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BUDGET 2020 The financial blueprint of 2020 – Deciphering budget on manufacturing

Mar 26, 2020

The Union Budget 2020-21 has been centred around three ideas – aspirational India, economic development and a caring society. The Indian manufacturing industry, amidst a protracted slowdown, had been expecting concrete steps to either stimulate a revival on a sectoral basis or boost spending in the economy at large. To understand if the Budget 2020-21 stood tall on the expectations of the industry, EM reached out to industry magnates soliciting their stance on how beneficial would Budget 2020-21 be to boost manufacturing within the country.

The key is quick and systematic implementation of initiatives - Mohini Kelkar, Director – Sales & Marketing, Grind Master Machines

I think there is nothing outstanding to speak about. Measures like privatisation of some public sector companies, further investments in infrastructure, railways & defence will certainly have a positive impact and will create both, long and short-term opportunities for the industry. The key is quick and systematic implementation of such initiatives.

The government spending on infrastructure should have reflected in more growth of economy and job creations. It does not seem to be happening. Of course, there is a large impact of global recession, environmental issues and relations between various countries. Some of these issues can bring more business to India. Several initiatives, like boost to the MSME in various forms are declared, but on ground implementation is missing. Similar is the case with ease of doing business. The reduction in corporate tax was expected to boost the capital investments by the companies, but due to several instabilities globally, the industry is still holding back investments.

The slowdown has bottomed out and the revival will start slowly - C S Shivashankaraiah, Managing Director, Trishul Machine Tools

There were great expectations from all the quarters on this budget, considering the current economic scenario and as a gateway towards the much talked about $5 trillion economy. The manufacturing sector, in general, was expecting several sops in the form of incentives, tax cuts and a major boast in the capital expenditure. There were no such spectacular announcements, and the manufacturing sector and the market is largely dissatisfied with the budget. Small changes brought to the direct taxes have not brought much cheers to the manufacturing sector. The minor changes in the GST and customs have not had any significant impact on the sentiments. Changes to the capital gains tax computation is a welcome announcement but has failed in making an impact. It may be a good idea to not make any major announcements at this stage of the slowdown in growth. The revenue collections are expected to be low; any major announcement would be left without resources. Maybe it’s a good idea to wait till the slowdown bottoms out and its full impact is understood before making any major announcements.

The budget has nothing significant to give an impetus to the slowing manufacturing activity & economic growth to revive confidence. But certainly, the cleanup in the system is happening very quietly in a major way. The GST implementation is more or less streamlined but with a few minor glitches and that is a major achievement. Going forward, the economy has to bottom out before there is a revival of confidence in the manufacturing industry. As of February, it looks like the slowdown has bottomed out and revival will start but it will happen slowly.

There is a huge opportunity for India to attract foreign investments - Jayant Joshi, Managing Director, RUJ & SRM Mechanics

Even though the manufacturing sector had seen a slowdown during October 2019, where the indices of industrial production for manufacturing industry had declined to 2.1%, there is still a sense of optimism for the industries to become the highest growth sectors. I believe the industry needs specialised manufacturing capabilities and skill development capacities like the ones at RS India. The Economic Outlook survey projected the country’s annual median GDP growth for 2019-20 which was at 5% in line with the projections made by the National Statistical Organisation (NSO). The survey has put the median growth forecast for agriculture and allies at 2.6% for 2019-20, the industry and services sector at 3.5% and 7.2% respectively in the current year. The growth is likely to improve to 5.5% in 2020-21 as per the projection.

The tightening of imports and custom duties is definitely a boon for manufacturing of Swiss quality precision products in India. With the EV market growing globally with the requirement of Swiss precision parts and components, revision in rates to support phased manufacturing plans for electric vehicles as well as mobile parts is also expected to advance domestic manufacturers in these sectors. The push to domestic industries, that was also pronounced in case of technical textiles, with the National Technical Textile Mission instituted to reverse the $16 billion imports in this sector is also highly appreciated. The reduction in customs duty on inputs and raw materials like fuse, chemicals and anti-plastics to further boost the manufacturing sector is a good step that will help the industry.

All in all, there is a huge opportunity for India to attract foreign investments in the manufacturing sector. I believe that skill development will also prove to be a boon in the manufacturing segment. Several automobiles, medical, mobile, textile and among other brands have an eye on establishing their manufacturing bases in the country, which will be a great opportunity for precision parts and the components industry to grow.

There may not be short-term gains in this budget but more long-term - Vivek Nanivadekar, Executive Director, Fibro India Precision Products

This Union Budget 2020-21, prima facie, looks not so effective or attractive. But if one looks at it from a long-term prospective, then it certainly makes sense. It clearly aims at ‘Make in India’ and the ‘ease of doing business in India’. Therefore, in this budget, the finance minister has given priorities to infrastructure, like transportation and power generation. These two things are essential for the growth of ‘Make in India’ and ease of doing business. As such, the concessional income tax of 15% has been extended to power generation start-ups as well. By reducing the corporate income tax, the government is trying to attract foreign investors to start the manufacturing activity. The other long-term objective is simplification of the direct taxes so that an individual does not have to go to a specialist for filing the return as well as the liquidity.

The incentives for manufacturing electronic components, including mobiles, should boost the manufacturing sector. MSMEs are the backbone of the manufacturing sector; as such, the finance minister has also proposed a tax relief and relaxation for statutory audit requirements. The automotive industry had big expectations from the budget on the current background of low sales, but somehow, no special mention was there in the budget speech even for EVs. The industry expected a reduction of import duty on lithium batteries, so as to encourage the manufacturing of EVs, but this sector has been disappointed. I believe the first priority is infrastructures, like power generation and then EV manufacturing, which would hopefully reflect in the Budget of 2021-22. In short, there may not be short-term gains for the industry in this budget, but there will be continuity in the next two-three years’ budget, and we will certainly see the gains, if we do not change the direction. It may not boost the economy in the near future, as the government alone cannot do that, but it can create a conducive atmosphere for every sector to grow. However, there are external factors, such as the coronavirus, global demand, global unrest etc, which would certainly have an impact on the Indian economy.

Measures which are declared, are delayed actions - Neeraj Bisaria, Managing Director & CEO, Premium Transmission

My comments on the overall budget are that it has nothing exciting and/or worth value-adding to the current state of affairs on the economic condition of the country. Most of the measures which are declared are delayed actions and today these actions will not help revive the economy or the trust deficit between the industry and the governing bodies, be it the RBI or the finance ministry. This budget has nothing to revive the economy; it can only hold the current state, at the best, so that it does not further slide down.

The budget has looked into the long-term revival of the economy - Parag Satpute, Managing Director, Bridgestone India

The Union Budget 2020 did not attempt to announce any big-ticket reform to revive the economy but put focus on increasing money with the consumers, to address the fall in demand witnessed of late. Wisely, the budget followed good economics and did not attempt for any short-term fix. What’s more, the government has wisely announced support for the Indian automotive component industry for technology upgradations, research & development and business strategy planning. Such initiatives help in the long-term. The attention to the rural sector, like setting up of warehousing facilities, refrigerated and better rail links to transport perishable farm products, will provide long-term solutions to growth. The manufacturing sector, too, will benefit from the improved rural purchasing power.

Few months before the budget, the government had announced a big cut in the corporate tax which will improve the investment climate. Now, with the focus on improving liquidity with consumer and the ‘Make in India’ initiative, the manufacturing sentiments will receive a boost. With regards to the automobile sector, the finance minister has been working on auto scrapping policy. Once finalised, there will be a boost in the auto sector, including ancillaries and tyres. The EV policy, particularly in terms of creation of necessary infrastructure for the EVs, will also act as a catalyst. The other rub off effect for the auto sector as well as the broader economy is expected from the accelerated development of highways to be undertaken, with the Delhi-Mumbai expressway and two other projects set to be completed by 2023. Overall, the budget has looked into the long-term revival of the economy.

Image Gallery

  • Mohini Kelkar

    Director – Sales & Marketing

    Grind Master Machines

  • C S Shivashankaraiah

    Managing Director

    Trishul Machine Tools

  • Jayant Joshi

    Managing Director

    RUJ & SRM Mechanics

  • Vivek Nanivadekar

    Executive Director

    Fibro India Precision Products

  • Neeraj Bisaria

    Managing Director & CEO

    Premium Transmission

  • Parag Satpute

    Managing Director

    Bridgestone India

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