New Delhi: India’s finance minister Arun Jaitley refrained from making any substantial proposal to attract investments in manufacturing but focused on clearing bottlenecks to promote government’s Make in India programme.
Jaitley said that India has become the sixth largest manufacturing country in the world, up from ninth previously. “We are seen as an engine of global growth,” he said in his budget speech.
Make in India has been an effort by the government to create a platform for global and Indian investors looking at setting up production facilities in India either to address the growing local market or to use it as a base to feed global supply chains.
Launched amid great fanfare in 2015 and followed up by renewed impetus during Hannover Messe in 2016, it has been seen as a critical effort in creating jobs in the country following a decade of jobless growth. In its wake, the country’s ranking on key global indices like Ease of Doing Business as well as the Global Competitiveness Index has improved, though on-ground successes haven’t yet been commensurate with these gains.
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“We are also creating an ecosystem to make India a global hub for electronics manufacturing. Over 250 investment proposals for electronics manufacturing have been received in the last 2 years, totalling an investment of Rs1.26 lakh crores,” Jaitley said adding that a number of global leaders and mobile manufacturers have set up production facilities in India.
This encouraged Jaitley to increase the allocation for incentive schemes like M-SIPS and EDF to Rs745 crore in 2017-18. This is an all-time high, he claimed.
To promote medium and small scale enterprise, income tax for smaller companies with annual turnover up to Rs50 crore reduced to 25%. FM proposed to exempt parts and components for manufacture of miniaturised POS card reader to encourage domestic manufacturing of these devices.
The government also proposed to reduce customs duty on inputs and raw materials to reduce costs in areas such as mineral fuels and mineral oils, chemicals and fertilizers, metals, finished leather, capital goods, renewable energy, textiles, catalytic converters for automobiles.
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Gross domestic product (GDP) from manufacturing in India decreased to Rs4,84,150 crore in the third quarter of 2016-17 from Rs4,901,64 crore in the second quarter. GDP from manufacturing in India averaged Rs4,13,621 crore from 2011 until 2016, reaching an all-time high of Rs4,90,833 crore in the first quarter of 2016-17. This happened due to an enormous push by the government to open up the economy.
The foreign direct investment (FDI) limit has been increased in 15 sectors and a single reference document for all FDI has boosted investor confidence. A rapidly growing consumer base holds out the promise of mega investments.
Further, the implementation of goods and services tax (GST) will create a pan-India common market of $2 trillion GDP and 1.2 billion people—a big attraction for investors.
Rising labour cost and transition from investment-led growth to consumption-led growth in China is presenting another opportunity for India.
But has the government done enough? The actual inflow into manufacturing indicates that a lot remains to be done. The focus should be on design-led manufacturing rather than assembly-led manufacturing.
Perhaps, one can look at Elon Musk to set up a car-manufacturing facility in India rather than chasing Apple.