With PLIs and various credit schemes, one would think India’s manufacturing sector has it down pat. In fact, ‘Make in India’ and ‘Atmanirbhar Bharat’ are not mere jargons but a policy that forms the bulwark of PM Modi’s ‘India First’ thrust for domestic manufacturing. Yet, why is the sector still in ‘desperately seeking’ mode on the eve of budget 2025?
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“While initiatives like 'Make in India' and PLI schemes have made a positive impact, the upcoming budget should focus on supporting R&D and encouraging innovation beyond just manufacturing,” said Arjun Bajaj, director of Videotex, a leading contract manufacturer of electronic products. “Streamlining processes, improving infrastructure, and reducing regulatory hurdles should remain priorities under the 'Ease of Doing Business' agenda.”
The manufacturing sector contributes 17% of the nation’s GDP and while services sector walks away with all the attention and accolades traditionally, the present BJP dispensation had always had a thing for domestic manufacturing, and after the 2020 Ladakh standoff with China, a strategic recalibration to self-reliance, which in other words means less imports from China even while trying to create a domestic manufacturing value chain.
While it is at best a work in progress (imports from China has only soared in the past couple of years despite all the talk and policy push following Covid and Ladakh), the silver bullet of PLIs, or production-linked incentives is much in demand, by both domestic manufacturers as well as multinational players hoping to (or being wooed) to set up shop in the country. The budget is also expected to again recalibrate the tax on new manufacturing and business set-up, offering the same reduced corporate rate as was announced back in 2019.
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PLIs had been a major booster when it came to areas like telecom, mobile and electronics manufacturing etc. In the full budget last July, the FM had extended it to automobiles and auto components as well. However the clamour continues, with sectors ranging from semiconductors to stakeholders in the green energy ecosystem asking for the status.
While those in electronics want more. “Extending PLI schemes to more sectors and supporting the 'China Plus One' strategy could help improve competitiveness. A balanced ecosystem that includes the electronics, healthcare, and automotive sectors will be crucial for strengthening self-reliance,” explained Bajaj.
Manufacturing’s significance also stems from the fact that it can be an intense job generator, and that is something in short supply in the present economy, leading to a slump in consumption and in correlation, GDP rate as well. Which may also be the reason why even the RSS has called for a national manufacturing policy along with the budget.
And in an era of innovation where technology can make or break a nation’s economy, old-school manufacturing a la a big factory and hundreds of workers could well be a thing of the past. Will the budget have provisions of further expanding the scope of last year’s proposal of investments R&D? “Challenges such as a shortage of skilled workers, limited focus on R&D, and dependency on imported components still need to be addressed…budget allocations for skill development, localised supply chains, and backward integration can help attract investment and move India closer to becoming a global manufacturing hub,” added Bajaj.