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BUDGET 2020 Union budget 2020 - Impact on the manufacturing sector

Mar 6, 2020

With the Budget 2020-21 declared, there has been a lot of deliberation on its impact on the manufacturing sector. It has taken big steps in several elements, from enhancing the MSME sector & start-ups, to an improvement in electronics manufacturing, to a rise in cost of electric CBU and CKD vehicles. The idea is, undoubtedly, to revive economic development. The Viewpoint section finds out if the Budget can revive economic growth in the country, its short-term and long-term gains and what are the opportunities it brings.

It is time for rural India to get smarter - Kailash Desai, Managing Director, Endress+Hauser India

The budget 2020-21 has introduced more tax slabs and offers higher limits, provided the taxpayer is ready to forego all the existing exemptions. Also, it looks to me that the Government has plans to introduce a policy that would boost the private sector and guide them through building data centre parks throughout the country. Since the last couple of years, we have been working tirelessly on various ‘smart city‘ projects and technology enhancement that would make a huge difference in the lives of Indians. The Government had in the earlier budget introduced technology enhancements in tier II and tier III cities and this time around an allocation of ₹6000 cr for BharatNet is appreciated. As cities are getting smarter, it is time for rural India to get smarter as well. To bring the Indian economy on the fast track and achieve the Modi Government’s target of $5 trillion economy, the budget has a major focus on three themes – aspirational India, caring society and Indian economic development, by taking into consideration the Indian technology sector, Artificial Intelligence initiatives and start-ups. For over five years, an amount of ₹80 billion ($1.13 billion) will be provided for quantum technologies and applications, and this truly will create job opportunities, help tech start-ups and boost the economy.

Budget 2020 proposes an array of measures for start-ups - Jhankar Dutta, Managing Director, B&R Industrial Automation

With the announcement of the Union Finance Budget for the year 2020-21, it is seemingly clear that the government is upbeat on consolidating its existing financial measures. One of the major highlights for manufacturing in recent times has been the proliferation of start-ups. Budget 2020 proposes an array of measures for start-ups, SMEs and MSMEs, mainly focusing on business growth. The introduction of ‘Assemble in India’ is expected to facilitate India to manufacture networked products to make it part of the global value chain. There is certainly a cost advantage in electronics manufacturing in the country other than its immense potential to create huge employment. Budget 2020 targets a boost in incomes and enhances purchasing power with reduced tax burden. With improved purchasing power of the common people, manufacturing, including EVs and the automotive segment, might witness better sales. The Union Budget this year mainly focuses on many important aspects like the social well-being of the economy by increasing infrastructure and agriculture budget, to mention a few, but only time will decide the fulfillment of short-term and long-term strategies.

Similar to earlier budgets, Budget 2020 too offers something for all, with a hope of reviving the economic slowdown. With several macro challenges and the target of reaching $5 trillion by 2024, the budget does promise some impetus to manufacturing but definitely, there is scope for more. We are making an effort to become a global manufacturing hub, the scope of the model spans across all sectors of manufacturing and service industry, with a special focus on micro, small and medium enterprises – some of the engines of Indian economic growth. Thus, there is hope for growth in the ever-challenging volatile market.

What boosts manufacturing will boost the economy - Ramani Iyer, District Vice-President – Asia Pacific District 14, International Society of Automation (ISA)

The Union Budget 2020-2021 , following the earlier big-bullet reduction of corporate tax to 15% , will have a very salutary impact on the automation sector. This ‘sun rise’ high technology sector is already poised to make a huge contribution to the manufacturing and services segment of the economy. Every 2% increase in investment in this sector is estimated to contribute to a whopping 5% increase in the GDP. The measures to boost the MSME segment are also very significant; over 50,000 MSMEs have already availed the benefits of restructuring of debt permitted by RBI in 2019-2020. This scheme has been extended in the current budget. Plus, waiving the dividend tax is a huge gain for MSMEs. Reducing the compliance burden on the segment, the budget has proposed that the ceiling on mandatory financial audit be raised to ₹5 cr from the current ₹1 cr.

Lowering the threshold for availing an invoice credit by uploading on the Trade Receivables Discounting Scheme will boost these companies. The cumulative turnover of such platforms is poised to increase to ₹1 trillion in the next 18 months. A ₹1000 cr scheme anchored in EXIM Bank and SIDBI is aimed at technology upgradation, research and development and business strategy, particularly to assist exports.

Today, automation technology is the major component of manufacturing and financial services sector. By enabling the MSME segment of this sector to grow with vigour, the budget will enable the economy to grow at a faster pace. Over 40% of the turnovers in this sector is contributed by the MSME components of the ‘brick & mortar’ automation technology industry,
IT and IT-enabled sectors. What boosts manufacturing will boost the economy.

We laud the government’s focus on improving the supply chain economy - Vartul Jain, SVP and CFO, GreyOrange

It is heartening to see how this year’s Union Budget focuses on promoting India as an investment and innovation hub. Focus on entrepreneurship, skill development and supply chain economy and a thrust on technology are important for the growth of the government’s Digital India and Make in India programmes. Measures such as an Investment Clearance Cell, early stage fund and multiple tax rebates and relaxations for start-ups will help widen their scope and provide more opportunities. From a business perspective, the government continues to extend its support to MSMEs and bolster their growth by allowing for debt restricting, all of which will help boost the entrepreneur ecosystem. We also laud the government’s focus on improving the supply chain economy. Measures such as geo-tag warehouses and establishment of efficient facilities at the block level, will be key in ensuring zero wastage and optimised resource allocation. We are now excited to witness how the industry makes the most of these initiatives for entrepreneurship and drive innovation to further the spirit of India Vision 2025.

The budget has in store positive measures for the MSME & start-up sectors - Sameer Gandhi, Managing Director, OMRON Automation India

The budget is expected to have a positive impact on manufacturing activities, mainly owing to the rearrangement in IT rates, which will act as a boost for the FMCG, white goods and two-wheeler automotive manufacturing segments. Also, I feel the announcement regarding ‘Assemble in India’ should act as a catalyst in expansion of the electronics hubs base in India. Eventually, this will lead to an increase in volumes which will motivate machine makers to start building machines in India rather than getting them imported. This will also lead to an increase in manufacturing activities. Another sector which is going to gain growth in manufacturing is the textile sector, with the announcement of reversal of $16 billion imports in by the National Technical Textile Mission. The budget also has in store positive measures for the MSME and the manufacturing start-up sectors. With tax reliefs and rebates being announced, both sectors are expected to become more robust and conducive to drive the growth of the manufacturing sector. Plus, notable buoyancy is expected to be felt in terms of electric vehicles as well as the mobile parts phased manufacturing because of this revision. But the retention of existing duty on EV batteries is a slight dampener. It will not work towards bringing the prices of EV vehicles down which will act as a hindrance against the mass adoption of EVs. Also, the overall automotive sector, which has been feeling the downturn, has not received significant relief or measures.

The Digital India initiative will see a new wave - Sanjay Sudhakaran, VP – Digital Energy, Greater India Zone, Schneider Electric

As per the Union Budget 2020, the allocation of ₹6000 cr for BharatNet to digitise one lakh gram panchayats is a step towards making India digitally more connected. These new initiatives will help improve telecom and internet services in the rural and remote regions of India. The Digital India initiative will see a new wave as citizens in deeper pockets will gain further access to services like e-governance, e-health, e-education and e-banking amongst others. In addition, the announcement of allowing private sector set up data centre parks across the country will help in data localisation and protection. We welcome the government’s decision in announcing additional smart cities in building a robust digital infrastructure. This also aligns with the Internet of Things (IoT) taking over as automation has made lives simpler and buildings smarter.

Image Gallery

  • Kailash Desai

    Managing Director

    Endress+Hauser India

  • Jhankar Dutta

    Managing Director

    B&R Industrial Automation

  • Ramani Iyer

    District Vice-President – Asia Pacific District 14

    International Society of Automation (ISA)

  • Vartul Jain

    SVP and CFO

    GreyOrange

  • Sameer Gandhi

    Managing Director

    OMRON Automation India

  • Sanjay Sudhakaran

    VP – Digital Energy

    Greater India Zone

    Schneider Electric

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