Photo: Bloomberg
Photo: Bloomberg

Opinion | A directional Budget that doesn’t go far enough to kick-start economy

For the short-term, the budget could have done more to boost consumption

This year’s budget was directionally sound, but could have done more to jump-start a stalling Indian economy. The focus on technology, connectivity, infrastructure development, as well as greater investments in healthcare and education, were steps in the right direction and will play out in the medium- to long-term. For the short-term, the budget could have done more to boost consumption by putting additional money in the hands of individuals and boosting the export sector. It did neither. Also, the investment commitment in this budget was not enough to spur the growth needed to achieve a $5-trillion economy by FY24.

Though the finance minister changed personal income-tax rates, I don’t think it would do enough to increase disposable income in the hands of the middle class, especially when exemptions are being withdrawn. Shifting the dividend distribution tax (DDT) to individuals from companies will make it difficult for individuals to hang on to more money, thus potentially offsetting the benefits from the income tax rate changes.

At the same time, the minister’s proposal of a “taxpayer charter" and the promise to end tax harassment through proposed amendments to the Companies Act for removing criminal action would reassure and infuse trust among India Inc.

However, what was heartening about this budget were the investments announced towards harnessing the potential of science and technology, for developing the kind of future technologies that will enable India to take a leadership position globally. The five-year 8,000-crore 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 and agriculture and for bio-diversity management.

Technology and big data analytics can make research and development more efficient by analysing billions of data sets. This will now get a boost because of the minister’s proposed policy for setting up data centre parks throughout the country and the provision of 6,000 crore for BharatNet in FY21.

The good health of the nation is essential for economic progress. The rollout of Ayushman Bharat in 2018 was a big step towards introducing universal healthcare coverage in our country. This year’s budget has attempted to reinforce health infrastructure by proposing a viability gap funding (VGF) window for setting up hospitals in aspirational districts, where there are no Ayushman-empanelled hospitals. To address the shortage of qualified doctors, it also proposed a VGF for setting up medical colleges under the PPP model. Special bridge courses for teachers, nurses, para-medical staff, and caregivers will boost the Ayushman Bharat programme. The use of machine leaning 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. However, the 10% increase in the healthcare budget to 69,000 crore is not enough for India to achieve its aspiration of raising public healthcare spending to 2.5% of gross domestic product (GDP) by 2025 from around 1% now.

The allocation of 99,300 crore for education and 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 in the education sector.

While the budget had a slew of measures for the agricultural economy, the outlay for the non-agricultural rural sector increased to 1.23 trillion compared to 1.17 trillion last year.

It was disappointing to see that there was nothing for the private sector to boost exports. When China is going through this huge slowdown, aggravated by the coronavirus outbreak, the budget should have announced export incentives such as a five-year tax holiday to make exports from India more competitive.

The minister has tried to do her best. She held the fiscal deficit for FY20 at 3.8% of GDP, versus the planned 3.3% target. However, I feel she could have relaxed the fiscal deficit a bit more and put more money to boost the economy. If we start utilizing this budget diligently and implementing on this budget rapidly, we can see economic revival. However, if they are going to take a long time to implement what is stated, I fear it won’t serve the purpose.

Kiran Mazumdar-Shaw is chief executive officer and managing director at Biocon.

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