Budget 2021: Measures FM Nirmala Sitharaman should announce. The past year has witnessed one of the worst economic crises mankind has ever faced. Surprisingly, it was also one of the most active years in terms of policy making. The spirit in which the Union Minister of Finance hosted many media conferences reassuring the troubled nation last year is expected to be reflected again on the Union Budget Day. The zest and expectations around the budget are always high, but the level of expectation and hope is certainly a lot of high notches this time around.
The epidemic has led to serious health and economic problems, bringing many challenges to government. Throughout this experiment, the government’s approach to managing these two problems is highly commendable. From managing overcrowding to building health care facilities and helping economic recovery and now rolling out the coronavirus vaccine, government machines have been working seamlessly and efficiently.
Although we remain optimistic after the release of the vaccine, pragmatism lies in caution. Mutable variants of COVID-19 can be highly contagious and pose a significant risk. Therefore, it is very important to stay alert and be prepared for everything that will happen.
Economic recovery has already begun. The Indian economy is now very open, and job creation is generally visible in all sectors. Preliminary GDP estimates for 2020-21 put the rate at a decline of 7.7% – which is in line with expectations. The return to healthy growth seems to be nearing the end of this financial year. Therefore, the time has come to set the pace of growth acceleration in the next financial year.
The Union Budget will be critical to economic restructuring and the COVID-19 epidemic should be used as an opportunity for better reconstruction. While the most urgent need is to revitalize demand and consumption, measures to improve India’s competitiveness are critical to long-term sustainability and economic prosperity. The Union Budget must balance between short-term measures and medium-term changes.
One of the major issues removed from this crisis has been the importance of innovation and the role of science and technology. Going forward, innovation, innovation, services and technology will be key ingredients for the economy to be competitive, fair, and independent. The PLI and PMP programs announced by the government are timely steps towards achieving India’s long-term goals.
We need similar efforts to strengthen the home eco-system for future growth drivers. For example, start-ups whose businesses are based on the use of Artificial Intelligence, Machine Learning, and other upcoming digital technologies should be encouraged.
Wireless access to wireless internet services will also be critical to their success. We hope to see greater funding for the Premier’s Wi-fi Access Network Interface project.
Research and Business Development should also be encouraged. Research shows that an annual increase of 0.2% of GDP on Research and Development (R&D) leads to an annual increase of 1.1% on GDP. India, however, is far behind in this area.
The annual expenditure on R&D as a percentage of GDP in India is unequal compared to the same figures for the United States, China, Israel and South Korea. Specifically, industry R&D investment remains low (at 41% of total R&D spending) and needs to be increased. The appropriate promotional framework can encourage major R&D activities by the industry. A 200% weight loss tax is being deducted from the in-house R&D facility.
R&D service firms play an important role in revitalizing other businesses (such as pharma, health care, health science, chemistry, electronics, etc.) and should be encouraged by the lower tax regime. Business taxes on those services may be reduced to 15% (similar to new production companies), depending on the achievement of certain conditions such as the creation of a certain number of jobs or the annual salary of the foreign exchange.
Low-income governments are not the only ones attracting investment in the economy. They come up with ideas that can help them grow important areas.
With that in mind, the government should invite foreign funding from Indian people scattered around the world, who have a lot of expertise in the technology sector that can help boost the country’s startups.
A dynamic tax framework is needed, which makes India an attractive residential option for foreign investors. For example, the investment of the scattered in new technology enterprises in India can be allowed without tax deduction on their overseas income for a period of ten years.
An open and sustainable tax regime will help attract investors, create a collaborative research space, promote innovation and develop human talent that will play a key role in making India a $ 5 billion economy by 2025.