Manufacturing Sector’s Budget Wishlist 2023-24

As the manufacturing sector is open to advanced technological arrangements from the globe, the Union Budget ought to allocate a significant slice to enable India as the visionary manufacturing hub. IMF projects the world economy to grow at 2.5% in 2023, the slowest in the last 20 years. It shall be fascinating to witness how the Union Budget of 2023-24, amidst such hindrances, can assist in strengthening the model of Make in India. ?

1. Increase in Customs Duty: India has witnessed an alteration in export growth attributed to multiple global headwinds. Simultaneously, there has been robust import growth which has impacted the trade deficit. Therefore, to control the deficit, the government should focus on increasing customs duty for non-essential items. It is also advised to check whether the production of such items is vibrant in the domestic economy. Non-tariff barriers like mandatory quality control and certifications can also be imposed on non-essential goods.

2. Automation-Driven Growth and R&D Incentives: Industrial Revolution 4.0 has indicated the utter requirement for automation at the industry level-product, process, and plant. Sensitive segments of the sector can be classified as specified businesses under Section 35AD to extend support for technological advancement. Experts also believe; like CSR, R&D expenditure should be mandated to allow innovation to flourish. NITI Aayog (2018) observed that the link between research, higher education, and the industry is weak and nascent in India.

Year-on-year Growth in Expenditure-Ministry of Science and Technology

3. Emergency Credit Link Guarantees Team: MSME exports are struggling with liquidity. The Union Budget, to encourage small and medium enterprises, must extend support for one more year with a suitable extension period as per their requirement. As of August 2022, loans worth about Rs. 3.67 Lakh crore were sanctioned under ECLGS. The market participants also seek enhancement in credit limits and the allocated fund under the scheme. The budget for 2022-23 increased the sanctioned limit by INR 50,000 Crore to a total of INR 5 Lakh Crore. A special PLI Scheme for the MSME segment can be launched too.

4.?Export Refinance and Marketing Facility: Since the global markets have slowed down, export marketing events like International Trade Fair and exhibitions may not cater to a huge breadth of audience. Therefore, the Union Budget of 2023-24 can introduce a corpus fund to inhibit the marketing and promotional requirements of exporters. Besides, the cost of credit can be brought down by an efficient mechanism of refinancing available to the export segment of the economy. Such a facility can later be expanded on gaining fair impetus.

5. District Export Hubs: To encourage and strengthen district producers, farmers, and small businesses and enable them in the process of global interaction, the government can establish District Export Hubs. As a result of healthy traction, the PLI Scheme is expected to expand to other sectors like toys, textiles, and other electronics. Its success can be attributed to the incredible performance-oriented structure of the scheme that has multiplied efforts.?

6. Ease of Doing Business: The government’s rapid implementation of projects and increase in CAPEX from the capacity utilization standpoint can support domestic demand, specifically rural consumption, to pick up. Large Indian Groups are now investing significantly in new energy, and infrastructure which has reflected a trickle-down effect. The Union Budget should emphasize softer challenges like reducing the cost of logistics by enforcing schemes like Gati Shakti and the New Logistics Policy. India’s ranking on Construction Permits parameter has improved from 184 in 2014 to 27 in 2019. The total number of procedures was reduced to 20 in Mumbai and 16 in Delhi. India must improve in “Registering Property” and “Enforcing Contracts”, where dispute resolution is a wide obstacle. On average, it takes four years to resolve a commercial dispute in India — as against 164 days in Singapore

7. Efficient and Effective Talent Pool: The Skill India Initiative has reflected a sound policy structure that aims to monitor labor displacement and address unskilled labor. To leverage the benefits of Industrial Revolution 4.0, the Government of India should create Talent Parks, where manpower is trained at par with industry standards with technological advancements. Therefore, it is essential to address manpower effectiveness to achieve the required rate of growth in employment in allied sectors. According to figures provided by the Ministry of Skill Development, till January 19, 2021, around 1.07 Crore candidates have been trained across the country under the Skill India Mission. A stronger implementation with a heavier outlay to cover more sectors should be the priority of the Union Budget 2023-24.

Sources: Business Standard, Invest India, Ease of Doing Business, Drishti IIAS, Press Information Bureau