Press release from Business Wire India
Source: Biocon Limited
Monday, February 28, 2011 05:51 PM IST (12:21 PM GMT)
Editors: General: Consumer interest, Economy, Politics, Social issues; Business: Accounting & management consultancy services, Banking & financial services, Business services, Financial Analyst, Stock exchanges
A Play-it-Safe Budget with no Bold Reforms: Kiran Majumdar Shaw
Bangalore, Karnataka, India, Monday, February 28, 2011 — (Business Wire India) — Striving to augment growth in the face of rising inflation and falling investor confidence, India needed Finance Minister Pranab Mukherjee to deliver a 2G Union Budget – a bold statement from the UPA government that addressed Growth and Governance. Unfortunately, all he has is delivered is a ‘play-it-safe’ budget by balancing his books, containing the deficit, averting subsidies and creaking open the door to foreign investment in Indian mutual funds.
While Mr Mukherjee has increased allocation for the social sector – which is a welcome step to enable inclusive growth – the fact remains that this enhanced outlay will not have an immediate impact. Moreover, the quantum of the hike in some areas is too insignificant. Rs 300 crore here and there is not going to make a difference in a country like India, with its large population and significant problems. Thus, the Budget has made cosmetic pronouncements when it comes to clean energy and higher education, without offering these crucial sectors the means with which they can bring positive change.
For a government that started its term with meaty pronouncements on the need for reform, this was an opportunity for the UPA government to take some long overdue and bold decisions in retail, insurance and infrastructure. It was a platform for the government to back up its pronouncements on growth and employment with bold budgetary rollouts in manufacturing and services. Not only would this have been welcomed by foreign investors but it would also have introduced strong growth traction in the economy.
The Indian Growth Story has been sustained by foreign direct investment, as investors across the world clamored to partake in the dividend offered by the country’s growth. Now, we seem to have lost the plot – even as other emerging markets are managing to garner higher foreign investment, we are failing to compete and seem to have lost our policy momentum. The result? In the past 2 months alone, $2 billion dollars have been taken out of the stock market. In 2010, FDI reduced 30 pc to $24 billion. These are very dangerous signs, reflecting a reality where investors are losing confidence and we cannot afford to be complacent. This budget needed to take steps to attract FDI back to India, especially in the retail and insurance sectors. However, apart from allowing FDI in MFs, Mr Mukherjee has failed to take any step towards this end.
Beyond growth, India’s sizeable population of youth requires jobs, which cannot be created by the government. The government can only enable jobs by setting a job-oriented tone for sectors that create jobs, such as retail and manufacturing, which are again largely absent in this Budget. While the finance minister is promising that the government will come out with a manufacturing policy, which is a welcome sign, we don’t know what it entails.
The Budget has been disappointing for the corporate sector. What is deeply distressing is that he has taken several retrograde decisions in this Budget. Not only has he increased MAT for the corporate sector, but he has also brought SEZs under the MAT ambit. SEZs augur well for exports, enabling development by generating employment, attracting investment and upgrading technologies. However, today SEZs are lost in the maze of ad-hoc policy and questionable practices.
This Budget has also let down the healthcare sector, which has not seen anything concrete beyond the increase in allocation and the extension of health insurance to NREGA workers. Instead of taking measures such as extending health insurance to all Indians and setting up an integrated healthcare system to ensure affordable and accessible healthcare for all, Mr Mukherjee has taken pot shots at easy targets such as bringing health check-ups and diagnostics under the service tax net.
The Minister has totally excluded the promising Biotechnology sector, failing to make provisions for the funding the industry requires. Incentivising R&D by providing a 5-year tax holiday on products developed in-house, venture funding, zero duty on R&D equipment, and a longer tax-free allowance for biotech SEZs are steps that have been totally ignored. No steps have been taken to enable scientific and technological advances or boost innovation. The government is failing to back its pronouncements with actual steps, leaving the pronouncements as mere rhetoric.
This Budget has not taken any imaginative decisions that can make a difference to India, its citizens and its industry. I would rate this budget no higher than 5.5 on a scale of 1 to 10. The UPA government will have to do a lot more to supercharge India and enable inclusive growth.
Kiran Majumdar Shaw
CMD, Biocon Group
CONSUMER, ECONOMY, POLITICS, SOCIAL, CONSULTANCY SERVICES, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES
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