Union Budget 2022: A balanced budget with a few missed opportunities, says Kiran Mazumdar Shaw

‘Cautiously optimistic’ — is what I think finance minister Nirmala Sitharaman was when she rolled out the Union Budget on February 1. I do believe that she had several constraints in coming out with a bolder budget, because we are still not over the pandemic. It’s also a bit too premature to come up with strong fiscal stimulus, and tax measures. She was constrained by the fact that we are just beginning to see green shoots, we are just about getting back to 2019 GDP growth levels, and we need to wait and watch for at least a quarter or so more before we can feel that the worst is behind us. From that point of view, she’s done a good job with a balanced budget. She has managed to curtail the fiscal deficit to 6.9 per cent. The only big ticket item was a 35 per cent bump up in capital expenditure, which is an important announcement because it signals investment in infrastructure projects, which will create jobs. Right now, there is an inequity between the formal and informal sectors. The formal sector is what is driving this economic revival, as the informal sector has been very badly hit. You know that the services sector has particularly been badly hit, and is yet to come out of it. So if you look at the job losses, the business decline in the informal sector is showing up in terms of the decline in rural consumption, and the decline in middle class consumption. So consumption has gone down, even though there’s been a robust performance in the formal sector. Even if you look at consumption, trends, and patterns, you will see that it is really demonstrating that the formal sector is the one that’s creating the demand; but the informal sector is showing a decline in consumption. For example, if you look at the two-wheeler industry, that’s a clear indication that the decline in two-wheeler sales is an indication that the MSME sectors and the services sector is declining. So we need to address that. I would have thought that the government would have at least helped that sector with maybe increasing the tax-free slab to even three or four lakh, from the present Rs 2.5 lakh. Just to give a kind of a signal to them that the government is on their side. Second, I thought that people have spent a lot of money and inflation is also hitting them. They don’t have jobs, nor an income. That is a tough spot to be in. I am sure that there is disappointment in that section of the population. I thought the government would have given some kind of respite in terms of tax deductions pertaining to healthcare spending, or for that matter, on EMIs for housing loans. The grapevine was that that was what the expectations were from the middle class. So there must be great disappointment there. As far as corporate India is concerned, obviously we are happy because there are no negative surprises. It is almost business as usual. From that point of view of the pharma sector, there aren’t any disappointments or complaints. I am a big proponent of R&D incentives, and was hoping that the finance ministry come out with these research-linked incentives because pharma R&D needs to move into more high risk innovation. Unless you give incentives, nobody is going to invest in that area. It’s a chicken and egg situation. Without incentives companies will pursue low-risk innovation, which only gets the volume share. It is only high-risk innovations that will give you a value share of the global pharma market. With all the skills and talent pool that we have, we should be getting into that area. Of course, the finance minister did mention R&D. But I don’t see any specific mention of pharma R&D. It is under a general category of medical and healthcare. Other than that there is nothing to complain about this balanced budget. But I really think that there is a problem with inequities between the MSMEs in the informal and formal sectors. I am puzzled that they did not even take advantage of the elections. The rural economy is suffering, and if the government had announced something for that section, I think it would have given a strong signal. So it is a missed opportunity in many ways. Overall, it is a fairly decent budget. That is the way I would read it.