Overall, a positive roadmap for growth

Finance Minister Arun Jaitley was expected to spell out a path-breaking Union Budget that would rev up the engines of the Indian economy with ‘Make in India’, the mantra expected to drive manufacturing and jobs.

He may not have introduced ‘big bang’ reforms, but he has definitely cracked open the sluice gates for economic benefits to flow over the next few years. In that sense, the Budget is positive and directional for the promised acche din in the long term. Importantly, the finance minister has been able to address both the corporate and the social sectors in this Budget.

The Budget will improve business sentiment and spur investments by domestic as well as overseas players in the country through easier regulations and an improved tax regime.

The reduction of corporate tax from 30 per cent to 25 per cent and the rationalisation of various tax exemptions over the next four years is significant and is likely to encourage private investment.

The roadmap for a crucial tax reform, in the form of the Goods and Services Tax (GST), has been laid out and will bring India on a par with developed economies. GST would absorb most federal, State and local taxes by April 2016.

The finance minister’s decision to defer the implementation of the controversial GAAR by two years and its application prospectively from April 1, 2017, will reassure investors. The simplification of regulations around foreign investments will encourage the inflow of foreign funds. Additionally, the modification of the permanent establishment (PE) norm will encourage relocation of fund managers to India.

The introduction of a modern bankruptcy law and the appointment of an expert committee to prepare a draft legislation for replacement of the current tiered approval system with a pre-existing regulatory mechanism are welcome steps towards ease of doing business.

The setting up of the Atal Innovation Mission with an outlay of ₹150 crore is a step in the right direction, but it is more in the nature of modest seed funding to ‘Innovate in India’. The ₹1,000 crore self-employment and talent utilisation (SETU) fund for incubating startups is positive, but it will achieve its goals only if implemented effectively.

While these are positive developments, they fall short of giving a turbo boost to the ‘startup culture’ in India. The introduction of special incentives and tax sops for angel investors would have ushered in a more conducive startup environment

The finance minister rightly touched upon the fact that the ‘Skill India’ and ‘Digital India’ initiatives are drivers for ‘Make in India’. The thrust laid on indigenous defence production as well as the focus on renewable energy will certainly push forward the agenda for ‘Make in India’. However, I expected more granularity for the implementation of the ‘Make in India’ programme, which has been quite a disappointment.

The attention given to the infrastructure sector in this Budget is likely to give a push to ‘Make in India’ in the long run. The corpus of ₹70,000 crore allocated to infrastructure is expected to lead to the development of major infrastructure projects, including roads, railway networks and power plants.

The proposal to revitalise the PPP model for infrastructure development will definitely yield positive results for the sector.

Additionally, tax-free bonds in rail, roads and irrigation projects will bring much-needed funds for this critical sector.

‘Skill in India’ is a critical enabler for ‘Make in India’. This Budget has attempted to introduce certain measures to kick-start the skilling of youth in India.

With 54 per cent of India’s population being 25 or below, India can reap the demographic dividend through right skilling. Unfortunately, less than 5 per cent of our potential workforce gets formal skill training to be employable. The Budget announcement of a National Skill Mission and the ₹15,000 crore Grameen Kaushal Yojana targeted at skilling rural youth will address this huge unmet need.

The Budget has not made any significant increase in allocation for the healthcare sector. While there is intent within the government for an integrated healthcare system to ensure affordable and accessible healthcare for all, the Budget allocation for FY16 seems to reinforce the low priority that the health sector gets from the government every year. The Budget does not provide any significant impetus to R&D in the pharma and life sciences sectors.

The move from ‘Jan Dhan’ to ‘Jan Surakhsa’ is a big reform that will go a long way in ensuring social security for the poor and for senior citizens.

The proposed Universal Social Security System is perhaps the most important reform, which I hope will be linked to universal healthcare in the near future.

Enabling India to become a pensioned society from a pension-less society and encouraging health, accidental and life insurance are also landmark initiatives that need to be applauded.

Overall, the Budget is a clear roadmap for investment and growth.

However, the government must ensure implementation and delivery of all these proposals to take us to the promised destination. I will rate the Budget 7 on 10.

The writer is the CMD of Biocon

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