A stalled global economy, coupled with political and financial crises across geographies, has certainly put a spoke in the wheels of India's growth path. The Indian economy has seen inflation soar, the fiscal deficit widen, the rupee fall, markets slide, growth falter — resulting in an investment sentiment that has hit a new low.
The CII-Business Confidence Index for the third quarter of 2011-12 declined to 48.6 from 53.6 in the previous quarter. Investment proposals plunged 45 per cent to a five-year low. India's GDP growth fell to 7.3 per cent in the first half of the current financial year as against the budgetary target of 9 per cent and is estimated to end this fiscal below 7 per cent.
Adding to this, political bickering and scandals kept the Government in fire-fighting mode, paralysing economic reform and key policies.
The slowing economy is not just hurting business and industry, but also India as a whole. Although our economic fundamentals remain strong, the Government must act now to take the India growth story forward – or, much of the progress we have made will be frittered away. The Finance Minister, Mr Pranab Mukherjee, needs to bring in a Budget that restores the world's confidence in India as a country open for business with a Government that is serious about advancing the economy.
Industry needs a boost with tax incentives and policies that lead the way to sustained growth through increased investment. As an industry, biotechnology makes an immense contribution to India, both economically and in terms of its varied medical and agricultural benefits. The industry recorded a searing pace of growth in the past five years in 2010-11 to touch revenues of $4 billion. As India leverages its low-cost-high-value advantage in biotechnology, the industry is well-poised to accelerate growth and climb up the value chain.
However, the Government needs to take steps to enable the industry become a world leader.
Extend tax incentives: A resource-intensive industry with long gestation periods for new products, biotechnology needs support for R&D to encourage the discovery and development of affordable drugs in India. The Government needs to provide a range of tax benefits – extending until at least 2017 the 200 per cent weighted deduction on R&D to provide an impetus to research, extending the 100 per cent tax-free status for Biotech Special Economic Zones (SEZs), exempting SEZ Biotech units from MAT, and continuing tax incentives on STP exports for an additional five years.
Remove duties on imports for life-saving drugs: The Government needs to address the anomaly with respect to the Customs and Excise duty levied on raw materials and components used by domestic manufacturers for life-saving drugs. Even as local manufacturers pay these duties, MNCs are allowed to import finished products duty-free, which is detrimental to the Indian industry. The various duties on newer life-saving anti-cancer drugs such as monoclonal antibodies must be removed to make them affordable for cancer patients.
Treat bio-manufacturing as research: India has a unique opportunity to replicate the global success it has attained in manufacturing Generic drugs for Biosimilar or Bio-generic drugs. In order to do this, the Government needs to provide investment incentives for establishing large-scale bio-manufacturing plants to enable the industry to have global scale and be competitive. By extending R&D tax benefits to bio-manufacturing, the industry can make the large capital investments required for building bio-manufacturing capacity and the supporting infrastructure.
Financing the innovation ecosystem: Innovation holds the key to unlocking India's potential — be it in biotechnology, information technology, or any other field. Without funding, transformational and creative ideas that can change the life of the common man can never be nurtured to reach the market. India needs a national innovation ecosystem that funds ideas. One model that can leverage existing resources is where academia generates ideas which are nurtured to proof of concept through Government-sponsored funding and then taken to market through small businesses backed by venture funding. Idea-rich yet resource-strapped companies in India do not have the revenues needed to be eligible to access capital markets. Venture capitalists shy away from funding technology companies that are unable to provide an exit through the capital market owing to SEBI guidelines. The Government must set up an Innovation Bourse to allow such companies to list and access capital in order to spur innovation.
Ensure affordable healthcare: Our growth will come to naught if we fail to fulfil the basic requirements of life for all — food, healthcare, education, and infrastructure. Our public health system – never in the pink of health – has crumbled and quality healthcare is unaffordable. Healthcare spending is less than 1 per cent of the GDP and personal expenditure pays for 80 per cent of the healthcare costs. Through the Budget, the Government must ensure that every Indian has access to affordable healthcare. Since the Government has not been able to perform as a healthcare provider, universal healthcare can be achieved through public-private-partnership (PPP). The private sector can provide healthcare even as the government immunises and insures the population, reimbursing the private sector. The national budget must double if not treble its investment in healthcare by allocating 3 per cent of GDP.
Overhaul education: Even as the literacy and enrolment numbers are rising, the quality of education is declining. Islands of excellence in technology and management can only do so much for India's young minds. The fact of the matter is that the overall quality of education must improve, for education is going to make the difference between the country's success and failure. The Government must invest in faculty and education infrastructure at all levels. The quality of science education in a vast majority of our institutions is poor. We urgently require greater investment in science education and a modernisation of the curriculum so that we nurture research-oriented science education that can make a positive difference to India. Technology and e-learning must be leveraged to address this literacy challenge to unleash the much talked about demographic dividend or else we will have to contend with unemployable youth.
Co-invest in infrastructure: India needs roads, ports, airports, power, and utilities to grow. Infrastructure continues to bottleneck India's socio-economic development in spite of the Government increasing investment in the core sector. The Finance Minister recently said that India needed $1 trillion during the 12th Five-Year Plan and 50 per cent of that has to come from the private sector. We need imaginative policies and large-scale investment to meet the vast infrastructure deficit and offer a better standard of life to the people. Increasing outlay on infrastructure and tying it to employment guarantee schemes such as the NREGS will have a multiplier effect on growth. The Government should continue to increase emphasis on PPP for infrastructure, which can be a viable and efficient model for the country's growth. However, for this to happen, land reforms must be the focus.
With this Budget, the Government has the opportunity to arrest its slide into the quagmire of problems that threaten to engulf it, and to jump-start India's economy with a view to helping its billion plus people realize their dreams.