By Kiran Mazumdar-Shaw, Executive Chairperson, Biocon
It was very encouraging to see such a pragmatic, growth-focused budget that addresses the key need to boost economic recovery in the aftermath of the COVID-19 impact. This has been reflected in the market cheer following the announcement. The budget covers the major segments which needed redressal with big investments in infrastructure, healthcare and manufacturing, to be largely funded through an increase in the fiscal deficit. This is an appropriate time to unleash capital expenditure in a predominantly benign interest-rate scenario.
Focus on Healthcare
Healthcare spending has been allocated a much-needed increase of over 137% with Rs 2.23 lakh crore directed towards health and well-being. I hope this is not a one-time spike but part of a trend that will take public spending on healthcare to the targeted 2.5% of GDP by 2024.
Included within this is the Rs 64,180 crores outlay over the next 6 years to develop primary, secondary and tertiary healthcare systems through the centrally-sponsored PM Atma Nirbhar Swasthya Bharat Yojana, which will strengthen disease surveillance, detection and cure.
We need to remember that India has one of the highest levels of out-of-pocket expenditure on healthcare in the world, which contributes directly to the high incidence of catastrophic expenditures and poverty. As pointed out in the Economic Survey, an increase in public health expenditure from the current levels of 1% to 2.5-3% of GDP can reduce out of pocket expenditure from the current level of 65% to 35%.
The allocation of over Rs 35,000 crore towards COVID-19 vaccination is another positive and reflects the Government’s strong focus on immunisation. We do not have a shortage of vaccines in India unlike many other countries globally, and the need of the hour is to deploy these vaccines at scale and speed. We have seen how the private sector helped scale up COVID-19 testing in the country. COVID-19 vaccination can be similarly ramped up if the government involves the private sector in the immunisation drive, to ensure the vaccines reach the at least half the country’s 1.3-billion population in the shortest period of time.
I think Rs 35,000 crore is a serious budgetary allocation that needs to be spent wisely beyond vaccine procurement. We need to utilise these funds well and include creating cold chain infrastructure and digital platforms for surveillance and pandemic preparedness. Post 2021, we need to allocate such funding to immunise our population for various viral diseases as well as NCDs like cancer, diabetes, cardiac and respiratory illness. Increasing healthcare spend in procuring Covid-19 vaccines this fiscal is directionally vital and I welcome this massive support for a preventive healthcare strategy. Further, this budget has gone beyond direct healthcare and addressed well-being through a focus on sanitation, nutrition and pollution control.
Boost to Public Sector R&D and Innovation
Finance Minister Nirmala Sitharaman spoke about ‘Innovation and R&D’ as one of the six important pillars of Budget 2021 and unveiled several measures to strengthen the public research and innovation ecosystem of India. This is timely as research and innovation will add value to our economy in the long run and help the country achieve self-reliance thus realising Prime Minister Narendra Modi’s dream of ‘AtmaNirbhar Bharat.’
The budget allocates Rs 50,000 crore to the National Research Foundation (NRF) to be spent over a period of 5 years. The NRF has been envisaged as an umbrella body that is expected to fund research across a range of disciplines, from science and technology to humanities. It has also been tasked with seeding and building research capacity at universities and colleges.
While this is a very welcome development and will strengthen the research and innovation ecosystem in the country, I am a bit disappointed that the private sector did not receive any kind of R&D-related incentives. I believe the private sector has a very important role to play in research and innovation in India. In addition, a much stronger focus on industry-academia partnerships is an absolute must for a robust research and innovation ecosystem in India.
The latest Economic Survey has also pointed out that India must give a significant thrust to innovation if it aims to become the third-largest economy in the world.
To spur research and innovation, the government needs to provide fiscal incentives, such as the tax credits and enhanced tax deductions, for India Inc to effectively leverage R&D to create valuable intellectual property.
Strengthening Infrastructure
It was good to see infrastructure given such a major boost given its critical role in any economic recovery. The Finance Minister has budgeted for a 26% increase in capital spending in order to spur economic growth through generating demand, creating employment and the resulting multiplier effect.
Public infrastructure including roadways, railways, ports and airports received the lion’s share of this allocation along with the creation of a new Development Finance Institution (DFI) to spearhead government spending in infrastructure.
Incentivizing Start Ups
The Finance Minister rolled out tax incentives for startups with respect to capital gains as well as a tax holiday for qualifying as an eligible start up. This will act as a boost for promoters and investors of startups, providing some relief in these difficult times and aiding their growth and expansion.
The budget also proposed the incorporation of one-person companies and relaxing the minimum holding of share capital or voting rights in the startup from 50 per cent to 25 per cent. Beyond that, however, the Budget did not do much to directly benefit the startup ecosystem in the country.
Conclusion
I think the Finance Minister has done well to focus on investment in infrastructure, healthcare and other mega projects. In order to fund these investments, the budget clearly addresses the need for divestment, privatisation and monetisation.
Timing is extremely critical to bringing back the jobs lost to the pandemic. The government must speed up the process of monetization of assets so that it can invest in all the sectors as planned. Taken together these measures will be able to spur a V-shaped growth recovery of the Indian economy after the COVID-19 hit. Overall, this was a reassuring budget with no negative surprises that has buoyed all-round sentiment.
