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The proposed Union Budget 2017 focusing on building a long-term growth plan for the manufacturing sector

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Union Budget 2017 Implication of budget on industry segment

Mar 27, 2017

The feature highlights key insights from the industry experts on the implication of budget in infrastructure development, skill enhancement, job creation, ease of doing business and tax reforms within the Indian manufacturing sector and its impact on the automation and robotics industry segment. A read on…

Recently, the Indian Government has been focusing on building a long-term growth plan for the manufacturing sector so that it can meet its set economic goals by 2020. The recently proposed Union Budget 2017 is a step in that direction and supports this objective. The following section highlights key insights from the industry experts on the implication of budget in infrastructure development, skill enhancement, job creation, ease of doing business and tax reforms within the Indian manufacturing sector and its impact on the automation and robotics industry segment.

“Budget addresses spirit of reforms”

- LR Katrat, MD & CEO, Katlax Enterprises

The Budget 2017-18 addresses the spirit of reforms promised by the government in its election manifesto. The situation was a bit embarrassing for the government after demonetisation to appease the largely affected sections and at the same time, address reforms and keep up with the GDP growth, which is falling globally due to slowdown of economies.

On direct tax regime, the government has given relief to individual tax payers by increasing the basic limit from Rs 2.5 to 3.0 lakh and with basic standard deduction, most of the salary class earning in the range of Rs 5.0 lakh per annum is almost relieved of taxation. There is also a good incentive introduced for firms with a turnover of Rs 2 crore by paying income tax at 8% of profit and 6% in case they adopt cashless/digital platform, which is another step towards encouraging digital economy.

For MSMEs, there is a good deal as the income tax is reduced to 25% against 30% for sales of turnover up to Rs 50 crore. This is a major incentive for genuine taxpaying MSMEs for declaring more book profits and increase in net worth through ploughed back profits, improve financial health and attract better options of borrowing for negotiated interest rates for the company.

The budget did not tamper with the income tax rates for the corporates and there is a sense of predictability on the taxation front, which, otherwise, is a matter of speculation. Corporate expectations were a bit nervous as they were expecting reduction in a tapered manner to settle with 25% from the present 30% level.

On indirect taxes, there is not much change except for the increase in service tax and it is in line with the GST reform, which the government has committed to implement from July 1, 2017. The GST implementation is truly going to bring a paradigm shift in national taxation reforms and government deserves full credit if they make it happen despite several hurdles and added opposition after demonetisation.

“Budget in line with IIoT initiatives”

- PV Sivaram, MD, B&R Industrial Automation

Digitisation is on the rise and manufacturing units too are feeling the need for machine-to-machine, cloud connectivity, safety and security. The current moves in the Union Budget are in line with Industry 4.0 and Industrial Internet of Things (IIoT) initiatives. Manufacturing is embracing digitisation, which is providing an impetus to smart control solutions right down to the sensor level. This, in turn, ought to reflect on the growth of automation and robotics in the industry. With the rise in digitisation, safety and security will surely be top of the list for the manufacturing industry, which will further fuel the need of automation.

The digital revolution will necessarily need devices to communicate with each other easily. This would need a set of commonly understood protocols, which are supported by multiple vendors. In short, devices must use open protocols, such as Ethernet POWERLINK, OPC-UA and openSAFETY. Such protocols must satisfy a wide variety of needs, such as real-time synchronous communication at field level, safe communication at M2M level and secure communications to the cloud.

“Growth engine for robotic companies”

- Pradeep David, General Manager—India, Universal Robots

With efforts to make India an electronics manufacturing hub, the Government announced in the budget that the total investment in the sector has now reached ₹ 1,20,000 crore. Investment in the electronics sector is sure to trigger an inspection and assembly-related market for robots.

The growth of the global industrial robotics market is driven by many factors, of which the need to reduce manufacturing cost in industries is one of the main drivers. Industrial robotics aids companies in reducing the cost due to product failure and product wastage. An increase in the outsourcing of manufacturing activities to low-cost countries, especially in the APAC region, is another driver. Many large global firms are outsourcing product development to low-cost destinations to reduce manufacturing costs. Robotics in India has already made significant inroads in electronics assembly in the recent past. Industrial robots are on the verge of revolutionising manufacturing. The Union Budget 2017 announcement will be a powerful growth engine for robotic companies. Apart from the investment, the Government has announced in electronics, we would have liked to see some incentives for manufactures in their need to embrace automation and robotics to improve productivity & quality.

As legions of robots and other automation technologies find their ways into production facilities and distribution centres - as well as through supply chains - manufacturers will grapple with an advanced level of participation of human and machine. Indeed, manufacturers could be looking at an awkward period of systemic human-resource change as they introduce robots to more varied manufacturing tasks, and as they call for greater human-machine collaboration. The CAGR of the global collaborative robot market is slated to be in the range of a phenomenal 60% over the next 5 years.

The Union Budget 2017 will certainly give a positive impact to robotics companies in India as the Government is committed to ensuring conducive labour environment / legislative reform to simplify labour laws.

“Focus on Railways is progressive”

- Tilak Raj Seth, Head – Mobility, Siemens & CII Chairman – Rail Transportation & Equipment Division

Indian Railways will contribute to the enduring success of the Indian growth story through its pivotal role in ensuring reliable delivery of goods and services as well as providing a safe and secure environment for businesses and people across India. It is good to see its adequate representation in the combined Union Budget bringing it to the centre stage of economic growth. With a focus on spending more on infrastructure, the planned ₹ 8.5 lakh crore investments towards Indian Railways modernisation initiative are on the right track. ₹ 1.31 lakh crore has been budgeted for Railways for capital expenditure and development in 2017-18. Focus on improving the throughput by a further 10% through various infrastructural developments will help railways in the long term.

Provisions in the budget with a focus on safety, infrastructure development and energy efficiency through various initiatives are also a welcome move. A separate safety fund (Rail Sanraksha Kosh) of ₹ 1 lakh crore over the next five years reaffirms this commitment. Railways should now invest in state-of-the-art technologies to enhance safety, e.g. train protection warning system, train collision avoidance system & automate signalling & safety systems. Phase wise, but speedy implementation of these technologies would help the elimination of unmanned level crossings by 2020 and it will enhance the safety in rail transport, which needs to be implemented at the earliest. Over 7,000 solar powered railway stations in the medium term and implementation of degradable waste to energy are some of the moves aimed at improving energy efficiency, apart from the infrastructural development initiatives like increasing speed of electrification. Overall, the focus on Railways in the budget 2017-18 is progressive and aims at ushering in the much desired transformation of the Railways at a faster pace. I would rate these provisions in the budget as pragmatic and positive, as it would be beneficial for the industry, and people at large.

Image Gallery

  • LR Katrat, MD & CEO, Katlax Enterprises

  • PV Sivaram, MD, B&R Industrial Automation

  • Pradeep David, General Manager—India, Universal Robots

  • Tilak Raj Seth, Head – Mobility, Siemens & CII Chairman – Rail Transportation & Equipment Division

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