Finance minister has given a road map for raising the share of manufacturing in GDP
With the Narendra Modi-led NDA government coming to power with an absolute majority, the expectations from its maiden full budget were naturally quite high. The budget was presented amidst positive sentiments and factorable macro environment that was aided by lowering inflation and a substantial drop in crude oil prices.
While some positive steps were taken over the last nine months, few concrete steps were visible on the ground. This budget was expected to set a tone, and to an extent, it delivers a solid punch in that direction, at least in intent. It has laid down a solid foundation for India Inc to carry forward the vision of Make in India.
This budget can also be looked at as an aggregation of important big-ticket ideas, one of them being moving towards the implementation of GST in the next financial year. It also focuses on job creation rather than freebies.
The finance minister manages to spell out priorities of the government viz. Make in India, Swachh Bharat campaign, enhanced push for infrastructure growth, increasing ease of doing business through single window clearance, tax benefits for expenses towards building of toilets, etc.
At the very heart of ‘job creation’ and “Make in India” lies the SME sector, which has been the largest contributor (providing jobs to nearly 60 million people) and also probably has the biggest potential to create entrepreneurs. Hence, it was heartening to see a Micro Units Development Refinance Agency (Mudra) Bank for the SME sector. This will enhance the credit facility for small businesses, particularly manufacturing.
Further fund allocation of R10,000 crore for start-ups can be a great booster to attract private equity and soft loans, while the District Level Incubation and Accelerator Programme could develop capacity for skill-set among the SME segment.
A reduction of corporate tax rate by 500 basis points over next few years, coupled with the reduction in excise duty on certain imports will help the entire industry, including SME to be more competitive.
If one looks at the bigger picture, one can drive comfort from the fact that this has been a very decisive budget in terms of direction–clearly, there is a road map given for transforming India to have a greater share of manufacturing in the GDP pie of this predominantly agrarian economy.
By Amitabh Verma
The author is head, SMEs, DBS Bank (India)