By Kiran Mazumdar-Shaw, CMD, Biocon
Finance Minister Nirmala Sitharaman’s Budget 2020 was directionally sound but needed to do more to jumpstart a stalling Indian economy.
The Budget aims to boost business confidence for India Inc. through various measures, including the proposal for a tax payers’ charter to prevent harassment by officials, increasing the investment limit of foreign portfolio investors (FPI) in corporate bonds, allowing sovereign wealth funds to invest in infrastructure and making the Dividend Distribution Tax (DDT) applicable to individuals instead of companies.
However, the Budget may not move the needle in terms of boosting consumption spending as the reduction in tax rates will not increase disposable income in the hands of the salaried middle class when exemptions are being withdrawn. Transferring DDT to recipients will also take money out of the hands of the retail investor.
So, while it’s true that the Budget will improve business sentiments, investments by India Inc. may take a few years to kick in, thus postponing economic recovery and the timelines for achieving a USD 5 trillion Indian economy.
On the other hand, the focus on technology, connectivity, infrastructure development, as well as, greater investments in healthcare and education were all steps in right direction and will play out in the medium to long-term.
Research and Innovation
What was heartening about this Budget were the investments announced towards harnessing the potential of Science & Technology for developing the kind of future technologies that will enable India to take a leadership position globally.
The five-year Rs 8,000 cr outlay for a National Mission on Quantum Technologies is a very important investment with huge future returns as it will advance our computational and analytical capabilities and enable us to join an exclusive global league of nations harnessing this futuristic technology.
At present, India lacks a reliable genetic information bank for research. Therefore, the proposal to create a comprehensive genetic database will be critical for next-generation medicine, agriculture and for bio-diversity management.
Technology and big data analytics can make research and development more efficient by analysing billions of datasets. This will now get a boost thanks to the FM’s proposed policy for setting up data centre parks throughout the country and the provision of Rs 6,000 crore for BharatNet in FY21.
However, several other specific measures are required to support innovation and address health challenges through biotechnology. Steps such as development for big data analytics skills for advanced diagnostics, innovation fund for MedTech start-ups to develop low-cost rapid diagnostic tests for rare diseases, creation of virus repository with genomic data, and extension of weighted tax deduction for R&D activities outsourced to laboratories or contract research organisations, should have been considered by the government.
Positive for Healthcare
The good health of the nation is essential for economic progress. The rollout of the Ayushman Bharat scheme in 2018 by the NDA government was a big step towards introducing universal healthcare coverage in our country. This year’s Budget has attempted to build on it.
The expansion of health infrastructure in tier II and III cities via public private partnership (PPP) model and upskilling of healthcare personnel will strengthen the Ayushman Bharat program. The use of Machine Learning and Artificial Intelligence for preventive healthcare along with increasing the number of Jan Aushadhi Kendras will take forward the government’s agenda of healthcare for all.
The government has also tried to address the critical issue of shortage of qualified medical doctors in India by proposing the setting up of medical colleges with district hospitals under the PPP model.
Immunization is an important aspect of preventive healthcare and the government’s decision to include five new vaccines and expand the number of diseases in the Indradhanush scheme to 12 shows the commitment of the government towards increasing immunization coverage in India.
Although the government has increased the outlay for healthcare by around 10% from last year to Rs. 69,000 crores, which includes Rs. 6,400 crores for Ayushman Bharat, more funds are needed to address the huge unmet needs of this sector. Much more needs to be done to build high quality healthcare infrastructure, and better accessibility and affordability of healthcare facilities, medicines and diagnostics to people. The government needs to invest much more if it wants to attain the target of healthcare spending reaching 2.5% of GDP by 2025 from about 1% currently.
Steps to Improve Quality of Education
The allocation of Rs 99,300 crore for education and Rs 3,000 crore for skill development in FY21 is also a welcome step as is the proposal to attract external commercial borrowing and foreign direct investment (FDI) in the education sector.
Boost to Rural Economy
Boosting rural consumption required the government to increase its expenditure on various schemes. While the Budget had a slew of measures for the agricultural economy, the outlay for the non-agricultural rural sector increased to Rs 1.23 trillion compared to Rs 1.17 trillion last year.
Giving Startups a Helping Hand
This Budget offered incentives to strengthen the existing startup ecosystem by increasing the turnover limit for startups to claim tax exemption from Rs 25 crore to Rs 100 crore and for up to a period of 10 years from incorporation as opposed to 7 years earlier. It also recommended a five-year tax holiday on ESOPs.
The measures announced in this Budget can give returns in the medium to long-term. However, we need to make sure that they are implemented fast to have the necessary impact.