Budget wishlist: Here are the key challenges in manufacturing sector

Current sector snapshot

The India Manufacturing Purchasing Manager’s Index (PMI) for December indicated an improvement in the manufacturing sector for the sixth consecutive month. International demand for Indian goods also improved. The industry is facing disruption from factors like new tech-based entrants, decoupling of the global supply chain, among others. Despite the pandemic, there is a sense of optimism about the prospects of the Indian manufacturing sector. The industry is expecting the Centre to intervene towards tariff rationalisation to improve the local supply chain, develop key downstream operations, and incentivise investments in high-tech production.

Key challenges
 

Sustainable demand creation: Government spending and policy initiatives are needed to ensure demand growth momentum continues to remain strong

Supporting new capacity expansion and innovation: Need to further provide tax incentives to enable setting up of new manufacturing capacities and also encourage investment in R&D and innovation

Funding MSMEs: Lack of adequate finance hinders the growth prospects of the MSMEs

Industry ask
 

The preferential 15% baseline tax regime applicable for the new manufacturing companies should be extended to existing firms which undertake substantial expansion/ renovation 

Time limit for commencement of new manufacturing should be extended to March 31, 2025

R&D weighted deduction be restored from current 100% and applicable for in-house R&D by firms engaged in manufacturing of goods or articles or things 

Measures need to be taken for MSMEs like enhancing the credit limit and access to finance