Union Budget 2021-22 Expectations for Manufacturing Sector: Given its major share in employment generation and the consequent effect on growth of the economy, the manufacturing sector has been a top agenda item of any ruling dispensation. Achieving this is looking extremely difficult in this financial year in view of the ongoing Covid-19 pandemic and related lockdowns. The Covid-19 pandemic has severely dented the manufacturing sector, with a massive doubt-digit contraction in growth, coupled with job losses. The National Statistical Organization predicted that the economy would contract 7.7 per cent in the current financial year, the worst performance in four decades.
The Government of India (“GoI”) has come up with ‘Make in India’ policy with a three-fold objective – increasing the sector’s annual growth rate, creating additional manufacturing jobs and increasing the sector’s contribution to Gross Domestic Product by the year 2025. The GoI has also come up with the production linked incentive scheme in March 2020. The same was initially limited to the pharmaceutical sector (with a focus on boosting domestic capabilities and reducing import dependencies), and subsequently expanded to ten sectors as part of the Atmanirbhar Bharat package. At this stage, though projections are being made, the outcome of such reforms cannot be predicted with absolute certainty as we have a dynamic domestic and international economic situation and the Covid-19 pandemic is still limiting capabilities and businesses. One would have to wait and watch to see the consequences of these reforms, and it will be a challenge to supervise and control the outcome to ensure that we do not deviate from the set growth objectives.
The Covid-19 pandemic has also resulted in huge possibilities for India, and the recent global investment trend recognises, to some extent, that India is an alternative to China for manufacturing, and this is the best time for India to showcase itself as a top-class manufacturing hub. Various stakeholders are waiting for the right opportunity to invest and experts believe that there is a strong possibility of a ‘V’-shaped recovery. I am optimistic that, the upcoming budget will have measures and reforms that will instil confidence and trust, and achieve sustainable growth.
Recently, our Finance Minister has promised a budget like “never before”, signalling that the GoI is willing to take tremendous steps to revive the economy and accelerate growth. Reviving the manufacturing sector with sustainable growth should be the theme of the upcoming budget.
Around 95 per cent of India’s trading by volume and 70 per cent by value is done through maritime transport. The Covid-19 induced lockdowns have disrupted supply chains and has brought the shipping industry to a standstill (save for dealing with essential goods).
Key concerns that we see in the shipping industry is outdated technology and practices, and efforts should be made to digitally transform the sector with best international practices. Efforts should also be made to develop efficiencies by upgrading with advanced technologies such as automation, machine learning and block chain strategies to enhance productivity.
Funds should be allocated for setting up single window clearance for imports and exports, automating payment systems at ports and customs, and introducing simplified documentation. Necessary awareness programs should be organised to incentivise new players to take part in tenders released by the shipping ministry.
At an international level, India should aim at becoming a hub between South East Asia and Europe. Efforts should be made to attract global shipping companies to establish businesses in India. Additional incentives for private sector investments in shipping sector may also be provided. This will lead to developing expertise, generating employment, increased research and development, and forex inflow.
It being a COVID year, the GoI will have to prioritize spending on healthcare and life sciences, and provide reliefs and incentives to almost all traditional economic sectors. This will be challenging, and given the importance of manufacturing and shipping sectors to the national economy, it is expected that reforms for these sectors will be prioritised in terms of allocation of funds.
This article was originally published in Financial Express on 28 January 2021 Written by: Arvind Sharma, Partner. Click here for original article
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that: