#Budget2014: India's ability to sustain high growth rates is under scrutiny: Ajeenkya D Y Patil

As India awaits budget from Narendra Modi's government, different sectors have different expectations from proposed reforms. dna spoke to Ajeenkya D Y Patil, Chairman of the D Y Patil Group and Consul general of GUYANA in Mumbai about his expectations from budget and reforms needed in the education sector. 

On budget: 

The budget will outline the first major policy response to the economic woes faced by the country. There a lot of expectations from the Union Budget presented by the new Government. We expect long-term measures to bring the economy back on growth track. At the same time, a lot of short-term measures are also essential to ensure that the confidence of people and industry in this Government increases and transforms the current environment of gloom and doom to that of hope. It is the hope of return of good days that brought this Government in office; it is now the turn of the Government to respond to this expectation.

For People

I expect that the coming budget should give respite to the tax paying class. Year on year they have been the worst hit by the travesties of economic roller coaster. Given high inflation and changed dynamics, it is imperative that the tax exemption limit be raised from present 2 Lakhs to 5 Lakhs, medical reimbursement exemption limit be revised considerably upwards from the current Rs. 15, 000. I would also expect increase in tax exemption limit for interest payment on housing loans from present 1.5 lacs to 3 lacs and increasing of upper limit of deduction under section 80C of the Income Tax Act from Rs. 1 Lac to at least 3 lacs. These suggestions might reduce the tax collections, but would increase investments, which would balance the shortfall and would rekindle a lot of economic cycles.

For Education

The process of education loans should be further simplified and interest rates reduced. The banks are financing only University affiliated full-time programs. In today’s time one is a student all his life and needs continuous training and re-training. There are many specialized programs being offered all around the country. The Government should consider rationalizing the definition of education to include all kinds of education. If the Government could charge service tax on all forms of non-university educational programs, why should it not consider expanding the definition of education from approving education loans? After all educated India is a necessary condition for our growth.

Expenditure on school education must be increased. The Government can maintain a status-quo on its spending on higher education and let the private sector take up the mantle, but school education as a focus is a must. We have a very poor transition rate of high school to college. This needs to be addressed through clear policy directives on public private participation. Also the Government should promote private investments in higher education sector.

Another area of focus is increasing the expenditure on vocational education and skill development. I hope that special emphasis will be placed on this very important sector. Skills training is essential to afford jobs to our large young population. The interim budget for 2013-14 had specific provision for this. However this provision was of incentivizing individuals undergoing skills training. We need to tilt this and incentivize the providers of such training. Specific public-private participation mechanisms, providing benefits to participating industries should be evolved.

For Design & Innovation

Design, innovation and growth are linked. Innovation and design aren’t simply about new products or technology. They’re also about how to improve products in everyday use, leading to reduced costs, increased usability and new business opportunities. Companies that use design are more successful than those that do not. The more strategic there use of design, the higher their growth rate.

To sustain and grow the manufacturing sector in India, we need to have a distinct focus on indigenous manufacturing. We need to promote indigenous manufacturing and support it through policy and capacity building mechanisms. Growth in Indigenous manufacturing will lead to organic growth in the manufacturing sector.

An increasing number of governments are offering special fiscal incentives to businesses to increase spending on research and development and design. In India, the Budget of 2007-08 accorded an overarching importance to promoting research and development (R&D) across sectors – agriculture, healthcare, pharmaceuticals, biotechnology and nanotechnology. Now the time has come to work further on this. The tax incentives for Business R&D should be expanded to all sectors.

The definition of R&D should be expanded to include design such as graphic design and product design. Considering that Design is the major driver for growth and competitiveness, I propose special tax incentives for manufacturing companies using design.

I see an urgent need for the government to introduce an incentive scheme with a view to attracting manufacturing industry to increase their investment in design. As a first step, I believe allowing companies to enjoy tax deduction on their relevant design expenditure would be a feasible option. It should be applied to companies of all sectors which undertake in-house design activities or out-sourced design services.

Pragmatic Approach

The tax cuts, raising of tax limits are fine. They will soothe the nerves of people and instill confidence, but we also need to think of increasing Government revenues and increased investments in infrastructure. The Government should create a road map of reducing subsidies and linking a lot of financial imperatives to market forces. The fuel subsidy, the fertilizer subsidies are some such areas, which need to be addressed. Our honorable prime minister during his speeches has emphasized on issues such as preventive healthcare, and increasing organic agriculture. This budget should showcase some major initiatives in these areas.

The budget should comprehensively show a move away from centrally planned economic model to a distributed, result-oriented model of fiscal governance. The stakes are quite high this time. Our ability to sustain high growth rates is in question. The budget should respond to this challenge.