The unveiling of the Union Budget for 2022-23 was, perhaps awaited more keenly than in previous years for a number of significant reasons.
The budget was announced against the backdrop of upcoming elections in five states, the looming threat of a fresh COVID-19– or Omicron wave, nascent economic recovery, and concern over key numbers like fiscal deficit, tax collection and spending outlook.
The budget showcased the government in a positive light by presenting strong growth-oriented budget proposals amidst the continuing pandemic and highlighting the success of its production-linked Incentive (PLI) schemes.
This year’s budget was expected to address issues like special incentives for industry to create additional jobs and direct fiscal support — instead of loan guarantees from the government — to help the manufacturing industry to tide over the third wave of COVID-19.
For the manufacturing sector, Finance Minister Nirmala Sitharaman’s objective is to steer the economy towards 25 percent GDP growth – from its current 17 percent growth rate – within the next decade.
The manufacturing sector’s target of reaching $1 trillion over a five-year period gave rise to expectations of a series of policy initiatives to augment the availability of products, maintain production costs, and create demand and jobs through ease of doing business.
Budget Highlights: the manufacturing sector
A key feature of the roadmap to economic revival in the growth-oriented budget focuses on boosting the manufacturing sector to create large-scale employment opportunities.
The manufacturing sector currently accounts for roughly 20 percent of India’s total GDP. It contributes to the economy by attracting investment, generating employment opportunities and by helping to fulfil the country’s industrial development goals. The tone for these concentrated efforts was set by the declaration made by the finance minister.
The four top priorities of Budget 2022 include PM Gati Shakti; Inclusive Development; Productivity Enhancement and Investment; Sunrise Opportunities; Energy Transition and Climate Action and Financing of Investments.
The extension, by another year – until March 2024 – of the offer of a concessional corporate tax rate of 15 per cent to newly incorporated manufacturing companies, is expected to incentivise activity and growth by encouraging new manufacturing industries and increasing private investment.
Another significant move involves aligning the National Skill Qualification Framework (NSQF) with the dynamic needs of the industry. It includes the launch of a digital ecosystem for a skilling and livelihood e-portal.
It will enable citizens to skill, reskill, and upskill through online training, in addition to providing API-based trusted skill credentials, payment, and discovery layers to find suitable jobs and entrepreneurial opportunities.
The rousing and heartening response to the PLI Scheme for achieving the goal of an Atmanirbhar Bharat is expected to contribute to the creation of 60 lakh new jobs and additional production of 30 lakh crore over the next few years. Introduced in 14 sectors to further these aims, the scheme is expected to generate four-fold improvement in the performance of manufacturing industries in the next four quarters.
Budget 2022-23: What more?
The positive measures outlined in the Union Budget need to be supported by timely strategic initiatives and action.
Steps need to be taken to incentivise and encourage investment in the manufacturing eco-system. Efforts to stimulate innovation among local technology providers must also be made.
The country’s manufacturing sector needs to be more competitive globally to realise India’s objective of becoming a major international manufacturing hub – and, to achieve this, greater attention and focus will need to be given to the ‘Make in India’ initiative. Policy initiatives are required to make products available, maintain production costs, and create demand and jobs by simplifying business processes.
Investment in enhanced technological innovations and the reduction or removal of permission bottlenecks are required to bring about a competitive manufacturing eco-system.
Upgrading the present logistics infrastructure – by way of better roads and more cost-effective and efficient solutions – is also needed to complement these efforts. The proposals announced by Finance Minister Nirmala Sitharaman, in Budget 2022, serve the purpose of laying out a roadmap for economic revival in India, in a climate still tinged with the challenges posed by the pandemic crisis.
Hopefully, endeavours to achieve these objectives will be bolstered by further announcements to encourage greater growth in the economy as a whole and the manufacturing sector.
India must take decisive steps to capitalise on the existing opportunity to become the next global manufacturing powerhouse. It has the potential to overtake other countries in manufacturing to occupy its rightful position in the world economy.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YS.)
