Majority of industry stakeholders said India will become a key manufacturing hub as it benefits from Narendra Modi government’s popular PLI scheme, as the country walks on the path to attain economic recovery amidst COVID-19 induced uncertainty, according to a survey conducted by KPMG India. As many as 60% of the respondents said they think that the Production Linked Incentive (PLI) scheme will have the desired results of making India a manufacturing hub while 83% of them said the government should expand the scope of this scheme to other sectors.
KPMG surveyed about 200 finance professionals across various sectors in January 2022 as part of KPMG’s pre-budget survey laying out what to expect from the budget. The government is expected to present the budget for fiscal year 2022-2023 next week. Finance Minister Nirmala Sitharaman will have to walk on a tightrope of balancing economic recovery buoyed by high tax collections as well as boosting fiscal measures to spur job growth and tackle inflation in the upcoming budget.
Four of every five respondents surveyed by KPMG said that the government should expand the scope of the PLI scheme to cover more sectors. For the same question, about 14% respondents responded with a “maybe” while only 3% felt that the government should not expand the scheme to other sectors. According to a separate survey conducted by Care Ratings, respondents expect expansion of the scheme to various other sectors such as electric vehicles, capital goods and renewable energy. Surveyees expect the budget to focus on schemes for infrastructure creation and increase in PLI schemes that will also boost domestic job growth.
The PLI scheme, which was announced by the union government in the last budget, has been termed a “game-changer” by the finance minister. With incentives of Rs 1.97 lakh crore over a five-year period for 13 key sectors, to boost production and exports, the government initially launched the scheme for sectors such as telecom, electronics, auto parts, advanced batteries, pharmaceutical drugs, and solar energy components.
KPMG survey also indicated that 64% of the surveyees responded affirmatively on the question about increasing the basic exemption limit for taxation of Rs. 2.5 lakh for individual income tax payers, a limit which has remained unchanged for the last few years. Increase in the 80C deduction limit of Rs. 1.5 lakh, enhancing the income limit of Rs 10 lakh at which the maximum marginal rate of 30 % tax triggers and increase in standard deduction limit of Rs. 50,000 for salaried class are also measures anticipated from the budget, the survey said.
On the corporate tax front, majority of the respondents expect that given the impact of the Covid-19 pandemic, government should extend the date of commencement of production beyond March, 2023 for new manufacturing companies intending to avail of the concessional 15% tax rate. Over 70% of the respondents said that the government should increase GST slabs even as indirect tax revenue exceeded direct tax revenues this year.