Driving Economic Momentum: Union Budget's Role in Supply Chain Innovation

Driving Economic Momentum: Union Budget's Role in Supply Chain Innovation

Rahul Garg , Founder & CEO, Moglix, 0

First-generation entrepreneur Rahul Garg established Moglix in 2015 with the goal of revolutionizing B2B industrial distribution for the manufacturing sector by putting technology first. Rahul held a leading position at Google Asia for five years prior to founding Moglix, during which he successfully established the Advertising Exchange and significantly influenced the company's sales strategy. As one of the biggest and fastest-growing businesses in Asia today, Moglix specializes in the digital transformation of supply chain and procurement procedures.

Rahul has received multiple honors for his noteworthy contributions to the expansion of B2B e-commerce, including Forbes Tycoons of Tomorrow, Business World Young Entrepreneur, IIT Kanpur Distinguished Alumnus Award, and Fortune 40 under 40 Leader. He is the Head of the CII Delhi Startup Committee at the moment.

As India races towards its $ 4 trillion GDP target in 2024, the spotlight falls on the upcoming Union Budget - a fiscal compass holding the power to transform the nation's industrial landscape and supply chain infrastructure. Let’s delve into the expectations of the supply chain industry, dissecting key areas where strategic incentives and allocations can unlock immense potential.

Boosting Manufacturing Prowess
The success of India's manufacturing sector is intertwined with its ability to adopt new technologies and increase capital expenditure. The upcoming budget should prioritize policies that incentivize companies to invest in modernization and technological upgrades. One effective measure is to enhance depreciation rates on new machinery and equipment, providing faster write-offs and improving return on investment. Additionally, investment allowances on capital expenditure beyond specified limits can offer tax benefits, encouraging companies to invest in plant, machinery, and technology, furthering the ‘Make in India’ vision in the process.

Subsidized loans and lower interest rates for technology adoption and capacity expansion should be considered, along with weighted tax deductions on research and development (R&D) expenses for new technologies. To bridge the talent gap, the budget should support skill development programs for the workforce, ensuring a skilled and competitive manufacturing sector.

Building a Robust Transportation Network
Transportation infrastructure is the heartbeat of a seamless supply chain network. The budget should prioritize developing dedicated freight corridors to efficiently connect ports with consumption centers. Incentives for public-private partnerships in highways, logistics parks, and cold storage facilities can unlock private capital and bridge infrastructure gaps. Investing in first-mile and last-mile connectivity will further optimize the flow of goods. Digitization, through adoption of GPS, RFID, and IoT, can offer real-time visibility and streamline processes. Initiatives like Direct Port Delivery and Direct Port Entry hold immense potential, requiring accelerated implementation. With targeted budgetary allocations and progressive policies, the Indian supply chain can shed its inefficiencies and embrace cost-effectiveness.

Empowering MSMEs and Startups
MSMEs and startups are the unsung heroes of India's economic growth. Extending credit guarantee schemes with longer tenures will ensure easier access to finance. Raising the turnover limit for tax exemptions and reimbursements can ease their cash flow burdens. Streamlining GST procedures and reducing rates can further alleviate administrative overheads. The budget
should incentivize private equity and venture capital inflows through tax breaks and relaxed FDI norms, boosting risk capital availability for startups. Continued budgetary support for schemes like Startup India and Stand-up India, coupled with robust policies focused on access to capital, growth incentives, and handholding support, will reignite the entrepreneurial spirit and drive job creation.

Fueling Emerging Industries
The upcoming budget presents an opportune moment to provide strategic incentives for emerging sectors like EV, renewable energy, and IoT automation. Extending schemes like FAME with higher outlays for EVs and increasing funds for charging infrastructure development are essential steps. Higher budget allocations for the PLI scheme for solar PV modules will boost domestic manufacturing, and similar schemes can be expanded to wind energy and batteries.

I expect a higher outlay on local manufacturing of railway coaches for Amrit Bharat and Vande Bharat trains, development of railway stations, airports, and ports.

Fiscal incentives for domestic IoT hardware production and increasing Renewable Purchase Obligations for DISCOMs are essential for nurturing these sunrise sectors. Viability gap funding for biomass and waste-to-energy projects will catalyze growth, fostering a sustainable and technology-driven future.

Optimizing B2B Logistics and Warehousing:
High logistics and warehousing costs can hamper the competitiveness of B2B companies. The budget can address this by increasing allocations for infrastructure development, including dedicated freight corridors, logistic parks, and cold chains. There should also be a focus on providing tax incentives for 3PL companies investing in warehousing solutions, and simplifying GST procedures for goods transport and warehouse operations.

Addressing these regulatory procedures and frameworks will make supply chains across the country more efficient and enable India to reach its targeted seven percent real GDP growth rate comfortably.

The future for the sector lies in adopting AI, robotics, and automation in warehousing facilities. The budget can provide funding support for such technological advancements, alongside Viability Gap Funding for developing large, modern warehousing hubs. Subsidies for electricity and capital costs in developing fulfillment centers around metro cities can further optimize warehousing costs.

Conclusion: Unlocking the Growth Engine
With bold vision and well-defined policies, the 2024 budget can be a defining moment for India's supply chain. By nurturing manufacturing prowess, building a robust transportation network, empowering MSMEs and startups, and fueling emerging industries, the budget can pave the way for a cost-effective, efficient, and globally competitive supply chain ecosystem. This, in turn, will fuel the nation's economic growth, create jobs, and unlock India's true potential as a manufacturing and technological powerhouse on the world stage.

The union budget 2024 is likely to sustain the infrastructure spending spree. I expect a greater approved budget for NHAI to reduce borrowing and therefore road development project costs. Also, I expect a higher outlay on local manufacturing of railway coaches for Amrit Bharat and Vande Bharat trains, development of railway stations, airports, and ports. Combined with an interest rate cut by the RBI the budget will be one among a long series of budgets for transforming India’s manufacturing and infrastructure sectors and push for India’s green transition. The honorable FM may like to consider the simplification of the regulatory framework for IPOs, for startups to leverage the power India’s equity markets.