Finance Minister Nirmala Sitharaman presented a Budget that was directionally sound but may not expeditiously revive the Indian economy.
The Budget has boosted 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in tax rates will not increase disposable income in the hands of the salaried middle class when exemptions are being withdrawn.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 $5-trillion Indian economy.
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 ₹6,000 crore for BharatNet in FY21.
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 ₹25 crore to ₹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 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. The expansion of health infrastructure in tier II and III cities via 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 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.
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.
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.
(The writer is a CMD, Biocon)