Manufacturing activity has been booming over the last few months triggered by PLI schemes and also the increasing focus of global companies towards India as a sourcing base.
Two key objectives of the imminent budget for manufacturing sector are expected to be
Indian manufacturers are dependent on imported raw materials and any hike in prices affect the profitability of the companies. A high custom duty adds to the increased price and makes the manufacturers uncompetitive. For example, some of the core sectors like cement depend on coal or petcoke imports which are an important source of fuel. Fuel cost hike along with other issues affected performance of Cement sector last year. Similarly, some of the industries like paper which are under margin pressure, are dependent on materials like wastepaper whose import duty is high. Hence this budget should consider lowering import duties for some of the key raw materials for manufacturing sector which can help in enhancing competitiveness.
Green manufacturing is high on agenda for India to achieve the targeted net zero goal. It is an approach that minimizes the environmental impacts of production processes and products through use of green materials and technologies. While the concept is understood well by manufacturers, a strong impetus is required to incentivise companies to adopt green manufacturing practices. This budget should bring out tax relief/incentives for companies who are adopting green manufacturing practices to drive sustainability agenda.
Rural consumption has been on the increasing trend and driving demand across sectors. Some of the key manufacturers in sector like cement are having focussed campaigns actively targeting to increase penetration in rural region. We see similar initiatives in other sectors too. While enhancing logistics infrastructure has been on focus for Indian government over the last few years, this budget has to lay special emphasis and increased outlay to increase the connectivity to rural areas across the country to enable reach for manufacturers.
While the power of digital tools and technologies in manufacturing sector is acknowledged, the number of companies who have digitally enabled their manufacturing processes are few in number across the country. Digitalisation of manufacturing is expected to be a critical step to be done by companies to increase scale and competitiveness. This budget should suggest funding schemes to promote adoption of digital manufacturing technologies such as IoT and other digital tools like AI and ML
MSMEs are the backbone of Indian manufacturing system and many of the MSMEs are tier one and tier two suppliers for many leading auto and industrial OEMs. They also have the capability to diversify their supplies to other growing sectors like aerospace and defence. Many of the global majors, who are targeting increased sourcing from India are also evaluating these MSMEs for being prospective suppliers. These MSMEs need support in terms of low-cost finance to upgrade themselves to meet global standards in terms of quality and skill development of their teams. This budget should define low-cost finance schemes for MSMEs who want to upgrade their capability.
Given the growth in Indian manufacturing sector, the manufacturers expect that the budget will enable India to rise up further in the ranks as most sought-after nation status for manufacturing through its recommendations and enabling mechanisms both on inputs and outputs.
