Budget 2023 will be the first “standard” budget for an economy that has survived supply chain disruptions, global recession, and inflation in the years following COVID-19. To achieve the estimated 6.5-7% GDP growth in FY24, India must take advantage of its economic momentum. The country must pursue value-added growth if it wants to achieve its goal of having a $10 trillion economy by 2035, driven by research and innovation. Developing a robust research ecosystem can increase India’s intellectual capital and stimulate the kind of innovation that enhances the lives of common Indians and has a long-lasting impact on the world. Therefore, the budget for this year should set the groundwork for realising this potential.
Drive Research and Innovation. A greater emphasis will be placed on promoting traditional knowledge systems, developing indigenous technologies, and encouraging grassroots innovation in order for India to move forward on a sustainable development pathway that includes economic development, social inclusion, and environmental sustainability for achieving an “Atmanirbhar Bharat.” For Research and Development (R&D) organisations, academia, and business, the pandemic presented a compelling opportunity to work together for purpose-sharing, synergy, collaboration, and cooperation. Up until this point, basic and translational research has been incrementally funded by the government. The country is experiencing a surge in scientific innovation which is coupled with a dynamic startup ecosystem.
However, for about a decade, India’s gross expenditure on research and development (GERD) as a proportion of GDP stayed constant at 0.7%, even lower than countries like Brazil (1.16%), and South Africa (0.83%). If India intends to build on its current progress in science and technology, GERD must be increased to 2% of GDP. The goal of the Science, Technology, and Innovation Policy (STIP) 2020 was to increase private sector funding for GERD by 50% over the course of five years. To do this, corporations are permitted to contribute through their Corporate Social Responsibility (CSR) programmes to universities, incubators, and research organisations that get public funding for their work in science, technology, engineering, and medicine. Perhaps, CSR funds should only be used to support IP-driven, proprietary research that fills unmet needs.
Prioritise R&D in Defence Sector. Self-reliance on cutting-edge technologies must be a major area of concentration if local production is to continue indefinitely in the State. Being independent would entail expanding internal R&D capabilities and budgetary funding, manufacturing complete platforms, etc. for defence. Additionally, some weighted deductions for R&D expenses as well as tax incentives for industry participants to engage in the transfer of technology (ToT) may prove to be the primary forces behind the development of a manufacturing ecosystem in the country.
Production Linked Incentive (PLI) Schemes were initially launched for 13 industries with an investment of INR 1.97 lakh crore (about USD 24.02 Bn), and in September 2021, they were expanded to include the production of drones and drone parts. Similar schemes should be established for manufacturing defence equipment as well, as the PLI scheme encourages domestic production and can significantly contribute to the development of the Micro, Small, and Medium Enterprises (MSME) ecosystem of the sector.
Focus On Digital Infrastructure and Skilling. Budget 2023 needs to place equal emphasis on the government’s commitment to digital skill development and its alignment with the IT and tech sectors. Talent development and digital skilling, including in schools and universities, require investment. And this can be accomplished by investing heavily in enhancing digital infrastructure and internet penetration in Tier 2 and Tier 3 cities and assisting them in emerging as the country’s future centres of technology and digital talent.
Consumer Durables and Electronics Industry. The summers of 2022 and 2021 showed a healthy trend for the consumer electronics and durable goods industry. Most consumers stayed home, which increased the demand for gadgets and household goods. According to CRISIL research, the consumer durables industry surpassed the pre-pandemic volume mark in value terms last fiscal and this fiscal it will further cross it by 3%. This fiscal year, revenue would climb by 15–18% to ₹1 lakh crore, driven by volume growth of 10–13%. The industry believes that the government is still dedicated to adopting and executing changes that will lead to ‘Ease of Doing Business,’ with an emphasis on increasing investment to make India ‘Atmanirbhar’ by actively promoting ‘Make in India’ projects.
Manufacturing of electronic devices is one of the key pillars of both Make in India and Digital India. The centre is focusing on boosting semiconductor and electronics manufacturing with an aim to grow India’s share in the $3 trillion global electronics industry. A $10 billion PLI programme was previously launched by the ministry of electronics and IT (MeitY) to support domestic semiconductor and display manufacture. By 2026, it intends to have local production of electronics hardware totaling $300 billion and $120 billion in exports.
The National Policy on Electronics (NPE) 2019 is another such initiative that intends to position India as a powerhouse for Electronics System Design and manufacturing by enhancing national capacities for manufacturing crucial components, such as chipsets, and by fostering a climate that will allow the sector to compete on the world stage.
India may have a positive attitude toward technology and ‘digital’, but more work needs to be done to support the nation’s digital-first strategy since it strives to become a USD 5 trillion economy. Although the next Union Budget for the current fiscal year on February 1, 2023, is going to focus on reducing inflationary pressures, there are still steps that need to be taken to assist development so that more people may benefit from the power of digital.
Views expressed above are the author’s own.
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