Besides India’s aim to become a $5-trillion economy by 2025 and (presently 3 trillion economy approximately), the risk of another lockdown and supply disruptions amid rising COVID cases across the country, the finance ministry has quite a difficult task to manage and deliver a practical budget on February 1, 2022.
The government is required to continue spending to boost consumption and keep aggregate demand higher as the capacity utilization by the private sector remains below 70 % and does not seem to pick up at least in the next few quarters.
The government needs to target increasing funds flow through foreign direct investment (FDI), asset monetization, and disinvestments to cover its fiscal deficit for the next budget year.
On a macro level, developing manufacturing, textile, and infrastructure sectors which are large employment generators, having a trickle-down effect on a lot of ancillary industries including SME and MSME should remain a focus.
What the Indian pharma and medical devices sector expect
Amid growing vaccine requirements globally and the COVID-19 pandemic, the Indian pharma and medical devices sector that played an incredible role is looking forward to strengthening the partnership with the government to sustain the momentum in 2022.
Incentives such as the extension of 15 percent tax rate for expansion by existing companies, capital gains exemption on start-up investments, depreciation on goodwill on account of acquisition should be offered to the sector in Union Budget, Bhanu Prakash Kalmath S J, Partner and Pharma & Healthcare Sector Leader at Grant Thornton Bharat, told Moneycontrol. Interest subsidies, lower GST on clinical trials and research activities, and restoration of weighted tax deductions can be considered by the government to encourage innovation and R&D.
The expert predicted that the Budget 2022 will build upon the Production Linked Incentive (PLI) schemes and enable expansion of sensitive APIs, among other things, crediting the government’s AatmaNirbhar Bharat initiative for the sector’s significant momentum.
“The pharma and medical devices sector has gained a significant momentum owing to the government’s AatmaNirbhar Bharat initiative. The budget is expected to build on the Production Linked Incentive (PLI) schemes and encourage continued investments in capacity expansion of sensitive APIs, complex excipients, drug intermediates, biopharmaceuticals, and medical devices,” he added.
He said that the export of vaccines, formulations, and devices should be incentivized to truly become the pharmacy of the world while speaking about the supply and distribution of COVID-19 vaccines.