Expectations from the first Budget in the second term of the UPA government were rather high given the suggestions in the Economic Survey recently tabled in Parliament. Expectation was that this would be a legacy Budget of Manmohan Singh’s government. The Budget did not quite reach there but is certainly moving in the right direction.
My expectation was that the Budget would provide stimulus to the economy while providing for inclusivity but with fiscal prudence. The finance minister no doubt had to walk a tightrope given the fiscal deficit of 6.8% and the challenge to get the GDP back to the 9% growth trajectory. While the fine print of the Budget is yet to be analysed, the fact is that the direct taxation elements add up to revenue neutral while the indirect taxes provide Rs 2,000 crore. It keeps one guessing as to where the resources will come from for such huge investments, example investments in infrastructure which are now expected to be 9% of GDP. There is no roadmap for this just. Neither is there one for reducing the fiscal deficit from the current 6.8%.
As in education the need is for equity, access and excellence, so is it for healthcare; only health is a much more emotive subject. The resources provided to bridge the yawning gap between investments required to improve healthcare infrastructure, improve access to medicines and encourage healthcare insurance, are inadequate. In fact, there is no mention of the UPA government raising healthcare investment to 2-3% of GDP.
The investments made to improve the literacy rate by 50% for women in rural India is very laudable as are the incentives for loans for higher education and investment for additional IITs. Introduction of GST by April 2010, abolishing of FBT and Commodities Transaction Tax are all very positive developments for industry as a whole. There are several positive measures for industry in general and the pharmaceutical industry in particular and we thank the finance minister for these. Increase in the outlay for the National Rural Health Mission and the Rashtriya Swasthiya Bima Yojana will help marginalise better access to healthcare. The proposed reduction in transaction costs for some therapeutic formulations and bulk drugs is a step in the right direction. The tax incentive for setting up cold chain warehousing facilities is also beneficial to the pharmaceutical industry as there are several drugs that need a cold chain.
Of course, there are some that remain on the wishlist like increase in the R&D weighted deduction to 200%. This would provide a boost to local R&D and help companies active in this space move up the value chain.
Some of the key policies announced are outside the Budget and we will have to wait and watch. There are also some questions which remain unanswered:
* Is it a growth oriented Budget?
* Will the Budget foster price stability?
* Will it come good on inclusiveness?
* Does it facilitate foreign trade?
* Will it create increased employment opportunities for the youth?
While the market in its collective wisdom has given the Budget a thumbs down on day one, all in all it is a positive consumption oriented Budget and we hope that the government will continue to propel the country on to a higher growth trajectory.
?The writer is vice chairman & managing director, Novartis India Ltd