- Finance Minister Nirmal Sitharaman in the most challenging of times has attempted to give a budget that can boost the pandemic hit manufacturing industry
- Goal to boost manufacturing sector through the increase in domestic production
- The Manufacturing sector of the country expected to grow In double digits and likely become an intrinsic part of the global supply chain
The Union Budget 2021-22 presented by Finance Minister Nirmala Sitharaman aimed at reviving the economy from a global pandemic hit the economy. With the industries facing uncertainty, leaders expected the Centre to boost the manufacturing industry through an increase in domestic production. The Finance Minister made some significant announcements that focus on the agricultural economy and the MSME sectors.
MSME to ride on the improvement of Supply Chain Economy
The government in its budget has given impetus to the MSME segment thereby enabling it to grow at a faster pace. The Union Budget aims at promoting India as a hub for innovation and investment. A major focus on entrepreneurship and thrust on technology along with skill development is key to the development of the PMs Digital and Make in India program.
The government’s focus on improving the supply chain economy. With measures like Geotag warehouses and the establishment of efficient facilities at the block level, will help in ensuring zero wastage and optimized resource allocation. President of BHEL Small Industries Association, Rajappa Rajkumar, said that it is a great move for the sector that there will be a formation of an asset reconstruction company that will take over stressed loans. The eradication of bad banks is the need of the hour to sustain weak units.
Will Vehicle Scrappage Policy a breather for Automotive Sector?
The Indian automobile industry is ecstatic as the much-awaited vehicle scrappage policy was announced which will boost demand for new vehicles discarding the unfit vehicles plying on the roads. Another positive aspect of the announcement is that it will help in the reduction of pollution caused by old vehicles.
Kenichi Ayukawa, President, Society of Indian Automobile Manufacturers (SIAM) said that the government has adopted an expansionary measure. Specifically, the vehicle scrappage scheme has a positive intent and the auto sector is looking forward to work with the Government on suggestions for maximizing benefits to the environment and society.
Electronic good manufacturers: encourage local companies
Another important budget announcement included the production linked incentive scheme (PLI) for large-scale electronics manufacturing. This will serve the purpose of providing incentives to producers. This will help the nation to grow s a hub for manufacturing and exports. This move is expected to draw investments from global players. The scheme also is looking at encouraging local companies to set up new units or expand existing units in the country.
This scheme suggests that industry players who are eligible will get incentives of 4 to 6 per cent of production value after they are able to achieve their production and investment value target every year. The govt is giving a huge push to mobile manufacturing in India. The Ministry of Electronics and Information Technology (MeitY), which had notified its PLI scheme in April 2020 for large scale electronics manufacturers, which included companies like Apple iPhones, along with domestic mobile phone makers including Bhagwati (Micromax), Lava, and Optiemus Electronics. Under the scheme, eligible players will receive incentives ranging from 4 per cent to 6 per cent of production value for five years, after they achieve their investment and production value target for each year.
Infrastructure: Capitalize on the Developmental Financial Institution
The Union Budget 2021-22 has given a tremendous boost to the nation’s infrastructure. The FM expressing the commitment to enhance the country’s infrastructure, proposed a significant increase of capital expenditure is, Rs 5.54 crore along with creating institutional structures and giving thrust to monetizing assets in an attempt to achieve the goals of the National Infrastructure Pipeline (NIP). The minister announced that an amount of Rs 20,000 crores have been set aside in the budget to capitalize on a Developmental Financial Institution.
Viswanathan, Partner at Cyril Amarchand Mangaldas mentioned that the budget has emphasized growth and introduced An array of initiatives in the infrastructure sector that can have a multiplier effect. It caters to the need for a special financial institution for funding infrastructure projects which require “long-term patient capital”.
The unprecedented global health crisis has brought about a sense of uncertainty and Finance Minister Nirmala Sitharaman in the Union Budget has tried to bring the country back on track. However, it will not be an easy task but the budget proposes a slew of possibilities for the manufacturing sector and if properly implemented will benefit the industry.
In a time of unprecedented economic stress, the Govt’s responsibility was to spend enough to revive the economy or else face enormous human suffering. So I had one expectation from this budget: that we should be very liberal in terms of the targeted fiscal deficit. Box ticked.
— anand mahindra (@anandmahindra) February 1, 2021
Mahindra and Mahindra Executive Chairman Anand Mahindra lauded the Union Budget and tweeted, that during such unprecedented times he had expected the government to spend adequately to revive the economy and be liberal in targeting fiscal deficit which he said was successfully done. Putting chaos of the pandemic to an end, manufacturing companies are all set to reconfigure their manufacturing production and operational activities and utilizing the local raw materials and rebuild a business ecosystem that will be prepared to take on the globe.
