Budget 2018: Let’s cast our minds back to the year 2015 when PM Narendra Modi first announced the government’s ‘Make in India’ initiative. The intention was to project India as an attractive destination for manufacturers, indigenous and foreign, to invest and build in India. With the world’s second-largest population at 1.3 billion and rising, India represents a profitable destination for any manufacturer looking to expand a business.
Since then, progress on this front has been above average and several policies and regulations have made it simpler for manufacturers to flourish in the nation. Last year’s Union Budget also put forth several great policies that aided the sector, and the expectation is that Budget 2018-19 will be similarly progressive to add further impetus to this movement. Recent reports stated that in November 2017 the Index of Industrial Production (IIP) hit a 17-month high of 8.4% and the objective should be to continue this growth rate.
Highlights from last year’s Budget that helped the manufacturing sector
All eyes are on Budget 2018. Here is a quick recap of some of the key highlights from last year’s budget which helped the manufacturing sector:
- Reduction in the income tax rates for MSME companies with turnover up to Rs. 50 crores
- Disbanding the Foreign Investment Promotion Board (FIPB) by 2018
- Extending MAT credit to 15 years from the previously restrictive 10 years
- Launching a Phased Manufacturing Programme (PMP) to encourage domestic manufacturing of electronic components and smartphones
- Raising the FDI limit within the defense sector to 51% to encourage greater stakes than the previous 49% and build ‘strategic partnerships’ to manufacture submarines, fighter jets, helicopters and armored vehicles
- Setting up 4 Centers of Excellence (CoE) for textile machinery, machine tools, welding technology and smart pumps
While all these announcements were encouraging for the sector and have had a positive transformational impact, industry watchers expect that the government needs to take it up further in Budget 2018 and get deeper into policymaking so that it benefits the manufacturing domain in the country. The importance of the Union Budget 2018-19 for the manufacturing sector thus has a lot riding on it.
Budget 2018 can boost manufacturing, Smart Cities and Industrial Corridors
So, what does the new Budget 2018 hold in store and what can we look forward to? India’s value as a destination for high-quality manufacturing is on the rise and the government should be looking to implement policies that would boost the building of mobile phones, luxury brands, automobiles and more. Positive policies can aid India to climb the list of growth-oriented economies and manufacturing destinations in the world.
Also watch: Budget 2018: National Retail Policy Will Be A Game-Changer For Sector And Ease Of Doing Business
The Goods and Services Tax (GST) regime has been a big draw for investors and similar policies should be chased which set the country’s diverse sectors down a similar path. Focusing on smart cities and industrial corridors is another step that can benefit all parties in equal measure. The motive of the Union Budget 2018 needs to be on building an integrated, well monitored and well-oiled environment that works for the betterment of industrial advancement and reduces restrictions on players. Bodies such as Society of Indian Automobile Manufacturers (SIAM) are also seeking the restoration of incentives on R&D and inclusion of electric vehicle parts in preferential tariff lists.
Incentivisation for MSMEs
In Budget 2018, the Finance Ministry should be aiming at providing greater incentivization for MSMEs in particular and improving taxation policies to have a positive impact on revenue chains from the ground up. The Micro Units Development and Refinance Agency (MUDRA) scheme can also see further encouragement in this regard. While the key focus of the government must revolve around better lending facilities for manufacturers, priority areas need to be identified and catered to with willingness. Sustainable development and renewable energy is one such priority area, and making it simpler for manufacturers to operate in this space should certainly be crucial for policymakers.
India’s growth story can only be further enhanced by aligning objectives and policies that function together to place the country as a manufacturing base. It is also crucial to encourage the use of high-end manufacturing processes and technologies in digital factories that can encourage Additive Manufacturing and other forward-looking initiatives for the sector. Reducing import duties on strategic capital equipment like Additive Manufacturing machinery will also encourage the industry and the country to stay competitive in a global market.
Anand Prakasam is Country Manager – EOS India, the global technology and quality leader for high-end solutions in the field of additive manufacturing.