Union Budget 2016-17 Expectations: A robust manufacturing sector is an essential element of Indian growth story. On the backdrop of Make in India initiative from government, we anticipate increased manufacturing activity in the country. Check the interview with The Financial Express: ‘Power-up growth, give Make in India a boost’
Some of the Budget Highlights for 2016-17: Drivers that Boost Manufacturing:
- First and foremost, as a step towards self reliance, this year’s budget should provide huge sops to R & D sector. This may take varied forms – amount allocated by businesses be completely tax exempted and expenditure on setting up of infrastructure for research be tax exempted, which constitute institutional level sops. At individual level, income drawn for being part of the research projects can also be tax exempted. This will serve as a motivational factor.
- Currently there are many export incentive schemes like focused market groups and focused product groups, where the raw materials imported for exports are exempted from paying duties. This in itself will not encourage exports in certain sectors such as process equipment industry and other capital goods industry as the profit margins are very thin and in certain cases there is no domestic market for these goods. In this kind of a scenario, though the goods are not manufactured in SEZs, the privileges and benefits of SEZ need to be extended to the companies exporting the goods irrespective of the manufacturing location.
- Initiatives undertaken by the current government combined with the proposed changes in taxation rates for the corporate sector are highly appreciated by MNCs and help in establishment of many businesses in India. However, these two initiatives will not suffice as we need to open up investment by foreign institutional investors by increasing the percentage of FDI in defence hardware, Oil exploration and even in Navaratna holdings. This has a double benefit of swelling of foreign currency reserves and inheritance of state of the art technology from the developed world. One recent initiative of selling of NTPC stake is highly appreciable.
- One of the major problems India faces is mobility of raw materials and finished goods from one end to the other in the shortest possible time and at lowest cost. This is achievable only when we have good infrastructure. When I say infrastructure, it is not only the Roadways and Railway network, India being a peninsula presents a great potential for water ways network for faster movement of goods. Adequate funds should be allocated for this aspect of infrastructure.
- Boost in spending – considering the geopolitical situation coupled with unpredictability and worsening of global economy, the mood and the sentiments is very negative. Spending is poised to take a big hit in this environment and will have an adverse effect on the entire circulation/flow of money. So the government should boost spending by announcing sops for certain segments.
- As per recent surveys, fifty percent of the Indian population will be living in cities by 2030, indicating a fast pace of urbanization. There should be an act passed in the budgetary session of parliament where the urbanization is regulated and at the same time it is made affordable to all sections of the society, else the divide between the rich and the poor will increase.
- I also expect the Niti Ayog, constituted to redefine the thresholds for poverty, to present a roadmap on how they are going to provide a measurable plan in the next session of budget.