The first full budget of the new government has laid a solid foundation for Viksit Bharat and will propel the nation forward on multiple fronts. A detailed document which outlined 9 priorities has set the tone for the next five years; and, manufacturing has been given its due which is heartening.
India’s economy has shown remarkable resilience, as evidenced by the Economic Survey 2023-24 which outlines optimistic picture. Robust real GDP growth rate of 8.2%, declining inflation at 5.4%, and an improved fiscal balance are all positive indicators of the economy’s health. The current geopolitical landscape, marred with rising tensions and a manufacturing void left by China, presents India with a golden opportunity. These crises have shed light on the importance of resilient and diverse supply chains, and India must grab this opportunity with both hands.
The nation’s industrial growth stands at 9.5% with manufacturing growing at an average of 5.2% per annum over the last decade. However, the journey towards becoming a global economic powerhouse requires continued reforms and strategic investments. The steps taken over the next five years will be crucial in realising India’s ambitions, and we can ill afford to falter in any way.
In this context, the continued stress in this budget on strengthening the domestic manufacturing ecosystem is crucial as it will lead to enhanced export competitiveness. While the Production Linked Incentive (PLI) Scheme has already shown impressive results, attracting investments of over Rs 1.28 lakh crore, generating Rs 10.8 lakh crore in production and sales, and creating 8.5 lakh jobs; complementary interventions and strategies will go a long way in providing a much-needed boost to manufacturing. The budget introduces three new employment-linked incentive schemes, including one particularly designed to boost job creation in manufacturing. These incentives will provide financial support to both employees and employers, benefitting 30 lakh youths entering the workforce and their employers over the next four years.
The budget also places special emphasis on MSMEs which are an integral aspect of the manufacturing ecosystem. A comprehensive package including financing, regulatory changes and technology support aims to help MSMEs grow and compete globally. Initiatives like the Credit Guarantee Scheme for MSMEs, a new assessment model for MSME credit, and credit support during stress periods are set to provide the necessary boost. The establishment of eCommerce Export Hubs in public-private partnership (PPP) mode will enable MSMEs and traditional artisans to sell their products internationally, under a seamless regulatory and logistic framework.
Recognising the importance of minerals and metals in addressing production gaps and reducing dependence on imports, the Critical Minerals Mission is a much-needed step towards boosting domestic production. The Mission outlines recycling and overseas acquisition of critical mineral assets, striking a balance between local and overseas sourcing with a strong emphasis on circularity. This will be significant in ensuring the availability of essential minerals for strategic sectors like renewable energy, defence and high-tech electronics.
Significant investment in infrastructure continues to be a cornerstone of the budget with a provision of Rs 11.11 lakh crore representing 3.4% of GDP. This sustained expenditure will help build world-class infrastructure, with a strong multiplier effect on the economy. The budget also aims to promote private sector investment in infrastructure through viability gap funding and enabling policies, alongside a market-based financing framework.
India’s emergence as the world’s fastest growing large economy has been made possible by a strong focus on enhancing ease of doing business and reducing cost of doing business. Going ahead, broadening and deepening of reforms is necessary to not just maintain but boost the growth momentum. The budget has set the tone by clearly articulating steps in this regard, and the stars look to be aligned for a step change in the growth trajectory.
Subhrakant Panda
Managing Director, Indian Metals & Ferro Alloys Ltd