, attrition has increased significantly. Attrition has been reported to be higher also due to increased new-age opportunities.” Layoffs by the tech platforms could also be explained by a consistent decline in funding. “In the last few years, technology enabled companies went on an overdrive to recruit employees amid a pandemic-fuelled economy of tech products and services boom; however, with the broader economy being hit by the perfect storm of inflation, rising interest rates, fears of a recession, an overcrowded startup marketplace and Russia’s war in Ukraine, the layoffs will stay for a while. Recruitment plans will take a slower approach as we proceed in 2023,” says Khanna of SHRM. Do these layoffs also reflect poorly on the management? Are these a result of misjudgement? The answer is both ‘yes’ and ‘no’, according to Khanna. “Initially, layoffs seemed specific to businesses in more fragile financial situations, like if they are unprofitable and funding dried up or if they do not have the runway to continue to operate without additional funding. Nevertheless, in the past few months, we have had big tech and stable sectors also giving pink slips,” she says, adding, “The CEOs and CHROs of 2023 will need to be more sensitive to geopolitical issues, technology disruptions, and a changing economic paradigm to avoid such situations in the future.” Legal Position on Layoffs Experts in employment law point out that the employers have the right under law to organise their workforce to align with POOJA RAMCHANDANI Partner, Employment Law, SAM & Co “For non-workman there is no statutory requirement to pay retrenchment compensation or complying with the ‘last in first out rule” IN DEPTH

25 February 2023 | B W BUSINESSWORLD | 57 “one’s business requirements” when faced with an unfavourable business climate. However, any such action of reduction needs to adhere to the process prescribed under law. Explains Pooja Ramchandani, Partner, Employment Law at Shardul Amarchand Mangaldas & Co: “Broadly speaking employees can be classified into workman and non-workman. The former having more protections under statues than the latter when it comes to lay off/retrenchment.” The laws prescribe that the process for termination of employment on account of redundancy in case of workman involves displaying a seniority list of the workman, complying with the ‘last in first out’ role (unless there are justifiable reasons in writing to deviate from the rule), providing a prior notice or pay in lieu thereof of at least 30 days, payment of a retrenchment or severance compensation and all other statutory and contractual dues and notifying the labour authorities within the stipulated timeline. “For non-workman there is no statutory requirement to pay retrenchment/severance compensation or complying with the ‘last in first out rule’. Payment of severance compensation for non-workmen is embodied in the policies of the employer, if any,” says Ramchandani. Many organisations adopt the mutual and voluntary separation route. “This manner of separation though costly is least contentious and mitigates risk of challenge if the separation package is attractive and employer and employees achieve consensus and idem. Many employers also offer additional benefits such as insurance, medical benefits, bearing the cost of recruitment agencies, etc. to make the separation package lucrative,” says Ramchandani. What happens if the ‘terminated/ laid off employees’ challenge the employer? “It is important that the rationale for a sudden redundancy is explained to the employees, especially in cases of mass terminations,” says Kriti Kaushik, Partner, Benefits & Compensation, Shardul Amarchand Mangaldas & Co. This, according to Kaushik, helps in demonstrating the bona fide of the employer. The communication also should be handled in a sensitive and humane manner, and to the extent possible the actions proposed to be taken by the employer to help ease out the impact of exit should be explained to the employees in the first meeting itself, says Kaushik. Green Shoots Digitally skilled talent for 5G and digital transformation initiatives will be a key driver of India’s growth journey. According to a recent TSSC report, India needs around 22 million digitally skilled resources by 2025 to reap the full potential of 5G. Telecom and tech companies need to think at the industry or even national level. Ankit Agarwal, Managing Director, STL says: “We are creating a skilled pool of talent for critical areas like fibre, 5G and cloud computing for India. Our digital skilling initiative - STL Academy -- has already trained nearly 37,500 people and this is just the beginning.” While layoffs of the scale and nature seen of late are a business cycle phenomenon that has short-term implications, what matters more is that India vigorously pursues its agenda for creating more jobs, both in the public and the private sector in 2023. ashish.sinha@businessworld.in ANKIT AGARWAL Managing Director, STL “We are creating a skilled pool of talent for critical areas like fibre, 5G and cloud computing for India. Our digital skilling initiative has already trained nearly 37,500 people...” KRITI KAUSHIK Partner, Benefits & Compensation, SAM & Co “It is important that the rationale for a sudden redundancy is explained to the employees, especially in cases of mass terminations”

58 | B W BUSINESSWORLD | 25 February 2023 YPICALLY, INDIA CELEBRATES women’s empowerment in set ways. Bluntly said, the annual tokenism to International Women’s Day, fostering assigned quotas in colleges, campus placements, Panchayat seats, etc. make up for much of these celebrations. As an irritant, most of the seminars and discussions on the topic of women’s empowerment would be largely manels (male dominated panels). Periodic discussions are also held on various laws that have been reformed It is all the more important that Gender responsive budgeting now play a critical role, as it focuses on inclusive programmes and policies developed to give space to women. The gender budget of the Union government is an exercise that applies a genderedlens to the allocation and tracking of public funds. The focus is on improving women’s welfare through government policies. Previously, the emphasis was on maternal health and childcare primarily and then onto education and land rights. Now, policies need closer scrutiny, as they cater to the aspirations of 21st Century India. For a nation that is working towards its developed nation status, it cannot have gender injustice, or play only an affirmative action towards gender. Gender budgeting allows the Union Budget to provide for outlays towards women’s empowerment while signaling India’s commitment to inclusive growth and Nari Shakti. The Ministry of Women and Child Development (MoWCD) defines Gender Budgeting as a tool to achieve gender mainstreaming, to ensure that the benefits of development reach women, as much as men. The Indian government publishes a Gender Budget Statement (GBS) every year in the Union Budget. The GBS is a reporting mechanism of ministries or departments to review their programmes from a gender perspective and present information on allocations for women while addressing gender disparities. While gender-based budgeting has been a part of the Union budget since 2005-06, it has been given further push since 2014- 15, with important steps taken towards gender mainstreaming and financial inclusion in policy actions across various spheres. India has shown exemplary efforts around encouraging women entrepreneurship, be it the Pradhan Mantri Jan Dhan Yojana (PMJDY), the Pradhan Mantri MUDRA Yojana (PMMY), Startup India or the Stand-Up India schemes. Definitely, aspirations in rural India have taken a big jump: from wanting to be teachers or say workers in the local Anganwadis, women want more and in no small measure, this comes from government policies like Arambh undertaken by the Maharashtra government. So, we move gender policies away from giving free rides on buses to women on Rakshabandhan (yes, T COLUMN By Dakshita Das & Srinath Sridharan Is Gender Budgeting Mere Lip Service? to give equal space to women and how more such initiatives are pending. Most voices are however, somewhat pedantic, speaking of the age-old so-called ways to clear gender gaps like “Boost her selfesteem...”, “Shut down the negativity…” “Support Women-Run Businesses...,” “Give her proper education...,” “Be Open and Honest...” etc. etc. Equal voting rights assigned in our Constitution has made the political class woo the women vote bank through fiscal and other initiatives such as prohibition. The holistic approach i.e. to foster women as individuals making choices and being aware of themselves with a totally gender neutral approach has yet to find traction in their case for total mainstreaming or, rather, it is seeing early days in India.

25 February 2023 | B W BUSINESSWORLD | 59 cally elected at the panchayat level. The WEF has also shown interest in studying India’s Gender Budget System. India, during its Presidency, has incidentally, sought inclusion of gender concerns in the core agenda of the G20. Wish List For More ‘Gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development and building good governance.’ — Former UN Secretary-General, Kofi Annan But all this accolade and positive cheer about forward thinking is not enough for an empowered India. The largest challenge to gender-responsive budgeting is that the quantum of this remains in the low range of four per cent to five per cent of the total expenditure comprising less than one per cent of the GDP. It would need a larger understanding of gender budgeting across all the functions of both the central and the state governments to avoid Multi-counting the Budget into the gender bucket. Any additional gender budget allocation should be able to provide economic opportunities and entrepreneurial access, including tax breaks or tax holidays, benefits in financial asset ownership, and better financial inclusion. Women led MSME can be a growth engine for a faster GDP growth. We must enhance women’s access to education at all levels – primary to tertiary, and even in R&D, as a tool for a better societal engagement. We need to develop equitable public health systems, ensuring easy access for women to overall healthcare, with special focus on reproductive and sexual health, preventive and proactive choices. This also allows development of a future society with better health standards. It would be useful instead to use gender budgeting in areas that can positively impact women’s development, but these areas have the “gender indivisible” issue. For example, having uninterrupted power supply and water on tap at home can reduce household chore time, as well as free up time for their livelihood enhancement activities. It would also allow for better socioeconomic participation of women. Gender budgeting has a sure role to play currently and maybe till India can proudly and naturally state that it has fully tapped its ‘Nari Shakti’ potential. That’s when we can proudly say that we can deliver what she wants, and work in gender neutral budgets. In short, Gender budgeting is more than a platitude and is instead, a policy commitment for gender justice. Gender budgeting has a sure role to play currently and maybe till India can proudly and naturally state that it has fully tapped its ‘Nari Shakti’ potential. That’s when we can proudly say that we can deliver what she wants, and work in gender neutral budgets this appears in a state budget’s Gender budgeting statement) to enabling inputs at an early age which give the girl child choices. Gender budgeting and financial inclusion are also inextricably linked since by focusing policies on giving access to formal financial services inevitably has a positive impact on women’s control over household resources by increasing their savings. The Pradhan Mantri Jan Dhan Yojana has been a powerful tool in enabling the process of opening over 56 per cent of bank accounts in the name of women and that too in rural and semiurban areas. With the opening of such accounts, granular data emerges such as usage of such accounts, access to financial services, improved banking and fintech outreach that can tweak policies and programmes. The process aids in self-awareness, natural rights and an inclusive society. Recently, the World Economic Forum (WEF) recognised the need to enumerate women’s participation in local government bodies in the Gender Gap Report. The World Economic Forum will count women’s participation in local government bodies in its Global Gender Gap report after India’s proven philosophy with it. This is a resounding positive for the 14 lakh grassroots women leaders, loDakshita Das is a policy expert and a former civil servant Srinath Sridharan is an author, policy researcher & corporate advisor Photograph by Indiapicturebudget

60 | B W BUSINESSWORLD | 25 February 2023 THE INDIAN EMPLOYABILITY CHALLENGE AND AN EXPERIENTIAL LEARNING SOLUTION Employability.life is working in partnership with Federation University Australia to bring a unique programme to India, designed to enhance student employability in the digital age through experiential education. By replicating the workplace environment and its focus on task delivery, Experiential Microcredentials (XPMCs) combine with a traditional degree to maximise outcomes in both learning and employment. Dr Annurag Batra of BW Businessworld sat down with the key figures in this transformative new approach. How has your past experience helped you in introducing Employability.life to India? Manish Malhotra: It all started when I began this business twenty years ago in Australia, where I finished my PhD and set up a technology college in association with, and affiliated to, Federation University Australia. We experienced terrific demand for almost twenty years, with over 30,000 Indian students being taught through our colleges, but in the last few years, we’ve found that the market was changing dramatically, predominantly because of the new digital economy. Automation in a country like India threatens up to 69 per cent of future jobs, and the challenge was to bring this programme to India with the same quality as in Australia but at the Indian price level, which was not an easy problem to solve. We came up with a product called Experiential Microcredentials (XPMCs), where we are delivering projects that are co-created with industry experts and higher education institutes, from our Australia and UK offices. We are embedding this into the Indian ecosystem through educational institutions here so that students can take advantage of experiential training and have real-life experiences even before completing their qualifications. So far we have signed up 68 colleges across the country, and hopefully more going forward. We want to create graduates who are ready to work! What has changed in the skills and employability space due to the Covid-19 pandemic? Duncan Bentley: In some ways, Covid-19 acted as a catalyst for us to concentrate on what it takes to become part of a much more digital world – it was happening already, but the pandemic was an accelerator. If you look at any of the big organisations like BCG, McKinsey, and so on, what they’re looking at is how businesses can cope with the digital transformation, to be able to survive in a highly globally connected world where the geopolitical environment is becoming more challenging… How do you find the skills that are needed for a twenty-first century career? One of the main challenges is that the academic curriculum has for too long been driven by traditional market demand without actually looking to where the skills are going… I can ask an app on my phone for almost any knowledge content that I need – for example, I tried ChatGPT the other day and it gave me a curriculum for international tax law that covered most of the necessary technical content. What it cannot do, however, is bring in the human dimension of creativity, collaboration, cultural understanding and problem-solving using that knowledge. This is what employers are really asking for post-pandemic. They want graduates who have these capabilities because they do not have the time and resources to train them because the economy is powering away. We've got a talent war and we've got to be able to deliver to the customers now. Employability.life is drawing from what we have built up in Australia over 150 years and refined to be able to deliver what employers want in graduates. How can we better teach soft skills to students? What role do they have in employability? DB: We have had a long tradition of cooperating with industry and bringing them into course design, delivery, and mall opportunities are often the Sbeginning of great enterprises.� Every single drop in the ocean counts. When talking about a progress of a developed or developing countries worldwide, we can't undermine the signi�cant role of SMEs. Undoubtedly, small and medium sized enterprises have made an indelible landmark on the economic landscape due to their premeditated importance in reengineering the industrial sector. Owing to their signi�cant inputs and involvement, SMEs assumes a pivotal responsibility in socio-economic development of India. These industries account for 95 per cent industrial units, contributing up to 40 per cent of GDP and 45 per cent of total exports. They are the second largest employers of human resources after agriculture. The scope of this sector is vast as individuals with entrepreneurial spirit but limited resources always have before them the option of initiating a business plan at the grass root level. Small �rms are reactive comfortably and more quickly to the changes in the environment. They enthuse innovation and bring into lime light new products, new methods and new ideas. S m a l l B u si n e ss is t h e s e e d b e d o f entrepreneurship. It provides an easy path for the novel entrepreneurs who wish to try their skills and wisdom to start a new venture. They have their own advantages over larger businesses. They are substantial generators of employment, and can act as shock absorbers during a catastrophic situation, responding veritably to topsy-turvy in the market. With not a complicated hierarchy, decision making is ea s y and simpler and so the ma r ket expectations can be ful�lled. They cater to provide services and a wide range of products at a�ordable prices to the consumers. This contribution is despite the sector being exposed to intensi�ed competition since liberalization of Indian economy in 1991. Small industry in India has been confronted with an increasingly competitive environment due to: (1) liberalization of the investment regime in the 1990s, favoring foreign direct investment (FDI). (2) the formation of the World Trade Organization (WTO) in 1995, forcing its member-countries (including India) to drastically scale down quantitative and nonquantitative restrictions on imports. (3) domestic economic reforms. The cumulative impact of all these developments is a remarkable transformation of the economic environment in which small industry operates, implying that the sector has no option but to 'compete or perish'. With the advent of planned economy from 1951 and the subs equent pol i c i e s by the Government of India, both planners and the law makers earmarked a special role for SMEs in the Indian economy. Due protection was accorded to both sectors, and particularly for small-scale industries from 1951 to 1991, till the nation adopted a policy of liberalization and globalization. The development of small industries is instrumental in veering the direction of industrialization to rural areas. The fact that these industries are labour-intensive and utilize less capital triggers the countries employment and supply of manpower in the rural areas. They contribute towards a better utilization of local resources and skills which may otherwise remain unde�led and might have tarnished eventually because of lack of exposure. It is a means of preserving our culture by means of encouraging people engaged in the handicrafts and �ne arts. Apart from improving standards of living by increasing the per capita income, these units hereby, assist in equitable distribution of income among the people. The sector helps the country to alleviate the generic living conditions of the people by overcoming the stigma of poverty and SME Carving Out a New Economy unemployment. One of the chief thrusts of SMEs is to regulate and provide a platform to the vulnerable groups of the society as the main drivers and empower the women and the youth to start their enterprises. Small enterprise promotion has continued to remain an important and integral part of Indian development strategy well before the First FiveYear Plan. However, the sec tors faces unforeseen challenges. Some of the most persisting constraints facing the sector, dominated by smaller units in the informal sector, include poor or non-availability of loan �nance, low levels of technology, inadequate physical and economic infrastructure and resources to invest in quality search and adopt new technology, and a policy of product reservation for small scale industries. Poor monitoring of implementation and e�ect of various small �rm policies has been an issue of concern. The larger enterprises o�er a sti� competition to the small scale units in the sale o f o u t p u t. Ap a r t fr o m t h e s e m a j o r impediments, the sector faces a number of other problems like ine�cient management, non-availability of cheap power, burden of local taxes, shortage of working capital and lack of demand for the products. The list is endless. SMEs have emerged as a vibrant tier of the economy as they have already taken over as key contributors to country's GDP. The new shout out is the Make in India Campaign. Owing to the launch of �agship Make In India Campaign, Prime Minister Narender Modi has given way to a new national program designed to facilitate investment, cultivate innovation , augment pro�ciency in skill development, protect intellectual property and build Best-in-Class manufacturing infrastructure, there has never been a better time to make in India. India's small and medium-sized industries can play a big role in making the country take the next big leap in manufacturing. India should be more focused towards novelty and innovation for these sectors. The government has to chart out plans to give special sops and privileges to these sectors. As clearly seen, the hindsight and the future vision of SME's cannot be simply considered a smaller version of their larger counterparts as they have di�erent managerial styles, scale of operations, levels of independence and decision making characteristics. However these di�erences do not eliminate the opportunities of SME's to internationalize and gain �ight in the global market. SME sector development will continue to spread its wings and be an integral part of the development thrust and promote the entrepreneurial culture. “

25 February 2023 | B W BUSINESSWORLD | 61 training of students. As a co-operative university, every single one of our students needs to have the ability to embrace soft skills, regardless of their academic discipline. 'Soft skills' is such a nebulous name, it suggests that they are somehow less important than some of the other skills. But in fact, that is the critical human dimension that we bring to any problem. The concept of imagination, curiosity and creativity is very important to problem-solving, as seen in academic studies, and it this that we've tried to distil into the XPMC products. Students can experience those elements that bring an expert interpretive framework to any problem in which the human dimension sits on top of knowledge and technical skills. What made Federation University want to partner with Employability.life? DB: Federation University has been working with Dr Malhotra for decades. We know he's an incredibly insightful entrepreneur and one of the things that we have done collaboratively is to really push the boundaries of education, learning and knowledge. Recently, the Indian Minister of Education came to Australia from India and put out a challenge. While Indianborn migrants are likely to become the top migrant group in Australia, India needs to have the same capability to offer these opportunities in India. With the forward-thinking National Education Policy 2020, we saw this as an opportunity to work with colleges that are looking for these solutions as part of their curriculum that will enable their students to be sought-after graduates. Thanks to our cooperative approach we are directly working with industry and it has made us number one in employment for undergraduates in Australia. There is a direct causation between working in an environment before you graduate and your life-long success and earnings. With this new project with Employability.life, we wanted to see if we could provide that gold-standard international credential that Australian universities have and support employability initiatives in India. We are here for the long term as we see this as a critical opportunity not just for India but for Asia and the rest of the world. What products are you launching and how do you plan to scale these in India? MM: The first product that we are launching out of Employability.life is the XPMC, a short form for Experiential Microcredential. When we started looking at this problem in India, we realised that the gap between education and employability is quite substantial, it's huge. Now a lot of Indian institutions – engineering colleges, MBA schools – are trying to dissolve that, but in all fairness, individual work Dr Manish Malhotra (Right), Co-founder and Chairman, Employability.life and Professor Duncan Bentley (Centre), Vice Chancellor and President, Federation University in conversation with Dr Annurag Batra, Editor-in-Chief and Chairman, BW Businessworld

62 | B W BUSINESSWORLD | 25 February 2023 is not enough. We did a conference last year and we invited a lot of leaders across India to talk about this problem, and we realised that there needs to be a solution which is common to all colleges and that can be built to replicate and scale in India. These experiential experiences are three-month projects that we have worked on with industry to create a simulated work environment that can be easily provided within the existing education ecosystem in India. The colleges we have signed up with are a mix of engineering, B-Tech and MBA institutes. We have now created these projects for experiential learning alongside them. We are aiming for different levels of experiences that will get students started as soon as they begin university. So the projects will be ongoing alongside the degree programmes. This provides a simulated work environment and real experience of a workplace. It is run on Agile methodology, much like a workplace, so there are no lectures or learning management systems, instead, there will be project managers and they will need to find task-based solutions, just like in industry. They have project management software and that's what we are using, replicating industry standards as much as we can. We're starting with two XPMCs in the month of February, in digital finance and cyber security. We have another seven streams that we'll be launching this year, including product management, artificial intelligence, digital transformation, supply chain, advanced manufacturing and health informatics. We are launching all these experiential projects this year and we have had an overwhelming response from our education partners in India: they absolutely think it's a brilliant idea because it will help them to move into this space. How do educators need to reorient their mindsets for this new reality? DB: I think one of the crucial elements is that we need to move much more to authentic student-centred learning, where students are key participants. When you go into the workplace, it is self-motivation and engagement with all the experiences you’re having that allow you to learn and improve the next time that you face the same problem. Experts learn from their experience, taking in what they did well, and what they didn’t do, then applying that going forward. For too long, education has tended to focus on large classrooms of the traditional kind, because we haven’t had the wonder of the digital and hybrid environment… For example, in Germany I found a lecture theatre that had not changed in about three hundred years! Universities are one of the few places on Earth where you can go and find pretty much the same setup that has been there for hundreds of years. That’s what we’ve got to change, and technology allows us to do that – it allows us to move from learning as information transmission to engaging fully with it. Is EdTech there to supplement mainstream education or compete with it? What is your view on EdTech? DB: I think EdTech is absolutely wonderful, from augmented reality, virtual reality, simulations, and all the support systems. It’s the same in any sector: technology is making what we do so much more effective, so much better, we need to embrace it, engage it, and incorporate it into everything we do. MM: In EdTech, especially with something like the XPMC, technology is huge: we cannot scale experiential training across India without the right platform. However, it’s not a substitute for a university degree, it’s there to complement them: we want to work with existing education providers to supply a better learning experience and help promote lifelong learning. Where will you be in 12 months? DB: It’s going to take time before any new product is broadly accepted, but it’s amazing how in the last nine months we’ve seen such an interest from so many colleges across the country and I would like us to start rolling out the XPMC: I really want to hear from students and colleges about how much they’ve got out of it… I also want to see employers be equally excited about taking on these new graduates: in about twelve months we should have seen batches actually graduating, so we should see a tangible difference soon. MM: We would like to see that we have now captured the profile of work readiness for each student – in the end, scalability will only be achieved if we can map it with the work readiness score for individual job profiles. Our long-term goal is to have the individual profiles of students who are building stacks of microcredentials, and then mapping them with job profiles. In the next six to nine months, we will see most of our college partners adopting the XPMC, and all the data generated from that will help us refine the project further. mall opportunities are often the Sbeginning of great enterprises.� Every single drop in the ocean counts. When talking about a progress of a developed or developing countries worldwide, we can't undermine the signi�cant role of SMEs. Undoubtedly, small and medium sized enterprises have made an indelible landmark on the economic landscape due to their premeditated importance in reengineering the industrial sector. Owing to their signi�cant inputs and involvement, SMEs assumes a pivotal responsibility in socio-economic development of India. These industries account for 95 per cent industrial units, contributing up to 40 per cent of GDP and 45 per cent of total exports. They are the second largest employers of human resources after agriculture. The scope of this sector is vast as individuals with entrepreneurial spirit but limited resources always have before them the option of initiating a business plan at the grass root level. Small �rms are reactive comfortably and more quickly to the changes in the environment. They enthuse innovation and bring into lime light new products, new methods and new ideas. S m a l l B u si n e ss is t h e s e e d b e d o f entrepreneurship. It provides an easy path for the novel entrepreneurs who wish to try their skills and wisdom to start a new venture. They have their own advantages over larger businesses. They are substantial generators of employment, and can act as shock absorbers during a catastrophic situation, responding veritably to topsy-turvy in the market. With not a complicated hierarchy, decision making is ea s y and simpler and so the ma r ket expectations can be ful�lled. They cater to provide services and a wide range of products at a�ordable prices to the consumers. This contribution is despite the sector being exposed to intensi�ed competition since liberalization of Indian economy in 1991. Small industry in India has been confronted with an increasingly competitive environment due to: (1) liberalization of the investment regime in the 1990s, favoring foreign direct investment (FDI). (2) the formation of the World Trade Organization (WTO) in 1995, forcing its member-countries (including India) to drastically scale down quantitative and nonquantitative restrictions on imports. (3) domestic economic reforms. The cumulative impact of all these developments is a remarkable transformation of the economic environment in which small industry operates, implying that the sector has no option but to 'compete or perish'. With the advent of planned economy from 1951 and the subs equent pol i c i e s by the Government of India, both planners and the law makers earmarked a special role for SMEs in the Indian economy. Due protection was accorded to both sectors, and particularly for small-scale industries from 1951 to 1991, till the nation adopted a policy of liberalization and globalization. The development of small industries is instrumental in veering the direction of industrialization to rural areas. The fact that these industries are labour-intensive and utilize less capital triggers the countries employment and supply of manpower in the rural areas. They contribute towards a better utilization of local resources and skills which may otherwise remain unde�led and might have tarnished eventually because of lack of exposure. It is a means of preserving our culture by means of encouraging people engaged in the handicrafts and �ne arts. Apart from improving standards of living by increasing the per capita income, these units hereby, assist in equitable distribution of income among the people. The sector helps the country to alleviate the generic living conditions of the people by overcoming the stigma of poverty and SME Carving Out a New Economy unemployment. One of the chief thrusts of SMEs is to regulate and provide a platform to the vulnerable groups of the society as the main drivers and empower the women and the youth to start their enterprises. Small enterprise promotion has continued to remain an important and integral part of Indian development strategy well before the First FiveYear Plan. However, the sec tors faces unforeseen challenges. Some of the most persisting constraints facing the sector, dominated by smaller units in the informal sector, include poor or non-availability of loan �nance, low levels of technology, inadequate physical and economic infrastructure and resources to invest in quality search and adopt new technology, and a policy of product reservation for small scale industries. Poor monitoring of implementation and e�ect of various small �rm policies has been an issue of concern. The larger enterprises o�er a sti� competition to the small scale units in the sale o f o u t p u t. Ap a r t fr o m t h e s e m a j o r impediments, the sector faces a number of other problems like ine�cient management, non-availability of cheap power, burden of local taxes, shortage of working capital and lack of demand for the products. The list is endless. SMEs have emerged as a vibrant tier of the economy as they have already taken over as key contributors to country's GDP. The new shout out is the Make in India Campaign. Owing to the launch of �agship Make In India Campaign, Prime Minister Narender Modi has given way to a new national program designed to facilitate investment, cultivate innovation , augment pro�ciency in skill development, protect intellectual property and build Best-in-Class manufacturing infrastructure, there has never been a better time to make in India. India's small and medium-sized industries can play a big role in making the country take the next big leap in manufacturing. India should be more focused towards novelty and innovation for these sectors. The government has to chart out plans to give special sops and privileges to these sectors. As clearly seen, the hindsight and the future vision of SME's cannot be simply considered a smaller version of their larger counterparts as they have di�erent managerial styles, scale of operations, levels of independence and decision making characteristics. However these di�erences do not eliminate the opportunities of SME's to internationalize and gain �ight in the global market. SME sector development will continue to spread its wings and be an integral part of the development thrust and promote the entrepreneurial culture. “

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64 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 STANDOUT FEATURE of Union Budget 2023-24 is the record capex at Rs 10 lakh crore, which is almost twice the amount spent in 2021-22. When roads, highways and railways are expanded, the economy gets a major boost. While global conditions remain uncertain, the Narendra Modi government’s commitment to boost infra on an unprecedented scale stands out. Indian Railways, for instance, plans to spend Rs 2.9 lakh crore over the next year, which, it is hoped, will have a multiplier effect on the economy. The Modi government’s emphasis on infrastructure development is not new. In fact, this has been the hallmark of Modi’s governance plank – first as Gujarat CM, and then as PM. For instance, it was in his 2021 Independence Day speech that the PM laid down his vision of the PM Gati Shakti Plan. This overarching idea gets reflected in this year’s Union Budget as well. Implementing the Big Ideas Come to think of it, there are many big ideas, outlined in his I-Day speeches, that are sought to be implemented through the Budget vision. In his I-Day speech last year, the PM spoke about his “Panch Pran” blueprint, and the COVER STORY A Template for Developed India Union Budget 2023-24, with record capex, hopes to see a massive expansion in infra, even as it aims for fiscal consolidation and assuaging key constituencies By Team BW

25 February 2023 | B W BUSINESSWORLD | 65 vision to make India a developed economy by 2047. This Amrit Kaal template is reflected amply in the Budget document. There has been a debate at the same time on whether rural schemes like MNREGA deserved greater attention and allocations. The counter argument that has been provided is that the universalisation of schemes like the Jal Jeevan Mission and the big push to rural infrastructure (Prime Mantri Awas Yojna – Gramin) more than make up for this. Many would have liked the government to think big on disinvestment and privatisation. The intent was visible in the last few budgets. This being an election-eve budget, probably, explains why the government’s approach towards this important issue is now cautious, at best. Fiscal Consolidation With global headwinds and the unprecedented crisis precipitated by the Ukraine war in the last one year, it’s however reassuring that the Budget targets the Centre’s fiscal deficit for 2023-24 at 5.9 per cent of GDP, down from 6.4 per cent. The overall template of the Union Budget, of course, remains what most government vision documents reflect now – the Amrit Kaal vision, or an action plan keeping the next 25 years in mind. While this as the big picture idea, the Budget assuages the middle class concern with “no tax till Rs 7 lakh” move. There is a renewed emphasis on skilling. Some enabling measures for startups have been extended, but this mushrooming constituency had hoped for much more. While there are various ways to analyse the Budget, the word WARM pretty much explains the thrust, with its emphasis on Women, Agriculture, Rural Sector and MSMEs. Addressing his party MPs, Prime Minister Narendra Modi said that the Budget proposals had something for all strata of society. It was also stressed that this was no “chunavi budget”. Clearly, the fact that the Union Budget caters to all sections of the society is a message that the government wants to take far and wide. Photograph by PIB

66 | B W BUSINESSWORLD | 25 February 2023 The robust infrastructure spending announced in the Budget bodes well for the growth prospects of engineering, procurement and construction companies By Ashish Sinha HE NARENDRA MODI government’s growth agenda has once again come through forcefully in the Union Budget 2023-24. Continuing the trend of the past several years, the Budget for FY24 has bumped up the allocation for capital expenditure (capex) by a record 33 per cent year-onyear (YoY) to Rs 18.1 lakh crore, which includes central government capex of Rs 8.2 lakh crore for FY24(BE), loans to states for capex of Rs 1.3 lakh crore, grants-in-aid of capital assets of Rs 3.7 lakh crore, and Internal and Extra Budgetary Resources (IEBR) of Rs 4.9 lakh crore. Roads and railways lead the infrastructure growth with a budgetary allocation of nearly Rs 5 lakh crore, a 53 per cent YoY growth. Urban infrastructure segment has been another focus area with an emphasis on urban local body reforms. What does the record allocation mean for the infrastructure sector? Simply put, the growth prospects for companies involved in the business of engineering, procurement and construction (EPC) will be buoyant for the next couple of BUDGET 2023-24 INFRASTRUCTURE T Big Boost for PRIORITY ON INFRA SPENDINGS years. Among the key beneficiaries, according to an analysis by India-Ratings (Ind-Ra), a Fitch Group company, could be KNR Constructions, Dilip Buildcon, Tata Projects, NCC, DRN Infrastructure and J Kumar Projects. Why? Because the order book for these companies are highly focused on the EPC sector. The outlay for the roads and highways sector has been increased 22 per cent YoY to Rs 2.9 lakh crore for FY24 versus the higher-than-expected spend of Rs 2.4 lakh crore in FY23 (RE). “This sums up the 14 per cent YoY higher allocation to National Highways Authority of India (NHAI), 44 per cent YoY higher allocation to road works, and flat allocation to PM Gram Sadak Yojana,” an Ind-Ra analysis said. This means the bidding for road projects and construction will get a significant boost in FY24. Anand Rathi, Founder & Chairman, Anand Rathi Group says a 33 per cent increase in capital expenditure to Rs 10 lakh crore, the highest ever, will go a long way in building roads, ports, and airports — crucial for making India a reliable investment destination. Infrastructure 33% Higher Capital Expenditure 22% Extra Allocation for Roads 15% Higher Allocation to Railways

25 February 2023 | B W BUSINESSWORLD | 67 “Investment of Rs 2.4 lakh crore in Railways is commendable. Boost to capex before the national polls is an indication that Modi is focused on realising his dream of making India a factory for the world,” he says. Experts also point to an increased demand for key raw materials including cement and steel as more construction projects are executed on the ground. The increase in the outlay for railways (Rs 2.40 lakh crore) and PMAY or the Pradhan Mantri Awas Yojana (a 66 per cent increase to over Rs 79,000 crore) as well as creation of 50 new airports and 100 critical transport infra projects for last-mile connectivity bodes well for the cement industry. Of the total outlay for the railways, Rs 37,581 crore has been set aside for new rolling stock. This, experts say, will help railway wagon manufacturers. “Substantial allocation in railways is in alignment with the National Logistics Policy. Sharp growth of 1.40x towards investment in rolling stock, new lines and electrification shall pave the way for an increase in the freight share of railways and boost last-mile connectivity,” says Mehul Pandya, MD & CEO, CareEdge in his analysis post Budget. In his reaction, Anil Banchhor, CEO & MD, RDC Concrete, the largest independent ready-mix concrete company in India, said the rise in budgeted capital expenditure will lead to an increased demand for cement and steel in FY24. “The budget outlay towards rolling stock for railways will encourage flat steel Photograph by Mrsiraphol 3% Higher Allocation to PMAY Rs 2.9trillion Outlay for Roads Railways To procure new wagons, add new Lines

68 | B W BUSINESSWORLD | 25 February 2023 demand which accounts for 46 per cent of overall demand. Similarly, the rise in the outlay for the Ministr y of Road Transport and Highways and the mass rapid transit system by 25 per cent and 40 per cent, respectively, will propel demand for long steel. Thus the overall steel demand will rise 12-14 per cent in FY24. And a jump in capex will also lead to a sharp rise in demand for cement in heavy roads and in the affordable housing sectors,” said Banchhor. Financing Infrastructure Creation: The government is trying to assist and attract more private investments in infrastructure projects by creating I n f r a s t r u c t u r e F i n a n c e Secretariat which will cover sectors that are traditionally dependent on public resources such as railways, roads, urban infrastructure and power. The government has also announced the setting up of an Urban Infrastructure Development Fund of Rs 10,000 crore a year for creating infrastructure in Tier-2 and Tier-3 cities, funded by priority lending shortfall. Allocation for the National Investment and Infrastructure Fund has been kept unchanged at Rs 2,000 crore; however, the FY23 revised estimate is lower than Rs 5,000 crore projected. Middle-Class Short-changed? As always, the budget announcements invited positive reactions from India Inc. But the salaried middleclass people are feeling short-changed. The enhanced allocation for PMAY has been applauded by industry. But where are the incentives for the salaried-class, the target customer for the housing market? There were no major direct announcements that could be seen as immediate booster shots, said Anuj Puri, Chairman, ANAROCK Group. “The new tax regime offers no benefits that taxpayers can avail of under any sections, including Section 80C — like the previous home loan tax benefits,” Puri points out. And shifting to the new tax regime is a question for the future considering it has limited takers so far as compared to the old tax regime that encourages tax breaks, offers rebate on home-loan interest etc. Agrees industry doyen Niranjan Hiranandani, who is also the vice chairman of NAREDCO. “It is a fantastic budget overall but not much has been done for the housing sector,” he says. “India needs to create a surplus of houses. There is a surplus of stock in clothing and other sectors, but where is the surplus in housing stock? No direction on pushing the rental housing scheme either,” he adds. As for the enhanced allocat i o n t o P M A Y, P u r i o f ANAROCK has an interesting take. Citing own research, Puri points to the trend reversal in affordable housing segment with the share of new supply in the category (<Rs 40 lakh) dipping to 20 per cent of total units launched in top-7 cities in 2022 from 40 per cent (of total units launched) in 2019. Simply put, without a change in definition of “affordable housing” across major cities, private builders are not keen on constructing them. Therefore, there are no gains for the salaried class while the PMAY largely caters to the poor segment of the society. The budget has also bad news for the rich and the super-rich, the main customers of the continuously thriving luxury housing segment. The FM announced the capping of the capital gains deductions at Rs 10 crore by amending the corresponding sections in the IT Act. Currently, there is no such cap as long as the proceeds were invested in another residential property within the stipulated time-frame. A direct impact of this move will be on the luxury and super-luxury segments in locations like Mumbai, Delhi, Goa, among others, witnessing redevelopment activities. Overall, the big push to the infra sector bodes well for the country’s economy and, hopefully, will kickstart private investment cycle in equal measures as well. [email protected]; @Ashish_BW “Boost to capex before the national polls is an indication that Modi is focused on realising his dream of making India a factory for the world“ Anand Rathi, Founder & Chairman, Anand Rathi Group BUDGET 2023-24 INFRASTRUCTURE

Utkarsh Agarwal, +91 98107 29644 [email protected] For Speaking Opportunity: Biren Singho, +91 87430 00885 [email protected] For Nominations: Mahek Surti, +91 98923 05192 [email protected] For More Details: MEET OUR EMINENT JURIES DR. ANNURAG BATRA Chairman & Editor-in-Chief BW Businessworld & Founder, exchange4media HARSHA KADAM Chief Executive Ocer & MD, President - Industrial Business Schaeer India RAGHAVENDRA VAIDYA MD & CEO Daimler Truck Innovation Center India (DTICI) RASHMI URDHWARESHE Director - Pune Knowledge Cluster Foundation and Immediate Past President, SAEINDIA (Society of Automobile Engineers India) VIKAS AGGARWAL Founder & MD IPower Batteries SANJAY GOPALAKRISHNAN Sr. Vice President - Electric Passenger Vehicle Business, BYD India NOOR F WARSIA Group Editorial Director BW Businessworld SOHINDER GILL CEO ‐ Global Business HERO ECO & Director‐General, SMEV SUNJAY J KAPUR Chairman, Sona Comstar President, ACMA Co-Chairman, CII Manufacturing Council SRIRAM SUNDRESAN CEO Firefox Bikes MARCH 2023 UNDER 40 #BWAuto40under40 JYOTI MALHOTRA Managing Director Volvo Auto India JURY CHAIR NEW DELHI NOMINATE NOW Recognising Future Masters of Indian Auto Sector LAST DATE TO NOMINATE: FEB 20, 2023

70 | B W BUSINESSWORLD | 25 February 2023 The government’s disinvestment programme, designed to free it from owning and running businesses, appears to have been put on the backburner By Ashish Sinha EBRUARY 24, 2021. Speaking at a webinar on privatisation by the Department of Investment and Public Asset Management (DIPAM), Prime Minister Narendra Modi declared that the government has no business to be in business and his administration was committed to privatising all PSUs barring the bare minimum in four strategic sectors. “It is government’s duty to support enterprises and businesses. But it is not essential that it should own and run enterprises,” he said. Adding that fiscal support to sick and loss-making PSUs using taxpayers’ money puts burden on the economy, the Prime Minister said there many underutilised and untilised assets in the public sector and 100 of these would be monetised to garner Rs 2.5 lakh crore. He was speaking a few weeks after the budget, and, perhaps trying to justify the sale of public assets so far. For two consecutive years—FY18 and FY19—the government raised nearly Rs 2 lakh crore from disinvestment against a stated target of Rs 1.53 lakh crore. Then things changed. The global pandemic came amid already sluggish economic conditions of FY20. And then came the RussiaUkraine conflict. Lower Targets Fast forward to Budget 2023-24. For the fourth year in a row the central government has failed to meet its own disinvestment targets. This time, the finance minister refrained from spelling out any targets for FY24. For FY23, the government managed to collect only Rs 31,100 crore through minority stake sale in state-owned PSUs, BUDGET 2023-24 DISINVESTMENT F out of the Rs 65,000 crore disinvestment target kept for this fiscal. Therefore, for 2023-24, the budget has pegged disinvestment revenue at Rs 51,000 crore against Rs 65,000 crore announced for FY23. For FY22, it had announced a target of Rs 1.75 lakh crore, which was revised lower to Rs 78,000 crore later. But the receipts were much lower. The year before, the FM while reading out the budget speech, had kept the disinvestment target of Rs 2.1 lakh crore for FY21. By the time the next budget day came, it was learnt that the disinvestment revenue stood at Rs 17,957 crore. And the year before that (FY20), against a set disinvestment target of Rs 1.05 lakh crore it received Rs 65,000 crore. Why has this been happening? What are the factors contributing to this? At this rate of disinvestment, is it possible for the government to end its involvement in running the PSUs? Madan Sabnavis, Chief Economist, Bank of Baroda explains. “The Budget has been sanguine on the disinvestment front once again with a target of Rs 61,000 crore being placed which includes Rs 10,000 crore of asset monetisation proceeds. Here it needs to be seen if this amount can be garnered as it has been observed that progressively, as the low hanging fruits are plucked, the abilLosing Steam? Photograph by Designer491

25 February 2023 | B W BUSINESSWORLD | 71 ity to push through disinvestment becomes tougher. The Budget, however, once again places high hopes here.” The Numbers Game The beauty of statistics lies in the art of presenting the numbers. Here, we have presented the numbers in terms of the target announced, revenue collected and the shortfall thereof. But this may create a negative impression. This year’s Economic Survey presents the same data in differently though. And it goes back in time to include the data from the two years that saw higher collection of disinvestment revenue, but in the first tenure. “During FY15 to FY23 (as of 18 January 2023), an amount of about Rs 4.07 lakh crore has been realised as proceeds from disinvestment through 154 transactions using various modes/ instruments. This includes Rs 3.02 lakh crore realised from minority stake sale and Rs 69,412 crore realised from strategic disinvestment transactions (in 10 CPSEs -- HPCL, REC, DCIL, HSCC, NPCC, NEEPCO, THDC, Kamrajar Port, Air India and NINL),” reads the section on disinvestment in the Survey. Here, in fact, the numbers have been clubbed for the past nine fiscal years, where the collections were much better in the first five-year of the government. Also, the Survey talks about the realisation n Disinvestment Targets (DT) On Decline n Govt. achieved only 48% of DT n FY24 Projection slashed to Rs 51K cr from Rs 65K cr n In FY23 DIPAM has raised Rs 31,106 cr n Budget Silent on New Asset Sales for FY24 n Rs 21K cr from LIC Divestment in FY23 n Divestment of SCI, NMDC Steel, BEML, CONCOR in FY24

72 | B W BUSINESSWORLD | 25 February 2023 of Rs 4.07 lakh crore but glosses over the overall announced target of Rs 7.20 lakh crore, thus making the realisation look impressive. That being said, the fact that the world was besieged by a pandemic and the global markets collectively faced various headwinds that had impact on local economies in myriad ways have also led to the wide gap between the targets for stake sale in the PSUs and actual market interest. The government has so far achieved just 48 per cent of the current year’s disinvestment target, and it has just two months to raise the remaining Rs 20,000 crore of the Revised Estimates (RE). So far this fiscal year, DIPAM has raised Rs 31,106 crore as disinvestment receipts and over Rs 36,000 crore as dividend. Of the proceeds collected so far this year, a majority came from the initial public offering of LIC, through which the government raised Rs 21,000 crore by divesting a 3.5 per cent stake. The Budget did not mention new asset sales for FY24, indicating that the Centre’s disinvestment target will depend on the completion of some big transactions, including the stake sale in IDBI Bank. Experts said most of the ongoing transactions will spill over into next year including the disinvestment in Shipping Corporation of India, NMDC Steel, BEML, HLL Lifecare, Container Corporation of India, and Vizag Steel. Explaining the rationale behind a lower target, DIPAM Secretary Tuhin Kanta Pandey said in a post-Budget briefing that these deals were dependent on market conditions. Besides, to facilitate certain strategic disinvestments, the Budget proposed allowing accumulated losses and unabsorbed depreciation allowance to be carried forward in the case of merger of one or more banking companies with any other banking institution or a company subsequent to a strategic disinvestment, if such amalgamation takes place within five years of strategic disinvestment. Balanced Approach Needed? The critics of large-scale disinvestment often put forth the argument that instead of divesting the government stake, there should be adequate efforts to introduce reforms, timely corrections in the overall working of these central public sector enterprises (CPSEs), especially those that have the potential of generating profits. After all, the profitable CPSEs are a good source of revenue for the central government in the form of dividends. For example, during FY22, the dividend declared by the CPSEs shot up 57.5 per cent to Rs 1.15 lakh crore compared to FY21 where it was Rs 0.73 lakh crore. The net profit of operating public sector enterprises jumped 50.87 per cent to Rs 2.49 lakh crore during 2021-22. It was Rs 1.65 lakh crore in 2020-21. Managing the workforce in these CPSEs and PSUs post disinvestment is another tricky challenge as there are fear of job-losses, mass retrenchment or layoffs. “Balancing priorities between undertaking rapid disinvestment versus adopting a rational approach would be ideal for our economy where tackling unemployment, providing food, education and health services to all still remains a distant dream,” says a senior economist. Till then, we can only hope for the best. [email protected]; @Ashish_BW BUDGET 2023-24 DISINVESTMENT S. No Name of CPSEs % of GoI's Shares Disinvested Method of Disinvestment Receipts (in Rs crore) GoI's Shareholding Post Disinvestment 1 ONGC 1.5 OFS 3026.23 58.91 2 ONGC 0 Employee OFS 32.55 0 3 LIC 3.5 IPO 20516.12 96.5 4 PPL 19.55 OFS 471.5 0 5 GAIL 0 BB 497.27 0 6 NINL 0 SD 0 0 7 Others** 0 OTHERS 3839 0 8 IRCTC 0 OFS 2723.73 0 9 Enemy shares sale 0 OTHERS 0.24 0 Total Sum 31,106.64 CPSES DISINVESTMENT IN 2022-23* * As of January 18, 2023; **Sale of Axis Bank shares held by SUUTI; Source: DIPAM

C M Y CM MY CY CMY K BW Hindi.pdf 1 12-11-2022 17:10:38

74 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 OES THE UNION BUDGET FY2024 signal the arrival of the politician Sitharaman? Or is it the economist Sitharaman? Seems the positive blend of both, a happier note that enriches the powerhouse of talent in the Union Cabinet. Especially at a time when nine Indian states will go to polls. Moreover, India will vote next year (probably around this time) to elect its next Union Government. The outlook electorally should not be a worry for the ruling party, but for skirmishes of animosity across a few -isms. The structural pillars for socio-economic growth have been put up, devoid of political colour. Even if that were the case, these Union Budget announcements cannot be faulted as populist, for the Budget did not scatter subsidies or sops. It is a Budget that structurally addresses all segments of the population, and equally has cheer for the employed and the entrepreneur. It is a post-pandemic budget that accepts its fiscal limitations, and nudges the private sector to rise up to the opportunities. But will Corporate India rise up to this opportunity to be a key contributor in the journey toward India becoming a developed nation by 2047? Amrit Kaal Debut Budget No budget can please everyone. Sceptics and critics would abound around worries that these announcements would not translate into ground realities. A healthy democracy needs such debate and open discussions, and the only solution is to transparently measure the project milestones and make with granular disclosures. The budget is persisting with the growth story, amid worries about the impact CO M M E N T D NirmalaNomics meets ModiPolitics With this budget, she has deftly showcased her ability to balance both the political compulsion of an economic resurgence and the economic need of timely policy actions. The budget has set the pace for addressing polls, people power, priority sector, and being a growth pillar. The baton now passes on to the Executive, to deliver these policies into realistic outcomes. This budget has set the pace for the theme – India matters! Srinath Sridharan, The writer is an author, policy researcher & corporate advisor

25 February 2023 | B W BUSINESSWORLD | 75 of the global slowdown on the Indian economy. The essential pillars of this budget include:Inclusive Development, reaching the last mile, Infrastructure and Investment, Unleashing Potential, Green Growth, Youth Power and the Financial Sector. The budget has been built on foundations of being techdriven, knowledge-based and with strong public finances. The government will target a budget deficit of 5.9 per cent of GDP for FY2024, in comparison to the current year’s 6.4 per cent. The targeted fiscal deficit is below 4.5 per cent by FY2026. The fiscal deficit would decrease in the year ahead, as it tries to create jobs while maintaining financial discipline. This is a clear indication of the government’s nudge for capex from private investments, and to speed up fresh employment generation and entrepreneurial opportunities. It has shown balance between the need for enhanced capital expenditure and fiscal discipline to push for sustained economic growth. This budget targets a gross borrowing of Rs 15.43 lakh crore. This would necessitate domestic debt markets’ largesse, as the GoI and its entities are the biggest borrowers from it. With India being seen as an economically better positioned economy in the global turmoil, can we look at the idea of low cost India Growth Bonds to sell to investors across the world? The other key aspects covered in this budget were schemes that provide newer opportunities for citizens, especially the MSME entrepreneurs and the youth. This budget has also signalled the big move to focus on data governance, something that could boost better public governance across the sectors. Misses This budget does not spell a clear roadmap for the disinvestment process, considering that previous attempts have not been successful. While the post-Covid economy and global economic turmoil might be the reason, this budget could have at least spelt out the way forward. The government expects to raise Rs 51,000 crore from stake sales in various state-run companies. Proceeds from divestment and monetisation will be put into a ‘National Investment Fund’, to be used for financing expenditure on infrastructure, education and health. This is a big miss considering that this government has time and again reiterated that it does not want to be in the business of many businesses. Another aspect that the budget did not mention was how the government would resolve the conflict of regulatory or governance arbitrage around public sector entities and their private peers. If only it gets done, the valuations for those entities would see higher numbers. Is there a political reason in the budget being silent about the status of the government’s announcements in previous budgets – on divesting stakes in two other PSU banks, apart from IDBI bank, and to sell a general insurance firm? In an election year, is that worry about how employees’ unions could create a hiccup? There is also an ominous absence of climate responsive budgeting. The challenges of climate actions and financing was also mentioned in the Economic Survey. With India presiding over the G20 this year, one would have thought it fit to include this in the Union Budget. On the taxation side, it is one more year of missed opportunity to simplify the structure and rate slabs. But for the political aspect of middle class’ content, at the savings with the newly announced lower-end slab revision, it is a lukewarm effort. Achieving the budget plan depends on not just the domestic condition, consumer sentiments and political winds but also the global economic situation. Hope there is wiggle room in this budget, if the year ahead brings some pressures. Sets the Pace A NirmalaNomics Budget meets ModiPolitics to set the tone. With this budget, she has deftly showcased her ability to balance both the political compulsion of an economic resurgence and the economic need of timely policy actions. The budget has set the pace for addressing polls, people power, the priority sector, and being a growth pillar. The baton now passes on to the Executive, to deliver these policies into realistic outcomes. This budget has set the pace for the theme – India matters! Photograph by PIB

76 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 HE FOCUS OF the Budget 2023 is pro-growth. It has a longterm vision. It has also been described as an “Amrit Kaal” budget. The budget allows free cash availability and pushes employment generation which will give an impetus to domestic consumption and also to rural demand. In order to stimulate further economic growth, the government has announced a number of measures and enhanced allocations to critical sectors. This will open up employment opportunities and increase disposable income. Such measures include allocation of Rs 2 lakh crore under PM Garib Kalyan Anna Yojana and setting up an agricultural credit target of Rs 20 lakh crore. The outlay towards PM Awas Yojana has been increased by 66 per cent to Rs 79,000 crore. While there’s a debate if MNREGA deserved a greater outlay, it’s hoped that the measures to boost rural India will more than make up for it. COLUMN T By S. Ravi, former Chairman, BSE & Founder & Managing Partner of Ravi Rajan & Co The capital outlay of Rs 2.40 lakh crore for Railways, which is nine times of 2013-14, is extremely significant. The Railways’ growth rate has been sluggish, and it’s hoped that this capacity expansion will have a multiplier effect on the economy. Overall, the capital investment outlay increase by 33 per cent to Rs 10 lakh crore (which means, roughly twice the absolute amount spent in 2021-22), is a standout feature of the Union Budget. It shows the government’s belief in the “boost infrastructure expansion to boost growth” dictum. The tweaks in the income tax slabs as well as no payment of tax by those earning up to Rs 7 lakh in the new tax regime is a welcome move. Overall, then, this budget has something for everyone, and every section of the society. For economy watchers, the government’s commitment to fiscal consolidation is welcome. Seen in the context of g l o b a l u p h e ava l s ( l o o k , f o r instance, what the Ukraine war did to fertiliser prices), the budget’s target of Centre’s fiscal deficit for 2023-24 at 5.9 per cent of GDP, down from 6.4 per cent, is reassuring. The overall contours of the budget appear more significant when viewed in the context of elections – nine Assembly elections, and then the Lok Sabha election in 2024. T hat the government resisted the temptation to come out with a populist budget and stuck to time-tested economic principles bodes well for the nation and the economy. To sum up, I would like to argue, that the budget has something for all sections even as it walks the path of fiscal consolidation. Budget has a Long-term Vision

            
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78 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 INANCE MINISTER NIRMALA Sitharaman has delivered a growth-oriented and inclusive Budget that aims to fulfil the aspirations of one of the fastest-growing major economies in the world. The FM has desisted from presenting a populist budget ahead of 2024 general elections and targeted a lower fiscal deficit for FY24. She has unveiled measures to create better infrastructure, improve ‘ease of doing business,’ encourage pharma innovation, spur domestic consumption and galvanise climate action through a thrust on green economy and energy transition. The FM must be praised for sticking to the path of fiscal consolidation by targeting a half per cent reduction in fiscal deficit to 5.9 per cent in FY24. She has also reiterated her commitment to meet a medium-term goal of reducing the deficit further to under 4.5 per cent by FY26. To stimulate a virtuous cycle of investment, the FM announced a 33 per cent hike in capital investment outlay to Rs 10 trillion for FY24. She also announced other measures for infrastructure creation, including a capital outlay of Rs 2.40 trillion for the Indian Railways, a push for revival of air transport infrastructure, continuation of the 50-year interest-free loan to state governments for another year, and proposed a Rs 10,000 crore per year Urban Infra Development Fund for Tier-2 and Tier-3 cities. COLUMN F A Growth-oriented, Inclusive Budget India’s pharmaceutical industry needs to focus on emerging opportunities across novel biologics, biosimilars, mRNA and other new-generation vaccines, orphan drugs, antimicrobials, precision medicines, cell and gene therapies, etc., which account for two-thirds of the global pharma value pool By Kiran MazumdarShaw, Chairperson, Biocon & Biologics

25 February 2023 | B W BUSINESSWORLD | 79 The speedy and efficient implementation of these projects can help kick-start a multi-year capex cycle in India by crowding in private capex investments. To improve confidence among local and foreign investors, the FM announced several measures to improve the business environment of the country. Notable developments include reducing more than 39,000 compliances, decriminalising more than 3,400 legal provisions, and introducing the Jan Vishwas Bill to amend 42 central Acts. She also spoke about setting up a system of ‘Unified Filing Process’ for removing the need for separate submissions of same information to different government agencies. Boosting Research & Innovation in Pharma India’s pharmaceutical industry needs to focus on emerging opportunities across novel biologics, biosimilars, mRNA and other new-generation vaccines, orphan drugs, anti-microbials, precision medicines, cell and gene therapies, etc., which account for two-thirds of the global pharma value pool. Developing these new, cutting-edge therapies is a complex and lengthy process. The scientific, technical and regulatory bars are considerably higher, making drug development difficult, more time consuming and very expensive. Exponential investments in R&D, manufacturing and digital transformation are needed for this transition up the pharmaceutical innovation value chain. The pharma industry has for long been urging the government to prioritise schemes that boost research in these “moonshot” areas. The FM has sought to address some of the pharma and healthcare industry’s demands by announcing a new programme for promoting research and innovation in pharmaceuticals through centres of excellence. The encouragement offered to the industry to invest in R&D in specific priority sectors is also very welcome and the industry awaits the details of the incentives to be announced. The opening of select ICMR (Indian Council of Medical Research) for research with public and private medical faculties is a positive move to enhance industryacademia linkages. The proposal for “dedicated multidisciplinary courses” for medical devices will ensure availability of skilled manpower. The proposed centres of excellence for artificial intelligence could lead to healthcare innovations that offer patients in India more personalised risk assessments, diagnoses, and treatments. Making Health a Priority Budgetary allocation for healthcare in FY24 has gone up by 13 per cent to Rs 89,155 crore. Of this, Rs 2,980 crore has been marked for research, while the balance Rs 86,175 crore will be utilised for centrally sponsored schemes and establishment expenditure. Given the recommendation of the National Health Policy 2017 to increase public healthcare expenditure to 2.5 per cent of GDP by 2025, the outlay seems to be gradually trending towards the target. Central and state governments’ budgeted expenditure on the health sector reached 2.1 per cent of GDP in FY23 (Budget Estimates). To address the shortage of nurses, the Budget has done well to announce the setting up of 157 new nursing colleges. Trained human resources are critical for achieving better outcomes and increasing access to high-quality healthcare in India. The mission to eliminate sickle cell anemia by 2047, which will involve screening, awareness creation and counselling, was also a key announcement in the Budget. Focus on ‘Going Green’ The FM underlined the government’s commitment to pushing the energy transition agenda and achieving net-zero emissions target by 2070 though an allocation of Rs 35,000 crore towards this goal. The Budget also provided some relief for electric vehicles, gave a boost to ethanol production and outlined new programmes on bioenergy, hydrogen and battery energy storage systems. The highlight was the Green Credit Programme that seeks to incentivise companies, individuals and local bodies that adhere to sustainable practises under the Environment Protection Act and will help mobilise additional resources for such activities. She also allocated additional funds to replace old vehicles and ambulances used by both central and state governments. In Budget 2023, the FM has unveiled several key measures for the creation of a conducive physical, financial, research and regulatory ecosystem that can deliver a $10-trillion economy by 2035. Photograph by Bigy00

80 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 HE FINANCE MINISTER presented a powerful Union Budget for 2023-24, setting the stage with figures indicating the country’s strong economic performance this past fiscal. Underlining the 7 per cent growth rate holds significance given recessive global headwinds of supply chain disruptions, and escalation of raw material prices due to ongoing geopolitical tensions in a period that was earmarked by the world for optimistic post-pandemic recovery. The resultant fiscal protectionism to combat inflation has entailed in noticeable concerns on recession in various countries. India however, stood out, and stood tall in measuring remarkable growth. The Union Budget captures the Indian economy’s encouraging performance to steer India towards long-term advancement. A striking feature of this year’s budget is its impressive and expansive scope. An equally if not more compelling component is the government’s keen focus on inclusive growth. Spotlight on the Digital Economy There is a clear realisation of the decisive role that technology plays and will continue to play in the realisation of India@100. This year’s budget posits a spotlight on the digital economy. Be it in terms of translating the successes of the UPI to sectors like agriculture and healthcare; or on the lines of Make Artificial Intelligence (AI) in India & Make AI Work for India and the development of Skill India Centres concentrating on the future of jobs (robotics, COLUMN T Surging Towards India@100 The budget captures the economy’s encouraging performance to steer India towards long-term advancement. A striking feature of this year’s budget is its impressive and expansive scope. An equally if not more compelling component is the government’s keen focus on inclusive growth By Rakesh Bharti Mittal, Vice Chairman, Bharti Enterprises

25 February 2023 | B W BUSINESSWORLD | 81 AI,coding etc.), the Government of India (GoI) has shown its commitment to ensuring the digital economy’s role in achieving India’s US$ 10 trillion ambitions. The centres of excellence on AI; setting up of 100 labs on cutting-edge research on 5G along with digital initiatives like the move to set up a National Digital Library are a call for a government-industry-academia linkage. Allocations to the Agriculture Sector The growth-oriented budget accounts for a realistic roadmap for India@100. Agriculture remains among India’s arterial economic enablers – the GoI announced a slew of measures addressing and encouraging innovation in the sector through the Agriculture Accelerator Fund; its modernisation with the foundations for digital public infrastructure in agriculture and in ensuring sustainability of the sector and incomes of farmers through due attention to crop diversification. With the establishment of 100 labs for the development and realisation of 5G’s potential, precision farming was identified as a priority on use case applications. The compelling allocations to the agriculture sector include setting up of 10,000 new farmer producer organisations to support small and marginal farmers; and proposes strengthening of the supply chain infrastructure in allied sectors like food processing, with an allocation of Rs 1,000 crore for modern storage facilities. Additionally, provisions for facilitating natural farming adoption among 1 crore farmers along with a substantial Rs 20 lakh crore line of credit targeted at animal husbandry, dairy and fisheries will certainly enhance the domestic agriculture and its allied sectors. Shree Anna, or the global hub for millets, backed by the convergence of establishing an Indian Institute of Millet Research will allow for further crop diversification, groundwater conservation and an increase in farmer incomes. These outlays will have a cascading effect on making international food value chains more resilient – this assumes critical importance in the context of food security in the current global scenario. Enhancing Investor Confidence In a cogent move to enhance investor confidence while maintaining positive domestic capacity utilisation, an outlay of Rs 10 lakh crore was announced on capital investments for infrastructure. Not only does this denote a 33 per cent increase from the previous fiscal, it also lends further strength to the government’s ongoing efforts on consistently surging ahead on Ease of Doing Business. From an industry and investor perspective, announcements of massive capital investments in tandem with reduction of 39,000 compliances provides the muchneeded assurance, particularly in the context of global realities. Further, the decision to inject Rs 2.4 lakh crore into the railways sector indicates a long-term strategy to reduce logistics costs, and pivot further investments towards India. Inclusive Growth Holistic advancement and inclusive growth has been underwritten in this budget in explicit terms. The transformation of the lessons and best practices from the Aspirational Districts programme to Aspirational Blocks will help in saturation of benefits at an even more micro level, ensuring public services, education, nutrition and healthcare, water resources etc. reach the last mile. The roll-out of a National Apprenticeship Promotion scheme that will ensure skilling for 47 lakh youth backed with stipend support is a call to reap the benefits of our demographic dividend. Further, outlays to the tune of Rs 3,000 crore in the Pradhan Mantri Awas Yojana are aimed at providing affordable housing to the urban poor. Under the Urban Infrastructure Development Fund, Rs 10,000 crore per year will be earmarked to ensure quality urban infrastructure to Tier 2+ cities. Supplemented by the allocation for development of affordable rental housing and drinking water, the creation of fixed assets is crucial to diffuse Ease of Living for all citizens across India. The Saptarishi presented in the budget signifies the dawn of Amrit Kaal led by a reformative government, lending stability to the economy and an energised industry, intent on being partners to underwriting a prosperous, equitable India@100. Photograph by Coffeekai

82 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 HE UNION BUDGET 2023-24 is undoubtedly one of the most challenging budgets the Indian government has faced to date, given the current global economic downturn and the ongoing war in Ukraine. The budget serves as a crucial roadmap for ensuring India’s continued growth and stability in the face of the economic storms affecting the rest of the world. It has been met with positive reactions from industry experts and stakeholders as it is viewed as a forward-thinking and optimistic document. Capital expenditure (Capex) is an essential component of the Union Budget, as the funds are utilised for a wide range of projects, including construction, machinery, equipment, schools, and infrastructure. The Finance Minister has raised the Capex by 33 per cent to Rs 10 lakh crore, which is 3.3 per cent of the total GDP. This move reflects the government’s focus on driving growth potential and creating more job opportunities for the nation’s youth. This increase in Capex will also present numerous investment opportunities for private investors looking to invest in the Indian market. One of the most applauded announcements from the budget was the increase in the rebate limit for income tax payments from Rs 5 lakh to Rs 7 lakh under the new tax regime. This increase, combined with the tax exemption limit being raised to Rs 3 lakh, provides much-needed relief for the salaried class, as they will now have more disposable income. Focus on 5G Services The Indian government’s focus on the successful deployment of 5G services COLUMN T Ladder for Economic Growth The budget has allocated Rs 2158 crore for optical fiber cables-based network for defence services and Rs 715.8 crore for telecom projects in North-eastern states. This initiative is expected to open up new employment opportunities and drive innovation in the field By Deepak Chhabria, Executive Chairman, Finolex Cables

25 February 2023 | B W BUSINESSWORLD | 83 holds immense potential for various industries, particularly the communication cables sector. The Finance Minister announced in the budget that to ensure India is at the forefront of the 5G revolution, 100 labs in engineering institutions across the country will be set up. These labs will be equipped with the latest 5G technology and will provide students, researchers, and industry professionals with the opportunity to develop new applications and business models utilising 5G services. The focus on 5G will play a crucial role in supporting the growth of the technology sector and contributing to the country’s overall economic development. At least 70 per cent of the towers need to be fiberised for optimum utilisation of 5G services, which will require an estimated investment of Rs 5 lakh crore in the next four years in terms of fiber and towers. The total allocation of funds for the department of telecom includes Rs 97,579.05 crore. The state-run BSNL, is expected to roll out 4G and 5G services this year as it gets Rs 52,937 crore capital infusion from the government in 2023-24. The budget has also allocated Rs 2158 crore for optical fiber cables-based network for defence services and Rs 715.8 crore for telecom projects in North-eastern states. This initiative is expected to open up new employment opportunities and drive innovation in the field. Not just this, the government is also focusing on making artificial intelligence (AI) in India to galvanise an effective AI ecosystem and nurture quality human resources. Moreover, the government’s efforts to support the electronics manufacturing sector through incentives and tax benefits are likely to result in a boost in the production of electronic devices and will further contribute to the demand for communication cables. The budget also seeks to make doing business easier by reducing over 39,000 compliances, a move that will be welcomed by all businesses operating in India. Measures to Provide Relief to MSMEs The government has taken steps to revamp the credit guarantee scheme for Micro, Small, and Medium Enterprises (MSMEs). The revised scheme, which will come into effect on April 1, 2023, will be infused with Rs 9,000 crore, enabling an additional Rs 2 lakh crore in collateral-free guaranteed credit. This will provide MSMEs with increased access to credit and better terms for financing, promoting their growth and sustainability. The government has implemented measures to provide relief to MSMEs in case of contract execution failures during the Covid-19 period. A total of 95 per cent of the forfeited amount related to bid or performance security will be returned to MSMEs by the government and government undertakings. Improving Infrastructure In its efforts to improve infrastructure, the government will establish t h e U r b a n I n f r a s t r u c t u r e Development Fund (UIDF).This will be an innovative measure taken by the government to address the infrastructure needs of Tier-II and Tier-III cities in India. The UIDF, which will be managed by the National Housing Bank, will provide a crucial source of funding for public agencies looking to create urban infrastructure in these cities. The government has incentivised the states to access the UIDF by encouraging them to leverage these resources. This initiative is expected to make an estimated 10,000 crore available annually to support the development of urban infrastructure in these cities. The UIDF is expected to play a vital role in promoting the growth and development of these cities, helping to create new job opportunities and improving the quality of life for their residents. Overall, the Union Budget 2023- 24 holds the potential for significant benefits for the common man and businesses alike. The budget’s emphasis on increased disposable income, capital expenditure, and job creation will provide a much-needed boost to the economy, while also creating new opportunities for growth and development. In conclusion, as the Union Budget 2023 presents promising prospects, the actual impact will depend on a range of factors, including the successful implementation of the budget’s proposals and the prevailing market conditions. Photograph by Elnur

84 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 INANCE MINISTER NIRMALA Sitharaman’s last full-fledged Union Budget before the 2024 Lok Sabha elections is a progressive budget that not only builds on the foundation laid in the previous years, but takes it forward. This is a budget that truly balances growth with fiscal prudence. The higher outlays on infrastructure development and agriculture will have a multiplier impact on the economy, while the changes in income-tax exemptions and slabs would go a long way in putting more disposable income in the pockets of the consuming class. The heightened focus on rural infrastructure development, enhancement of irrigation facilities as well as increase in targets for agricultural credit, and impetus on agri-tech are measures that would surely help improve the quality of life in rural India and ensure continued rural demand for branded consumer goods. The Agriculture Accelerator Fund being set up to support agri-tech startups in rural areas and bring modern technologies to Indian farms and increase productivity, extension of the concessional institutional credit through Kisan Credit Cards to animal husbandry and fisheries sector, and an outlay of Rs 2,200 crore towards Atmanirbhar Clean Plant Programme to improve availability of disease-free quality planting material for high-value horticultural crops will provide the much-needed solutions to present-day challenges of farmers. This would be highly beneficial for companies with a strong rural footprint and would help drive growth for the consumer products industry. Dabur has COLUMN F Balancing Growth and Fiscal Discipline Dabur has been investing ahead of the curve in strengthening its rural footprint, which today covers over 1,00,000 villages. This exercise would further gain pace, going forward By Mohit Malhotra, CEO, Dabur India been investing ahead of the curve in strengthening its rural footprint, which today covers over 1,00,000 villages. This exercise would further gain pace, going forward. The biggest positive, according to me, is the 33 per cent increase in overall capital expenditure outlay on infrastructure development, which will take India towards become a true global powerhouse and help urbanise the hinterland. The decision to set up a Rs 10,000 crore per year Urban Infrastructure Development Fund to be used for creating infrastructure in Tier-2 and Tier-3 cities will go a long way in boosting overall consumer confidence, and also help generate employment. Agenda for Growth The seven-point agenda for this year’s budget with a clear focus on building social infrastructure, reaching the last mile, driving inclusive development, green growth and harnessing the country’s youth power, ticks all the right boxes. I am certain that these measures would help r e d u c e t h e g a p between the haves and have-nots in the country. H e r f o c u s o n empowering the middle class with the higher exemption limit and new tax slabs would provide some relief to the salaried class and put more money and more savings in the hands of the common man. Overall, this Budget is all about maintaining continuity and accelerating economic growth. It will also boost confidence and spur greater investments in capex by the private sector. I would call it a Budget that lays down the blueprint for creating an enabling framework that would promote an Atmanirbhar Bharat. Photograph by Himanshu Kumar

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UNION BUDGET 23-24 86 | B W BUSINESSWORLD | 13 May 2017 HE UNION BUDGET 2023 builds on India’s relentless commitment to accelerate the economy’s transition to green energy. Presented by Finance Minister Nirmala Sitharaman, the Union Budget 2023 speech introduced several big bang initiatives to promote green growth and sustainable living. What is more, the budget identified ‘green growth’ as one of the seven priorities, or Saptarishi, as India embarks upon a crucial phase of sustainable growth and development for the next 25 years or the Amrit Kaal. The Green Boost Best of all, in keeping with the nation’s commitment to combat climate change, the Union Budget allocated a sizeable Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives. It also rolled out specific measures for energy efficiency, electric mobility, energy storage, and green bonds – a combination that will serve to lower the economy’s carbon intensity and spur a movement towards an environmentally conscious lifestyle and create green jobs. The budget has laid adequate focus on addressing the intermittent nature of solar and wind power. Policymakers have been striving to come up with scalable and cost-effective solutions to ensure round-the-clock supply of renewable power and cut the dependence on fossil fuels to provide continuous baseload for electricity. The budget, by ushering in viability gap funding for building COLUMN T Path to Green Growth and Energy Transition The Union Budget allocated a sizeable Rs 35,000 crore for priority capital investments towards energy transition and net zero objectives. It also rolled out specific measures for energy efficiency, electric mobility, energy storage, and green bonds By Pratik Agarwal, Managing Director, Sterlite Power

87 | B W BUSINESSWORLD | 13 May 2017 Battery Energy Storage Systems with capacity of 4,000 MWH and the promise to formulate a framework for Pumped Storage Projects, has made a solid start to tackle the intermittency of power generated by windmills and solar panels. Imagine, when the wind drops or the weather clouds hover in Rajasthan, say, pumped-hydro plants in the south, could supply a compensating amount of clean power via the national grid to aluminium smelters located in the east. Unlike US, which has only limited connections between regional grids, India has a much better-integrated national grid, which makes such an idea feasible. Further, the introduction of incentives will also encourage energy companies to set up battery backed/hybrid projects, where wind or solar will be backed by pumped storage. Spotlight on Transmission That brings us to the next big action item – transmission. With the onus firmly on renewables, the budget also set aside a massive Rs 20,700 crore for setting up of an inter-state transmission system for grid integration and evacuation of 13 GW renewable energy from Ladakh. The northern most union territory is ideal for both wind and solar projects and a robust infrastructure for evacuation of power will boost projects in the region. It will also create green jobs for the local economy. While the details were lost in fine print, it is important to note that many countries have suffered by keeping transmission as an afterthought in their greening initiatives. Here, we need to commend the proactive approach taken by the Indian government towards greening the Indian transmission network. Mending the Last Mile For a robust energy ecosystem, major reforms are required in the distribution sector. Despite repeated bailouts, most distribution companies (discoms) are still incurring huge losses every year. The burgeoning debt on the balance sheet of the state discoms – which has reached $4 billion at an all-India level – has a far-reaching impact on the economy. Any further reforms upstream (in generation) will not yield any benefit unless the last mile is fixed. The budget seeks to address this issue by linking power sector reforms to states’ fiscal deficit cap. States will now be allowed a fiscal deficit of 3.5 per cent of Gross State Domestic Product (GSDP) of which 0.5 per cent will be tied to power sector reforms. This is an added incentive for the states to reform the discoms. However, along with this, a major incentive and disincentive package for the discoms will prove beneficial. Boosting Infrastructure Financing Among other key measures, the newly established Infrastructure Finance Secretariat will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are so far predominantly dependent on public resources. This is a step in the right direction since there is substantial scope for investments by the private sector. India has a reasonably high rate of Provident Fund (PF) corpus of 17 lakh+ crore in Employees Provident Fund Organisation (EPFO). We can learn from global best practices and channelise this for investment into infrastructure which has a cascading effect on the overall economy. This is also a win-win for pensioners as they can enjoy a better yield. The recovery in infrastructure activity, supported by robust investments, will give the economy the much-needed impetus and help us march towards the $5 trillion mark. In addition, we must laud the masterstroke by the government for introducing a Green Credit Programme under the Environment (Protection) Act to incentivise environmentally sustainable and responsive actions by companies, individuals and local bodies, thereby helping mobilise additional resources for such activities. Overall, the budget has pushed all the right buttons and laid down a comprehensive roadmap that will enable the Indian economy to move quickly on the path to energy transition and decarbonisation. India, which is now the world’s fifth-largest economy with 1.4 billion people, has once again shown its commitment to focus on green growth and lead from the front. Photograph by Biancoblue

88 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 HE UNION BUDGET 2023-24 is a transformative budget and it sets a clear direction for the economy for the foreseeable future. The most striking feature of the budget is its unambiguous bias for green and tech-driven growth. While the budget is big on investment in infrastructure and industry, it shows strong commitment to cleaning up and digitalising the economy. The Finance Minister Nirmala Sitharaman listed the government’s green priorities in her budget speech and she has backed up the intent with some specific allocations. She reiterated the government’s commitment to reducing carbon intensity of the economy and creating job opportunities through large-scale investments in green projects. It would involve a huge effort to achieve meaningful greening of energy, mobility, construction and farming itself. When the conventional economy is growing without creating proportionate new jobs, it is not surprising that the government is betting on a reinvention of the economy to do the job. Green Initiatives The budget has put money behind the government’s green initiatives meant to make India a net zero emitter and also reduce the dependence on imported fossil fuels. In fact, India’s economic and foreign policies have been hostage to external energy dependence since independence and the COLUMN T Transformational and Green Budget India is very much in the race for early mover advantage in the development of AI. The budget has made India’s bid a little more specific by providing for establishment of centres of excellence for AI in the country’s leading educational institutions By Shrinivas V. Dempo, President, AIMA & Chairman, Dempo Group

25 February 2023 | B W BUSINESSWORLD | 89 green alternatives hold the promise of facilitating substantial policy sovereignty for the country. The budget has provided Rs 35,000 crore for capital investment for energy transition and security. It is funding creation of green hydrogen production and providing viability gap funding for battery energy storage systems. It is also putting money into a transmission system to evacuate renewable energy from Ladakh, something that would not only deliver clean power to India’s industrialised states but also allow integration of Ladakh in India’s economic mainstream. The budget accelerates the drive to clean up transportation, which is desperately needed to protect public health and meet the net zero emission targets. The vehicle scrappage and replacement scheme announced a couple of years ago now has money behind it. Funds would now be available to the governments at the Centre and the states to get rid of their aged, polluting vehicles and replace those with new, cleaner, greener vehicles. Equally important is the offer of 25 per cent rebate on road tax for the vehicles bought to replace old ones. Changing the technology is the key to changing behaviour and it would help that the budget is favouring green transportation technologies. The continuation of the import duty exemption on machines and equipment for making lithium ion cells and batteries is a logical move. The allocation for the Faster Adoption and Manufacturing of Electric Vehicles scheme has been raised substantially. Intensive Digitalisation The budget also aligns the government with the relentless digitalisation and automation of economic activities. India is very much in the race for early mover advantage in the development and use of artificial intelligence (AI). The budget has made India’s bid a little more specific by providing for establishment of centres of excellence for AI in the country’s leading educational institutions. What is particularly encouraging is that the scheme would involve the industry in research, application development and the deployment of AI solutions at scale. The budget also dovetails the government’s AI efforts with its green agenda and sustainable cities is one of the identified areas for applying the AI solutions developed by the proposed AI centres of excellence. 5G, another emerging resource for intensive digitalisation, has received attention in the budget. The budget has announced the government’s intention to fund 100 labs in engineering institutions for developing 5G services and business models. The budget has promised to support development of applications for digital classrooms, precision agriculture, connected transportation and healthcare solutions. The budget also clarifies and cons o l i d a t e s t h e g o v e r n m e n t ’s approach to collection and use of public data, which is critical for a comprehensive digitalisation of the economy. The budget suggests that anonymised public data would be made available to startups and academic institutions for research and innovation. The budget also announced the creation of ‘Entity DigiLocker’ to get all businesses and trusts to store their documents where the government and other businesses could access those. However, investment in technology needs to be backed up with investment in the skills to use the technology. The budget would fund a new skill development scheme that will support industry’s involvement in training in coding, AI, robotics, Internet of Things, drones and other skills that are required by Industry 4.0. Public Investment Importantly, the budget has also maintained the continuity of the larger public investment push - it has raised the government’s capital expenditure by nearly a third - which would be crucial in dealing with the headwinds created by global economic slowdown, aggravating international conflicts, trade disruption and distortion, hardening monetary policies, and volatility in capital flows and exchange rates. The budget suggests that the government is leaning towards a green and smart solution to give the economy a new growth thrust and also insulate it from external shocks. Photograph by Everythingposs

90 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 N THE PREVAILING domestic and international economic environment, formulating the budget was riddled with several complexities. After the shocks created by the pandemic in two successive years, the economic disruptions caused by the Russian invasion of Ukraine and the sanctions following it, the Indian economy has had to meet the challenge of unsustainable levels of deficit and debt and declining trends in investments. In fact, the investment-GDP ratio of the country has shown a steady decline from 39 per cent in 2011-12 to 32 per cent in 2019-20. Although the economy has shown a remarkable recovery from the series of shocks and is one of the fastest-growing large economies after the pandemic and crossed the level of incomes that existed in 2019-20, it is still 7 per cent below the pre-pandemic growth trajectory. Global Growth Seen Slowing Internationally, the excess liquidity during the pandemic and the Russia – Ukraine war has led to sharp increases in prices and interest rates in the advanced economies, and continued restrictions in China have caused serious supply disruptions. The IMF has estimated the global growth for 2013 at 2.9 per cent and at least a third of the global economy is facing recession. The pressure of imported inflation combined with the withdrawals from foreign institutional investors have put greater pressure on exchange rates and prices. COLUMN I Signaling Growth with Macroeconomic Stability Given that public investment stimulates private investment by 1.2 times, the increase in capital expenditures provides a clear signal for the private sector to increase investments. Barring unforeseen circumstances, this should help in rejuvenating the public and private investment engines to accelerate growth… M. Govinda Rao, Chief Economist, Brickwork Analytics

25 February 2023 | B W BUSINESSWORLD | 91 Not surprisingly, the only engine of growth working in India is private consumption and given the bleak export prospects in a slowing world economy, the prospects of growth acceleration depend on rejuvenating investments. In this environment, the Budget had the unenviable task of providing impetus to investment by significantly increasing public investment while containing the fiscal deficit on the path of calibrating sustainable fiscal policy. Under these circumstances, the Finance Minister must be credited with undertaking a fine balancing act in the Budget. Considering the sharp increase in the subsidy bill last year on account of both food and fertilisers and increased MGNREGA bill, the fiscal deficit was contained at the budgeted level of 6.4 per cent of GDP. The increase in the subsidy bill on food and fertilisers totalled almost Rs 2 lakh crore over the budgeted figures. The fiscal deficit was contained at 6.4 per cent mainly due to higher tax collections to the tune of almost Rs 1.6 lakh crore. Another factor that helped to contain the deficit at 6.4 per cent of GDP was the higher nominal GDP estimate in the first advance estimate as compared to the assumption made in the Budget. While the 2022-23 Budget assumed the nominal GDP at Rs 258 lakh crore, the first advance estimate places it at Rs 273 lakh crore. Budget’s Big Capex Push The salient feature of the 2023-24 Budget is its thrust on capital expenditures while traversing the path of fiscal consolidation. The capital expenditure has been budgeted to increase by 37.4 per cent to 3.7 per cent of GDP and this comes on the back of 25 per cent increase last year. In fact, in the last four years, the ratio of capital expenditure to GDP has shown a steady rise from 1.7 per cent to 3.7 per cent. Given that public investment stimulates private investment by 1.2 times, the increase in capital expenditures provides a clear signal for the private sector to increase investments. Barring unforeseen circumstances, this should help in rejuvenating the public and private investment engines to accelerate growth, though exports will continue to be subdued during this year due to a global slowdown. The increase in infrastructure spending is budgeted even as the fiscal deficit to GDP ratio has been compressed by 0.5 per cent of GDP. In the 2020-21 Budget, the Finance Minister had promised to free the borrowing space to private businesses by containing the fiscal deficit at 4.5 per cent of GDP and this year, it is budgeted to be reduced from 6.4 per cent of GDP to 5.9 per cent. This has been done mainly by reducing the food and fertiliser subsidy bill. The fertiliser subsidy is budgeted to be lower by Rs 50,000 crore mainly due to lower prices of fertilisers. Tapering Food Subsidy The food subsidy bill is slated to decline by Rs 90,000 crore due to the policy announcement in December to discontinue the additional foodgrain provision under the Pradhan Mantri Garib Kalyan Anna Yojana. In addition, the allocation to the MGNREGA has been lowered by Rs 29,000 crore from Rs 89,000 crore in 2022-23 to Rs 63,000 crore in 2023-24 because, with the revival of economic activities in urban areas, the migrants are expected to return to urban jobs. Perhaps, to keep up with the fiscal adjustment path, it would have been better to front-load the fiscal adjustment this year because it may be difficult to make a significant reduction in the deficit in the election year. There are a number of other announcements made in the budget which may not have significant macroeconomic implications. The seven focus areas underlined in the budget are basically meant to spread the benefits across the spectrum of people with small allocations and many of them are in the state or concurrent list. The direct tax policy announcement is mainly aimed at incentivising taxpayers to opt for the new tax regime. Of course, a tax policy without tax preferences is simple and desirable and there is no need to provide options and increase the number of tax brackets. The customs duty changes are basically tinkerings, and the protectionist stance continues. On the whole, this is a budget that provides clear signals for rejuvenating investments while traversing the path of fiscal consolidation. (The author is also former director of NIPFP & Member, Fourteenth Finance Commission) Photograph by Bluebay2014

92 | B W BUSINESSWORLD | 25 February 2023 UNION BUDGET 23-24 UDGET 2023-24 strategised a structural shift in favour of capital expenditure (Capex) to push growth. Government Capex is known to generate higher multiplier effects. The RBI has estimated the central government Capex multiplier at 2.4 in the first year and at an even higher level in the second year. An increase of 37.4 per cent has been budgeted for Government of India’s (GoI’s) Capex. In addition, the GoI has incentivised the state governments to undertake Capex by providing them grants for capital asset creation amounting to 1.2 per cent of GDP, extending an interest-free loan for 50 years for Capex undertaken in 2023-24, and permitting them a fiscal deficit limit of 3.5 per cent of gross state domestic product (GSDP). However, alongside, GoI’s investment through its public sector enterprises has fallen from 2.3 per cent of GDP in 2019-20 to 1.1 per cent in 2023-24 budget estimate (BE). Considering both investment expenditures together, the extent of the increase is much less, rising from 4 per cent of GDP in 2019-20 to 4.5 per cent in 2023-24 (BE). We may recognise that the budget has supported demand through indirect channels as well. Some of these include the tax slab adjustment which may lead to an increase in disposable income especially in the lower middle-income segments and the crowding-in effects of the high government Capex which may COLUMN B Between Growth and Fiscal Consolidation The GoI has incentivised the state governments to undertake Capex by providing them grants for capital asset creation amounting to 1.2 per cent of GDP, extending an interest-free loan for 50 years for Capex undertaken in 2023-24, and permitting them a fiscal deficit limit of 3.5 per cent of gross state domestic product By D.K. Srivastava, Chief Policy Advisor, EY India