Finance Minister Nirmala Sitharaman has presented a well-thought-out Budget that lays the foundation for long-term growth that is both sustainable and inclusive amid global economic headwinds. It has addressed several critical aspects of the economy to establish a conducive business environment marked by macroeconomic stability.

The 33 per cent hike in capital investment outlay to Rs 10 trillion for FY24 can stimulate a virtuous investment cycle, leading to job creation. To further spur infrastructure creation, the finance minister announced a capital outlay of Rs 2.40 trillion for the Indian Railways, gave a push for the revival of air transport infrastructure, continued the 50-year interest-free loan to state governments for another year, proposed a Rs 10,000 crore per year Urban Infra Development Fund for Tier 2 & 3 cities.These projects’ speedy and efficient implementation can kick-start a multiyear capex cycle in India by crowding in private capex investments.

The FM has also sought to spur private consumption by providing income tax relief to the salaried and middle class, including an increased threshold for personal income taxes for citizens who have opted for the new tax regime. Under the new regime, those with an annual earning of under Rs 7 lakh will no longer have to pay income tax. The tax measure is expected to boost consumption, as it will put money into the hands of people at a time when inflation has been eroding disposable incomes.

She proposed the rollout of a next-generation Common IT Return Form to improve taxpayer convenience further. To advance its share and value in global pharma trade, the Indian pharma has been urging the government to prioritise schemes that boost R&D in advanced therapeutics such as biologics, biosimilars, precision medicine, cell and gene therapy, mRNA vaccines, genomics, orphan drugs, complex generics, antimicrobials, and others.

This year’s Budget has sought to address this demand by announcing a new program for promoting pharmaceutical research and innovation through Centres of Excellence. The encouragement offered to the industry to invest in R&D in specific priority sectors is also very welcome, and the industry awaits the details of the incentives to be announced.

The opening of select ICMR (Indian Council of Medical Research) for research with public and private medical faculties is also a welcome step to enhance industry-academia linkages. The focus on research in pharma in Budget 2023 is in addition to the increases in the allocation to Production Linked Incentive (PLI) schemes for the KSMs & APIs, and medical devices. 

These measures can not only strengthen India’s current position as the ‘Pharmacy of the World’, they could also lay a strong foundation for a discovery-oriented and science-driven approach to ‘moonshot’ areas in pharmaceuticals. The finance minister must be commended for sticking to the path of fiscal consolidation ahead of the general elections next year. Her Budget targets a half per cent reduction in fiscal deficit to 5.9 per cent in FY24. She has also reiterated her commitment to meet a medium-term goal of reducing the deficit further to under 4.5 per cent by FY26.

The Union  finance minister also signalled her intent to remove bottlenecks and improve the ease of doing business. She said the government has reduced 39,000 compliances for companies and decriminalised over 3,400 legal provisions. She also focused on trust-based governance via the Jan Vishwas Bill and the amendment of 42 Central Acts, which will reduce regulatory cholesterol.These initiatives are welcome when India is improving on the World Bank’s ease of doing business rankings and is currently in the 63rd spot.In Budget 2023, the FM has laid the groundwork for long-term, sustainable and inclusive growth.

Kiran Mazumdar – Shaw

The article first appeared in The New Indian Express on February 03, 2023.

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