Indian Budget 2014 – Highlights & Comments

arun-jaitley2The Union Finance Minister Mr. Arun Jaitley presented the Budget for 2014-15 (“Budget 2014”) yesterday. I intend to highlight the relevant proposals and make some comments in this regard. Kindly note that my comments do not, in any manner, reflect my views on other parts of the budget.

A budget is essentially a policy statement of the government. It does reflect its priorities and understanding on various issues. The Budget 2014 puts forward some salubrious proposals. I am, however, inclined to note that the Budget 2014 is largely piecemeal in nature. It does not reflect a cogent, coherent and comprehensive appreciation of ‘entrepreneurship’, ‘science & technology’, ‘innovation’ and ‘IP law framework’. The aforesaid areas are not disconnected realms. It will be, however, unfair to criticize Mr. Arun Jaitley given the lack of time in his hand. He did set the ball in motion in his very maiden budget. As the Minister rightly stated (though in a different context), “it would not be wise to expect everything that can be done or must be done to be in the first Budget presented within forty five days of the formation of this Government.” (paragraph 4) Therefore, this post is to be treated more like a submission to the Government of India (“GoI”) for setting a healthy future course of action.

a)                  On setting up / raising institutions to a higher level

The GoI intends to raise at least five institutions on areas such as nanotechnology, materials science and bio-medical device technology under Dept of Science & Technology to the level of ‘Technical Research Centres’. The intention is to make them more effective in the innovation space through PPPs. The Budget 2014 also makes some serious proposals for stimulating investment in biotechnology like developing biotech clusters in Faridabad and Bengaluru to the highest international quality and developing global partnerships for transforming the Delhi component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) into a world-leader in life sciences and biotechnology.  Also, the Budget 2014 proposes to set up five IITs, five IIMs and Jai Prakash Narayan National Centre for Excellence in Humanities in Madhya Pradesh.

The aforesaid proposals are indeed forthcoming. But they are not enough. The need is to revitalize and re-energise the extant ecosystem for the promotion of research and innovation. As to contextualize my argument, I would like to draw your attention to “Higher Education at a glance” released by UGC on 21 March 2012 wherein it was noted that the nation spent a meager 1.25% of GDP on higher education. I appeal to the GoI to set a policy course correction in the coming years. The nation can afford to overlook this necessity only at its own peril – as the demographic dividend will in fact turn out to be a cataclysm if adequate measures are not taken.

As noted by Priyamvada Natarajan in ‘Bridging India’s knowledge gap’ in ‘The Business Line’ (16 January 2013), “Historically, the set-up of the Indian S&T enterprise stemmed from the Nehruvian vision of the significant role expected of S&T in the country’s development. With Nehru’s patronage, the renowned scientists of that generation such as Meghnad Saha, Vikram Sarabhai, Homi Bhabha, and C. V. Raman all pushed for building scientific research as a high priority in order to rapidly cultivate a homegrown scientific community and achieve technical self-sufficiency with expediency. Scarce resources were therefore directed to a few elite research centres inspired by the model in the USSR; a few national laboratories in specific subjects.…….Research universities are the backbone of invention and innovation in the US. The tight coupling of undergraduate and graduate training, along with a strong research base, has provided natural incubators to nurture new ideas that could potentially translate immediately into applications, as well as more long-term basic science research that might not produce immediate commercial benefits. However, as a consequence of this initial historic cleavage in India, university research has failed to garner adequate support and the structural changes required to invigorate and reshape universities to do so, never took root. In the meantime, more and more research institutes have been created in the sciences and social sciences outside the university system.” The corrective steps advocated by the author include reintegrating research and teaching; encouraging collaborations with colleagues at research institutes; targeted grants programme and giving adequate attention to Massive Open Online Courses (MOOCs). I request the GoI to consider the aforesaid proposals. As a note of caution, the Budget 2014 does not focus on enhancing R&D facilities in existing universities. Further, unfortunately, it is silent on incentivizing R&D in the industry.

I strongly appeal to the GoI to consider the Science, Technology and Innovation Policy, 2013 (“Policy, 2013”) and judiciously implement its proposals. As I had noted here, the aforesaid Policy, 2013 is incomplete (like its ‘one size, fit all’ approach, lack of focus on leveraging TK, lack of focus on correcting the regulatory framework, lack of focus on informal IP norms, silence on its approach towards IPR and lack of focus on strengthening the research infrastructure in Indian universities) and does warrant a re-look. Even then, it is an encouraging policy document and sets the ball in motion. It is imperative to set out the broad contours of the Policy, 2013 here:

The Policy, 2013 came in the light of the realization that treating innovation and S&T as two disconnected realms was a serious lacuna especially when the former has now assumed centre stage in the developmental goals of countries around the world. The Policy, 2013, unlike the earlier policy documents, recognizes the synergistic linkages among them.

The Policy, 2013 intends to position India among the top five global scientific powers by 2020, facilitate S&T-based high-risk innovations through new mechanisms; facilitate partnerships among stake holders for scaling successes of R&D; and trigger changes in the mindset and value systems to recognize, respect and reward performances which create wealth from S&T derived knowledge. It intends to “accelerate the pace of discovery and delivery of science-led solutions for serving the aspirational goals of India for faster, sustainable and inclusive growth”– a strong and viable Science, Research and Innovation System for High Technology-led path for India (SRISHTI).

The Policy, 2013 intends to tap global resources including Indian diaspora for accelerating the pace of technology-led development.  On a related note, I would like to draw your attention to the ‘The Hindu’ report titled ‘Centre to offer lucrative stints for Indian scientists’ (20 January 2013) which stated that the government was considering a scheme for offering lucrative stints for Indian scientists working abroad to teach and conduct research in Indian scientific and technical research institutes. Since then, I haven’t heard anything about this proposal.

The Policy, 2013 recognises the extant fragile innovation ecosystem. It has been under 1% of the GDP. It observes that achieving the target of increasing Gross Expenditure in Research and Development (GERD) to 2% of the GDP in the next five years is realizable provided the private sector matches India’s public investment and the ratio of public to private sector investments in R&D changes from the current 3:1 to 1:1 within the next five years. The Policy, 2013 also calls for facilitating S&T based high-risk innovations and creating an environment conducive for enhancing private sector investment in R&D. According to the Policy, 2013, “India’s innovation machinery should aim to lead rather than to follow safe paths of discovery.”

b)                  On skill development and entrepreneurship

The Budget 2014 proposes for a national multi-skill programme called ‘Skill India’. It intends to skill the youth with an emphasis on employability and entrepreneur skills. The Budget 2014 also proposes to set up a “Start Up Village Entrepreneurship Programme” under National Rural Livelihood Mission for encouraging rural youth to take up local entrepreneurship programs. The Budget 2014 rightly recognizes that the promotion of entrepreneurship and start-up Companies remains to be a challenge. While there have been some efforts to encourage, one principal limitation has been the availability of start-up capital by way of equity to be brought in by the promoters. In order to create a conducive eco-system for the venture capital in the MSME sector, the Budget 2014 proposes to establish a INR 10,000 crore fund to act as a catalyst to attract private Capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies. The Budget 2014 also carries a proposal for amending the Apprenticeship Act, 1961 to make it more responsive to the youth and industry.

The aforesaid proposals are quite forthcoming and they do set the ball in motion. A salubrious approach, however, demands addressing these areas in the context of objectives set out in Policy, 2013. It is imperative to incentivise grass root innovations which is now accepted as an important policy tool for achieving inclusive development. Further, the Budget 2014 is also silent on leveraging Traditional Knowledge in skill development and entrepreneurship.

There is a need to frame a vibrant ‘Start Up’ policy so as to set a favourable ecosystem and address all the related requirements/concerns of the ‘Start Up’ sector. I request the GoI to review the performance of Start up Village in Cochin, Kerala. Carefully nurtured by the Government of Kerala, it has made some major inroads. The success of Startup Village has prodded the Kerala government to come out with some major policy recommendations like India’s first student entrepreneurship policy, which provides 20 per cent attendance and 4 per cent grace marks to students pursuing innovations. The state has also made a major policy change by setting aside one percent of its budget for entrepreneurship, which translates into more than Rs.500 crore a year. [See report.] Given the right ecosystem and impetus, (at least some of) the youth of this country will turn out to be employment generators rather than employment seekers.

In this regard, I would like to highlight the need to redefine our higher education system in such a manner that the employer enjoys an important position in the whole learning process. The extant system is by and large not suited to create ‘work ready’ labour. Recently, the GoI has started focusing on community colleges, vocational education etc. However, more needs to be done. The proposal to amend the Apprenticeship Act, 1961 in Budget 2014 is a step in the right direction. Presently, the organizational structure and rules and regulations overseeing the Apprenticeship Act, 1961 are complex and burdensome. There are strict norms on permissions, trades permitted, training duration, stipend levels, apprentice/employee ratio and training facilities. As it is onerous to create new apprenticeship positions, India has under 3,00,000 formal apprentices.

c)                  Bridging Digital Divide

The Budget 2014 proposes to launch a pan India programme “Digital India”. This will ensure broadband connectivity at village level, improved access to services through IT enabled platforms, greater transparency in Government processes and increased indigenous production of IT hardware and software for exports and improved domestic availability. Software product startups will receive special focus. The Budget 2014 also proposes for a National Rural Internet and Technology Mission for services in villages and schools and training in IT skills and E-Kranti for government service delivery and governance scheme. I can comment on them only after receiving the details. These schemes prima facie appear to be promising in achieving citizen empowerment and citizen-centric governance. 


The Budget 2014 sets out some forthcoming proposals like setting up INR 10,000 crore fund to act as a catalyst to attract private capital for start-up companies, proposal to amend the Apprenticeship Act, 1961 etc. I strongly appeal to the GoI to adopt a cogent, coherent and comprehensive approach vis-à-vis ‘entrepreneurship’, ‘science & technology’, ‘innovation’ and ‘IP law framework’ in the coming years. They are not disconnected realms. The National Knowledge Commission headed by Mr. Sam Pitroda has made quite a few salubrious and feasible proposals for incentivizing grass root innovations, democratizing knowledge etc. I am optimistic that the GoI will consider the merits of the proposals of National Knowledge Commission and Policy, 2013. A piecemeal approach will always give sub-optimal results which is, obviously, not what the nation wants. As I stated earlier, this post is not a criticism of the Budget 2014. Mr. Arun Jaitley had a lot of things to worry about in the last forty five days. Only a naïve would expect Budget 2014 to be a panacea. I would, however, appeal to the GoI to set a healthy course of action in the coming years.





About The Author

Leave a Comment

Scroll to Top