Modi government has been trying to help manufacturing sector ever since it came to power - first with Make in India and now with Aatmanirbhar Bharat. The latter came into being only last year with the idea to make India self-reliant and help the country out of the economic lurch it was left in by the coronavirus pandemic. Finance Minister Nirmala Sitharaman is most likely to provide a fillip to the Aatmanirbhar Bharat plans in her Budget speech today.
Last year, Centre announced production-linked incentive (PLI) scheme for 13 industries in two tranches. The aim is to improve manufacturing capabilities and exports in these sectors. The combined financial outlay for PLI scheme in these sectors is almost Rs 2 lakh crore. Notably, balance allocation from one sector can be utilised in other sectors under the ambit of this scheme.
The industries included in the PLI scheme range from electronics and telecom equipment to automobile, steel and even pharmaceuticals. Keeping in mind the needs of future, Sitharaman could include measures in the Budget 2021-22 to boost manufacturing in these sectors.
In November last year, the Cabinet included 10 sectors - Advance Chemistry Cell (ACC) battery, electronic and technology products, automobiles and auto components, pharmaceuticals drugs, telecom and networking products, textile products, food products, high efficiency solar PV modules, white goods (ACs and LED), specialty steel - into the PLI scheme. These sectors were added over three existing sectors - mobile and certain electronic components, Active Pharmaceutical Ingredients (APIs), and medical devices.
With the 5G network being adopted globally, and considering India's plan to jump on the bandwagon, manufacturing telecom equipment indigenously will be of great help. With growing distrust over Chinese equipment and government's decision to restrict use of foreign equipment, telecom equipment manufacturing might receive significant attention in Budget 2021.
As for electronics and white goods, government may include more verticals. Industry has been asking for reducing barriers in sourcing components like TV panels from abroad. This aspect too might be dealt with in the upcoming Budget. Notably, the Budget this year will be completely paperless.
With the coronavirus pandemic ravaging the country and its economy, pharmaceuticals and medical devices grew leaps and bounds on the back of surging demands. India scaled up its capacity to manufacture items like gloves, masks and PPE kits manifold, but that is merely scratching the surface. Several coronavirus vaccines are under development in the country, with two already being approved for emergency use. With the writing on the wall being clear - the pandemic is here to stay - and WHO's emphasis on preparing for even severe pandemics in future, India might want to continue the momentum it has gained in the pharmaceutical and medical devices manufacturing.
However, boost in domestic manufacturing will depend on associated policies and tax norms too. India Inc has been asking for more incentives for manufacturers. Unless that happens, private investment will always be stymied.