Manufacturing sector seeks major reforms from FM
Industry experts said the share of the sector in GDP has to go up if India has to achieve its target of becoming a $10 trillion economy in the coming years.
NEW DELHI: As the Union budget FY25 is approaching, manufacturing sector is seeking major reforms from finance minister Nirmala Sitharaman.
There are expectations from the government to rationalise tax structure, give emphasis on R&D and introduce schemes such as PLI to improve competitiveness in the domestic as well as global market.
“The kickstart to boost the manufacturing sector has happened. The government is not only looking at foreign investment but is taking steps to ensure investment by Indian investors. There needs to be certain things on the ground to attract and support investment,” Blue Star MD B Thiagarajan told TNIE.
He said the government should look at introducing PLI schemes for sectors where cost of capital is high. The other important area is to see how India can boost its R&D capabilities without which it is highly unlikely for the country to become globally competitive.
“Domestic value addition has to go up. Capital cost has to come down and private players have to chip in to promote innovation. R&D investment as a percentage of total GDP is just 0.65%. In developed nations, it is 2.5%. Then there is a need to look at the ease of doing business.
Logistics cost here is high as we don’t have a robust container and shipping infrastructure. If this single thing is answered, margins for the industry can go up 2-3%,” said Thiagarajan. Kunal Chaudhary, Tax Partner, EY India, said budget 2024-25 can introduce or enhance policy measures aimed at creating a more favourable business environment for manufacturers.
“A few policy measures may include reintroduction of reduced corporate tax for manufacturing units, rationalisation of duty structures for components/ parts to promote domestic backward integration and value addition in India, specific budget allocation for grants or subsidies to promote design/R&D activities in manufacturing sector, policy measures like public procurement orders, phased manufacturing programmes (PMP), new PLI schemes for import-dependent sectors, and incentives for adopting green manufacturing practices and technologies,” added Chaudhary.
Industry experts said the share of the sector in GDP has to go up if India has to achieve its target of becoming a $10 trillion economy in the coming years. While the services sector’s contribution to GDP has risen from 45% to 55%, the share of manufacturing has remained stagnant at 15% in 2017 and 17% in 2022.
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