Opinion: Bornali Bhandari KS Urs Ajaya K Sahu & Samarth Gupta
The NCAER Business Expectations Survey (BES) closely tracked firms throughout the pandemic period on a quarterly basis trying to understand the challenges that they faced how they adapted and whether they were able to leverage government benefits targeted at them.
After the second COVID-19 wave business sentiments recovered in 2021–22:Q2 as compared to those prevailing in 2021–22:Q1. The NCAER Business Confidence Index (BCI) increased by 90 per cent on a quarter-on-quarter basis and by 80 per cent on a year-on-year basis. Furthermore BCI is now higher than the pre-pandemic level in 2019–20:Q2 signalling recovery from the worst of second COVID-19 wave.
The NCAER Business Expectations Survey (BES) closely tracked firms throughout the pandemic period on a quarterly basis trying to understand the challenges that they faced how they adapted and whether they were able to leverage government benefits targeted at them. In this article we focus on two things – (i) government pandemic measures & their relevance for firms and (ii) firms wish list from Budget 2022.
Availing benefits from policy measures
The government had announced several measures for firms including subsidised rate or special credit facilities greater repayment flexibility or extended loan tenures postponement of filing taxes and reduction in penalty on overdue Goods & Services Tax filing. In Round 118 of the NCAER BES we had asked firms to evaluate to rate the perceived benefits of key policies on a scale of 1 to 5 with 1 being least beneficial and 5 being most beneficial. Policies were found to have significant benefit when firms rated them 4 or 5.
Wish list from the government for Budget 2022
As the pandemic abates and economic conditions improves policy set may require changes to support firms. Among the various policy options 83% firms responded that they wanted the GST process simplified. Thus easing regulatory burden or business rules was the top priority of firms. This was followed by some measure of financial support. Around 63.5% of firms wanted wage support and 54% firms wanted the government to provide financial grants to sail through the crisis. Interestingly only 48% firms require tax holidays while 32% firms responded that they wanted favourable custom duties/import tariffs.
In sum the relevance of the policies announced by the Government in the immediate aftermath of the pandemic was varied. Only two policies namely ‘postponement of filing taxes’ and ‘reduction/waiver of late payment penalties’ were perceived to be significantly beneficial by slightly more than 50% of firms. Further easy credit availability either through credit guarantee scheme or market innovation of factoring did not appear to be of significant interest to firms. Thus cost reducing measures appeared to have benefited the firms more than capital infusion policies.
Juxtaposing the perception of benefits against wish list in the future we find that capital infusion or monetary support were not the most preferred options. Instead easing regulatory burden by simplifying GST procedures may gain better yields. This not only improves ease of doing business but also improves further tax collections.
Bornali Bhandari is Senior Fellow KS Urs Associate Fellow and Ajaya K Sahu is Senior Research Analyst at NCAER. Samarth Gupta is a former Associate Fellow at NCAER. Views are personal.