Budget 2018: Steps to Stimulate the Manufacturing Sector

Expectations of the Manufacturing Sector from Budget 2018
Budget 2018-19 is the government’s last full budget. To provide relief and the required impetus to the corporate and the manufacturing sector, the government can announce some big ticket announcements in the budget. According to sources, a rate cut in the MAT (Minimum Alternative Tax) and Corporate Tax are being considered. Experts believe that the corporate tax rates may be reduced to 25 percent; also Special Economic Zones may get relief from MAT. Many players are also expecting relief from Dividend Distribution Tax (DDT) and cess. The first and foremost necessity of the manufacturing sector is that in the Budget the FM should take steps to revive demand. The manufacturing sector is both struggling with excessive capacity and is also inhibited to add extra capacity due to slow demand. Thus improving the confidence and purchasing power of the consumer but steps such as reduction in personal income tax rates can help put extra cash in the pockets of the consumers and thus enhance demand. Another expectation of the industry from the government is to continue and add anti-dumping duties of certain goods from China to protect the local manufacturing industry. Cut in GST rates and import duty on equipments used in the manufacturing units will also help reduce manufacturing cost thus help cut product prices and boost demand.

How Budget 2018 can boost the Manufacturing Sector?
One of the concerns with regards to the manufacturing sector has been that even though the sector has been able to clock decent growth rates but the growth has been jobless. Although big manufacturing plants and increase in FDI in manufacturing sector is welcome but a special focus in Budget 2018 should be given to small and medium sized enterprise (SMEs) as they are the real job creators. Government should ensure that manufacturing units that are employment intrinsic, export oriented manufacturing units and new-age hi-tech manufacturing should have simpler setup process and easy access to credit facilities. Certain manufacturing segments such as that of electronics and semiconductors manufacturing should be offered incentives and tax breaks just as their software development counterparts. Consistency in long-term policy formulation, steps to bring the unorganized manufacturing sector under the organized one and increase in public spending and capital investment will also help provide impetus to the manufacturing sector. For India to shine as a manufacturing hub instead of assembly hub the government needs to provide a nurturing environment for manufacturing startups too. Government schemes such as MUDRA, skill development, push for Digital economy, nationwide road-building program, further improvement in power supply especially in the rural areas and building of 10 million homes for the underprivileged under the Housing for All scheme can also be used to boost the manufacturing sector.