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(Representational Image) Major budget highlights included import duty on select auto components, which has been enhanced to 15% and reduction in corporate tax for MSMEs to 25%

Union Budget 2018-19 Enabling manufacturing growth

Mar 20, 2018

The Union Budget 2018-19, presented by Finance Minister Arun Jaitley, has been welcomed by the industrial sector. The measures announced in the Union Budget provide the much needed thrust to the economy and have been deemed inclusive. The industry expressed its approval for the focus on development of rural economy, manufacturing, infrastructure, education, ease of doing business, attracting investments and encouraging innovation and digitisation. Major budget highlights included import duty on select auto components, which has been enhanced to 15% and reduction in corporate tax for MSMEs to 25%. This viewpoint section further explores this year’s budget, keeping in mind the growing Indian manufacturing sector. Excerpts…

“Momentum from the last quarter will sustain through 2018” — Dr Jairam Varadaraj, Managing Director, ELGi Equipments

The budget has introduced some interesting schemes towards agriculture and rural development. They continue to support investments in infrastructure, which will support our portable compressor range. Many of our suppliers will benefit from the MSME tax reduction and perhaps the tax reduction will encourage capital expenditure, which could in turn support our industrial compressor range. Overall, while there are no explicit manufacturing boosters, we hope that the momentum from the last quarter will sustain through 2018.

“Budget is inclusive and pro-manufacturing” — Nirmal Minda, President, ACMA

The Budget unveiled by Hon’ble Finance Minister is indeed inclusive and pro-manufacturing. The component sector is delighted that the duty on select items such as engine & transmission parts, brakes and parts thereof, suspension and parts thereof, gear boxes and parts thereof, airbags etc, have been enhanced from 7.5-10% to 15%. These items account for more than 50% of USD 43.5 billion domestic component industry’s turnover and over 30% of its USD 11 billion exports. The industry is extremely competitive in these areas and this measure will not only encourage investments but also encourage technology development in these areas.

Further, reduction in corporate tax to 25% for SMEs with turnover of up to Rs 250 crore is yet another welcome step as over 80% of the companies engaged in the auto component manufacturing are SMEs. This measure, as also enhanced budgetary allocation of Rs 3,794 crore for credit support, capital and interest subsidy, will have a benign impact on the smaller enterprises. Simplification of procedure for credit availability through online-system for SMEs is also a welcome step.

The thrust given to the development of rural economy, infrastructure, particularly roads, augurs well towards creating a vibrant automotive market in the country, which in turn, will fuel growth and development of the domestic auto component industry.

“Union Budget paves way for transforming India’s manufacturing landscape” — V Anbu, Director General & CEO, IMTMA

India’s commitment to long-term macro-economic stability and prudent fiscal management has been reaffirmed with the Union Budget 2018, tabled by Hon’ble Finance Minister and Minister for Corporate Affairs, Arun Jaitley in the Parliament recently. The budget offers stability and opportunities for India’s manufacturing sector as well as its machine tool industry. The reduction in corporate tax for entities with turnover of up to Rs 250 cr to 25% is a positive step towards development of MSME sector and enhancing their production capacities.

The Indian machine tool industry has around 1000 units engaged in the production of machine tools, accessories/attachments, subsystems and parts. Of these, around 25 companies in the large sector account for about 70% of the turnover and the rest are in the MSME sector and this sector stands to benefit a lot from this budget.

The ministry’s move, therefore, is expected to give an uptick for the machine tool industry business, which has a significant number of MSMEs. The budget has taken measures to promote job creation in several sectors such as auto components, electronic goods, textiles, mobile phone manufacturing, and so on. An allocation of Rs 1.48 trillion for track doubling, gauge conversion, line works and redevelopment of stations will spur manufacturing. We foresee demand rising for a wide range of machine tools required by railways.

Further, the sanctioning of Rs 120 crores for Scheme for Enhancement of Competitiveness in Indian capital goods sector including Advanced Manufacturing Technology Development Centre and Tumakuru Machine Tool Park is a continuation of the initiative taken by the Department of Heavy Industry to spur the development of advanced technologies in machine tools. Also, the capital expenditure outlay of Rs 80 crores towards trade infrastructure for export schemes for setting up of trade promotion centres will give a boost to export trade. It is a matter of satisfaction that the government has extended concessional custom duty on critical imports to all categories of CNC metalworking machine tools.

Image Gallery

  • “Momentum from the last quarter will sustain through 2018” — Dr Jairam Varadaraj, Managing Director, ELGi Equipments

    Image: ELGi Equipments Ltd

  • “Budget is inclusive and pro-manufacturing” — Nirmal Minda, President, ACMA

    Image: ACMA

  • “Union Budget paves way for transforming India’s manufacturing landscape” — V Anbu, Director General & CEO, IMTMA

    Image: IMTMA

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