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Union Budget 2021 – A Challenging Task!

It is time for the budget to leave 2020 behind, make 2021 a year of recovery as we look ahead to 2022 and beyond!

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Adversity never comes alone, accompanying it are the seeds of opportunity that if nurtured, will sprout, grow and flourish. The past year has been tough for businesses and industry with numerous challenges resulting from the global lockdown. Supply chain disruption, a drop in demand from changes in consumer behaviour have disrupted plans and strategies. However, the global rollout of the vaccine and a revival of the economy have led to an air of optimism for the future. It is against this background that the budget will be presented this year.  

The initial economic indicators suggest that it will be challenging task faced by the Finance Minister. The first advance estimates presented last week estimates the growth in real GDP for the current FY at -7.7% as against 4.2% last FY with contraction in almost all sectors with the exception of agriculture. Along with the vaccine for the citizens, the government will also need to ‘vaccinate’ the economy to stimulate and jumpstart the economy. This would require the budget to focus on proposals that revive demand and boost economic activity. A budget that leads to growth and revives industry, provides incentives for capacity creation, encourages investments, and creates jobs. A budget that increases spends in infrastructure development, which will have a ripple effect on the economy. Considering the loss of employment faced by many workers and the migrant crisis last year, the provision of relief to the economically weaker sections of the society should continue.

With regard to Indian pharma and healthcare, despite the lockdown challenges, the industry has performed relatively well. An ICRA report indicates that while the domestic pharma industry will grow at 4-6% in the current FY, the CAGR from FY2020-2023 is expected to be 8 -11% per cent driven by robust domestic demand. Achieving this growth will require support from the Government in the form of enabling policies that will help the industry to focus on making India the pharmaceutical hub for the world. The Production Linked Incentive (PLI) scheme and Promotion of Bulk Drug Parks scheme launched by the Government have promoted investment in the sector. The budget should build on this. 

The budget in previous years has been progressive with increase in healthcare expenditure and introduction of landmark schemes such as Ayushman Bharat. There has been an improvement in spends on schemes to improve overall hygiene, sanitization and build awareness around chronic diseases. The current pandemic is a timely reminder to be more aggressive and proactive in planning healthcare budget allocation.  While the budget should continue to ensure wider implementation of schemes like Ayushman Bharat, as against the marginal increase in budget allocation for healthcare every year, the budget this year should put health on top priority and increase spends on public health substantially from the 1.3% in previous years. We are way behind our BRICS peers as well as the developed countries and need to bring public expenditure on health up to at least 2.5% of GDP.

It is time for the budget to leave 2020 behind, make 2021 a year of recovery as we look ahead to 2022 and beyond!

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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gdp growth Union Budget 2021-22

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