The budget 2019 will be Narendra Modi government’s last budget before the General Elections. These past 5 years of the present government have witnessed significant macro-economic changes including Demonetisation of the Indian currency, enactment of Indian Bankruptcy Code, RERA in housing, the roll-out of GST etc. Our country today is the fastest growing large economy and yet there is still a lot more to be done. We would want the budget to focus on creating the enabling conditions to further power the growth of India Inc.
Indian Home Furniture market at Rs 2.7 lakh crore is large and fast growing at over 13% per year. It is estimated that less than 10% of furniture is in the organised sector with only about 2% being sold through eCommerce. The category is yet unorganised; over 5 lakh small and medium enterprises (SMEs) manufacture furniture in India. We believe certain initiatives if chalked out in Budget 2019 can help Furniture eCommerce to grow over 100% in the coming years.
Unleash the Power of MSMEs
MSMEs are the original start-ups and embody the spirit of entrepreneurship. Our furniture manufacturers are artisans providing design quality that have no parallel across the world.
The absence of free-flow access to capital and higher cost of doing business have been core struggles for this sector. Earlier in September 2018 Finance Ministry has launched a web-based portal to make loans available to MSME within 59 minutes. Likewise, in the past weeks, RBI has made changes to its policies on risk assessment for MSMEs and required banks to provide lines of credit to MSMEs. We would expect a continuation of the momentum in this budget with focus to reduce interest rates/cost of borrowings to the MSME sector.
Fasten the pace of Infrastructure Development
Trucks in India on an average travel 200-km per day compared to 600-km per day in the developed world. This is also reflected in logistics cost in India which are around 15% as compared to 7-8% in the developed world. Next avenue of growth in India is trapped in Tier 2/3 cities in India. A world-class logistic infrastructure can unlock this demand propelling our country to double-digit GDP growth. We need to find all around solutions here; the budget should set targets which will increase the pace of highways development from the current rate of 30-35-km per day, invest in dedicated freight corridors connecting inland cities to ports, explore low-cost waterways through our rivers etc.
Make in India
Manufacturing has the potential to transform India into a Global Economic power. Industrial activity generates employment, keeps inflation under check while making India self-reliant. Our present Government has taken many steps to promote Make in India. The success of these initiatives has resulted in India now being ranked 77 on World Bank Global Index of Doing Business from being at a low of 142 in 2014. The Handicraft sector is where India enjoys a competitive advantage with over $2.42 billion of exports between April – November 2018 from this sector. There is clearly an opportunity to replicate our experiences from Special Economic Zone (SEZ) or State Industrial Development Corporations (SIDC) into Handicraft Sector with MSE-CDP development (Micro & Small Enterprises Cluster Development approach). More furniture clusters should be included in this scheme as Handicraft Processing Zones (HPZ) which addresses specific requirements of this sector including Skill Development, Intellectual Property protection, Simplified tax, marketing promotion etc. to tap growing India’s furniture market as well as exports.
(Ther writer is CFO, Pepperfry)