The finance minister has presented a moderate budget with focus on spurring infrastructure and agricultural growth. Declining gross domestic product (GDP) growth remains an area of concern and FM’s projection of 7.6 per cent GDP growth in the next financial year (FY13) appears slightly optimistic. This is because the necessary impetus required to achieve this growth are not clearly visible. For example, no clear- cut measures are spelt out for stimulating industrial growth, nor does the Budget seem to tackle the pressing issues of high inflation and rising interest rates.
While the FM has announced that inflation will be lower, he has increased the excise duty and service tax rates from 10 per cent to 12 per cent. This is likely to have a negative impact on inflation and could also stifle industrial growth which is already fighting inflation and high interest rates. The increase in excise duty and service tax will also impact the pharmaceuticals industry. Also, any incentives for encouraging innovation and R&D in the pharmaceuticals industry has not been recognised.
A welcome move for the pharmaceuticals industry is the proposal to extend weighted deduction of 200 per cent for R&D expenditure in an in-house facility for a further period of five years beyond March 31, 2012.
Some positives of the Budget include: proposal to introduce Advance Pricing Arrangement into Income Tax Act to give certainty to the international transaction; taxing all services except those in the negative list; reducing restrictions on the utilization of input credit and showing commitment by proposing a white paper on black money.
Glen Saldanha, Managing director & Chairman, Glenmark Pharmaceuticals