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Will Budget 2024-25 benefit the manufacturing industry?
Industry News- Jul 24,24
The manufacturing sector is crucial for job creation, export growth, and overall economic development.
The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman, focuses on key areas to bolster the economy. While the budget lays out ambitious plans and promises significant support for the manufacturing sector, there are potential shortcomings and challenges. Here’s an evaluation of the budget’s provisions, highlighting both promises and areas needing more concrete action.
The manufacturing sector is crucial for job creation, export growth, and overall economic development. It has the potential to absorb a large workforce, vital for India’s growing population and high unemployment rates. A robust manufacturing base can reduce dependence on imports and boost exports of high-value goods. Achieving this requires effective implementation of policies and addressing challenges such as infrastructure bottlenecks, skill mismatches, and bureaucratic red tape.
The PLI scheme is a cornerstone of the government's strategy to boost manufacturing. Budget 2024-25 proposes expanding this scheme to additional sectors, including renewable energy components, textiles, and electronics. Implementation challenges, including bureaucratic delays and limited awareness, need addressing to ensure incentives reach the intended recipients.
Significant allocation for infrastructure development aims to improve transportation networks, power supply, and digital infrastructure. Key projects include expanding national highways, developing new industrial corridors, and investing in renewable energy infrastructure to reduce logistics costs and improve supply chain efficiency.
The budget introduces several tax reforms to ease the burden on manufacturers, such as rationalising customs duties on raw materials and intermediaries, and simplifying tax compliance. These measures aim to reduce production costs and make it easier for businesses to operate. However, frequent regulatory changes and lack of clarity in the tax system remain challenges.
Special attention is given to Micro, Small, and Medium Enterprises (MSMEs), with increased credit support and a new scheme for technological upgrades. Provisions to address delayed payments and the establishment of a dedicated MSME portal for real-time grievance redressal and payment tracking are notable. Effective execution and monitoring are critical for these initiatives to succeed.
The budget allocates significant resources towards skill development and vocational training programs, focusing on aligning with industry requirements, especially in emerging technologies like AI, robotics, and advanced manufacturing techniques. Collaboration with industry stakeholders is necessary to design relevant curricula and ensure quality training.
Increased funding for research and development (R&D) in the manufacturing sector includes tax incentives for companies investing in R&D and the establishment of innovation hubs and incubators. Despite increased funding, private sector investment in R&D remains low. The government needs to create a conducive environment for R&D and focus on commercialising research outcomes.
The expansion of the PLI scheme is likely to attract both domestic and foreign investment, increasing production capacity in high-tech manufacturing sectors. A stable policy environment and addressing issues like land acquisition and labor laws are crucial for attracting investments.
Rationalising customs duties can make Indian manufacturing more competitive globally by reducing production costs. However, a holistic approach to cost reduction is necessary, addressing other costs such as energy and compliance.
Investments in infrastructure, particularly in logistics and power, are expected to enhance manufacturing efficiency by reducing transit times and ensuring uninterrupted production. Timely and budget-compliant completion of projects is essential, along with a focus on sustainable and environmentally friendly infrastructure development.
Supporting technological upgrades, especially for MSMEs, is crucial for enhancing productivity and innovation. Financial support, technical assistance, and training are needed to help MSMEs adopt new technologies effectively.
While the budget provisions are promising, effective implementation is the real challenge. The government needs robust mechanisms for monitoring and evaluating budget provisions, ensuring transparency and accountability. Strategies to mitigate global economic uncertainties, such as diversifying export markets and strengthening trade relations, are also essential.
The Union Budget 2024-25 lays down a comprehensive framework to support the manufacturing sector, with measures like the expansion of the PLI scheme, infrastructure development, tax reforms, and targeted MSME support. However, sustained efforts and vigilant monitoring are necessary to realise its full potential. Continuous engagement with industry stakeholders, transparent policy implementation, and a focus on long-term sustainability will be crucial for the manufacturing sector’s success and its contribution to India’s economic resurgence.
(Source: Policy Circle)
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