The Budget that will be presented on February 1, 2019 will have to factor the forthcoming general elections and I therefore expect it to be populist in nature. The Agriculture, Healthcare and Education sectors are likely to receive priority attention. However, I do expect certain Industry sectors like the MSME and Start-ups to receive a number of fiscal incentives. The Angel Tax is likely to go and the IT exemption threshold is likely to be raised to ?5 lakhs. Additionally, I expect GST simplification to 2 slabs and some exemptions on filing frequency for the MSME sector.
Healthcare: Budgetary allocation to healthcare should be increased in line with the public health spending target of 2.5% of GDP by 2025. The Ayushman Bharat program, introduced last year, is a great initiative which needs to be funded well. Last year’s Rs 2,000 crore allocation for the Pradhan Mantri Jan Arogya Yojana (PMJAY) is grossly inadequate, and needs to be raised to at least `10,000 crore in order to provide cashless health insurance to 100 million poor and vulnerable families. Under PMJAY, the government has defined medical package rates for 1,350 procedures covering surgery, medicines and diagnostics. These prices need to be revised up to offer sustainable margins to private healthcare providers that have been empanelled to implement the scheme. The government should also exempt drugs to treat non-communicable diseases (NCDs) especially cancer and Diabetes from the Goods and Services Tax (GST) to ensure they are affordable and accessible for larger patient pools.
Startups: This Budget needs to offer incentives that can strengthen the existing Startup ecosystem, to enable a smoother transition from an incubator to commercial success. The government’s flagship Startup India scheme that offers income tax exemptions for a short period is not good enough. The government needs to look for socio economic returns from Startups by way of new jobs created by them and direct and indirect taxes paid to the government by them.
Recently, tax authorities have started issuing demand notices to Startups to pay ‘angel’ tax, further vitiating the atmosphere. Taxing angel investors is a retrograde step as it will further dry up the funding stream for Startups struggling to get VC funding. In fact, about 300-400 Startups access angel funding every year. Imposing a tax on angel investments will only drive them away.
Instead the government needs to give at least a 10-year tax holiday for angel investments in all DIPP-registered Startups.
Science & Technology: Science & Technology is of strategic importance for the country’s future. But research project proposals are either facing funding delays, receiving partial funding or no funding at all. This does not augur well for a country where R&D spending has stagnated at around 0.65% of GDP for two decades, much below other economies at a similar level of development.
The Budget should raise the outlay for Science & Technology to kick-start a virtuous cycle of basic and applied research that drives world class innovation.
GST Rationalization: There is an urgent need to reduce the complexity of the GST and rationalize rates if the tax is to deliver on its promise of ensuring ease of business. Bringing the tax slabs down to two will simplify the system, improve tax compliance and benefit all stakeholders.
Digital Economy: Incentives should be announced to complete India’s transition to a robust digital economy characterized by faster economic growth, more jobs, and better services. With India’s smartphone user base to cross 700 million by 2020, there is a great opportunity for digital transformation. The Budget should also give a push to agri-technologies that enable transparent price discovery in commodity markets as well as help farmers increase cop yields.
A forward-looking Budget that addresses the larger interests of the nation will signal that the government is committed to its long-term vision of a robust Indian economy.
The author is Chairperson and MD, Biocon Limited...