‘’Aim to incentivise higher spending in R&D’’

The economic and political developments in the Eurozone area and the US have affected the world economy including India. Although the Indian economy is showing signs of improvement with growth of exports; surging inflation and high interest rates are still areas of concern. If the interest rate environment and inflation do not improve, industrial growth will continue to be under pressure.

The priorities for the next Budget is to therefore provide growth impulse, especially in the manufacturing sector, keep an anti-inflationary stance, reduce the fiscal deficit and revive investment spending. A move which will be a big boost to the Indian industry, including the pharma sector is reduction in excise duty and service tax. Excise duty and service tax rates, which are currently at 12 per cent, should be restored to the earlier level of eight per cent prevailing two years back. Reduction in these rates would help in augmenting the industrial growth, which has significantly fallen due to low capital investment and high inflation. For the pharma industry, which is already reeling under price controls and intense competition; a reduction in excise duty and service tax will come as a welcome measure.

Talking from a pharma industry perspective, the budget should aim to incentivise higher spending in research and development. Union Budget 2012-13, did precious little for the pharma industry in terms of R&D sops to encourage innovation. The notable exception was the proposal to extend the 200 per cent weighted deduction for R&D expenditure in in-house facilities for a further period of five years. The Government needs to encourage the sector to promote higher spending in research and development through various incentives in the budget. Hence, it is necessary to exempt import of all capital goods, raw material and consumable to be used for R&D purposes from custom duty, besides making Cenvat Credit available on capital goods used for R&D to reduce research cost. Bringing down taxes and duties on life saving drugs and active pharmaceutical ingredients (API) would further provide an impetus to growth.

– Rajesh V Desai, Executive Director & CFO, Glenmark