The most awaited Union Budget 2023-24, to be presented by Finance Minister, Nirmala Sitharaman on 1st February 2023 will be the first post-COVID and the last full-fledged budget of the Modi-led government, ahead of the general elections scheduled in 2024.
The upcoming budget is expected to focus on long-term development, with a major focus on sectors such as manufacturing, technology, healthcare, defence, pharma, and energy, among others.
The manufacturing sector which contributes 15 per cent to India's GDP, is optimistic to see a big boost in the upcoming budget, as it will further lay a roadmap to steer the industry's economy towards 25 per cent GDP growth within the next decade - an ambitious target set by the finance minister, as well position itself as a major international manufacturing hub.
We spoke to the Industry experts and here's what they are anticipating from the upcoming Union Budget 2023-24:
According to Kamal Bali, President & Managing Director, Volvo Group in India, who represents the auto sector given the challenging global macro-economic environment as well as the emerging opportunities for a resurgent new India, he looks forward to yet another budget that re-enforces India's high growth journey by continuing capex support for the development of sustainable and robust national infrastructure, efficient logistics and persisting with reforms for ease of manufacturing, ease of doing business and ease of living.
For Mahesh Babu, Chief Executive Officer - SWITCH Mobility Ltd India is making an intense push for faster adoption of electric buses, and the segment has seen exponential growth over the years. "Given this scenario, one of the key expectations from the budget is a continuation of FAME subsidy, for at least a few years and a reasonable EV penetration in the commercial vehicle segment. To democratise sustainable mobility, priority, and access to funds, with payment guarantee by STU's is a pragmatic solution for EV bus adoption."
With the growing popularity of EV, Pankaj Abhyankar, Senior Vice President & Business Head, Godrej Tooling, is confident that the Indian automotive industry is poised for rapid growth in the upcoming fiscal year owing to factors such as significant OEM investments and developing ecosystem in the sector. "Future market development in the coming year is expected to be fuelled by trends in material light-weighting, and lower battery costs, particularly for 2-wheelers and mid-sized passenger vehicles. The EV sector anticipates improved battery production support in India and significant reductions in import taxes on raw materials."
Anshul Gupta, Managing Director, Okaya Electric Vehicles expects the ‘policy makers' to take steps to make EVs more affordable and accessible to the public, such as by lowering GST rates on EV spare parts and reducing input GST on EV OEMs. "We believe that these measures will help to drive the widespread adoption of this clean and sustainable mode of transportation."
Amit Gupta, Head- Energy Infrastructure Solutions, Delta Electronics India firmly believes that E-mobility will advance in India as a result of newly announced government measures to improve the infrastructure for charging.
"Given the Infrastructure for charging requires capital-intensive design and installation costs, the sector's top aim is to keep capital costs as low as feasible. For making it easier to install charging infrastructure, is to facilitate grid connectivity, but it is crucial for the sector that the government also subsidizes electrical connections and fixed load fees for EV charging point operators," he adds.
As far as GST is concerned, "The government has levied 5 per cent on the sale of charging stations, but the GST rate is 18 per cent when using the infrastructure. Given that many people utilise these charging stations and do not qualify for an input tax credit, the government must reduce this GST to 0 per cent, just like it does with the sale of energy."
With the government's support and ongoing initiatives to further build the infrastructure in the country to aid the growth, Amitabh Mathur, President and MD Aptiv India & ASEAN is hopeful of favourable policies to be announced at the Union Budget in terms of incentives that support the Electric Vehicle market in the country. "This also enables us to invest in onboarding the right talents to develop safer, greener and more connected solutions enabling a more sustainable future of mobility."
As the ambit of EVs expands, Hyder Khan, CEO, Godawari Electric Motors hope that the upcoming Union Budget considers increasing the FAME-II subsidy for the e-auto (L5M) segment to Rs. 15000 per kWh or 40% of the ex-showroom cost, whichever is lower in line with EV two-wheelers. The e-auto segment has undergone rapid electrification transformation and will prove to be a major source of enhancing last-mile connectivity."
That said, Sanjay Koul, Managing Director, Timken India believes that the power of Indian manufacturing is growing and alongside new product development out of India for the world will make us unbeatable and the expectation is that something comes from this year's budget that will push the cause. Also, the expectation is to have bearings as part of the PLI scheme to promote more localisation.
As far as renewable energy is concerned, PKC Bose, Vice Chairman and Managing Director, Enercon Windenergy Pvt Ltd is not a happy man as the Indian wind industry is ignored to a greater extent, especially the wind turbine manufacturers because the wind turbine industry is largely driven by international companies who brought very large FDI to India and exporting wind turbine components whereby bringing forex to the country.
"Unfortunately, there are no incentives to the industry at all, whereas solar and green hydrogen companies have benefits such as PLI (Production Linked Incentives). Hence it is very important for the government to closely look at this industry from its right perspective whereby further foreign investments can be attracted."
According to Deepak Jain, President, Grew Energy Pvt. Ltd., energy production and its sustainability are the two major issues of recent times. While the government has shown its commitment to mainstream renewable energy by introducing policies such as Production-Linked Incentive Scheme-II (PLI-II), developing close to 100GW of solar manufacturing capacity by 2030 needs a much more conducive environment. "In the Union Budget 2023, the Government should think about centralising solar installation policies which will boost installed renewable energy capacity, to achieve the goal of 500GW installed capacity by 2030," he adds.
For Srivatsan Iyer, Global CEO, Hero Future Energies, the Union Budget must prioritize decarbonization, accelerate energy transition towards RE and development of a manufacturing and support ecosystem to enable this transition. For India to meet RE goals by 2030 and truly compete with regions like US, China, and the Middle East on emerging technologies like Green Hydrogen, the GoI must provide some immediate relief to counter significant cost and schedule disruptions in the wake of the implementation of Basic custom duty (BCD) and Approved List of Models and Manufacturers (ALMM) and the global supply chain disruptions.
"One area would be in the form of deferment of BCD implementation on solar modules and cells, till such time sufficient domestic manufacturing capacity is operationalized to fulfil the annual demand estimated to reach the 2030 targets. Also, parallel measures to reduce the incidence of domestic solar module manufacturers exporting a large portion of their production, leaving the domestic Industry without viable alternatives."
"Additionally, measures like rationalization of GST on Solar Power Generating Systems and the O&M of wind and solar projects, tax incentives for residential and commercial Rooftop solar consumers, no capital gain tax on sale of land for wind and solar farms and other associated land reforms will bolster the growth and public support for RE and accelerate the country's green transition."
Sandeep Singh, Managing Director, Tata Hitachi Construction Machinery Co. Pvt. Ltd is having a high expectation from the Union budget 2023. He hopes to see continued growth in investment and sustained execution of infrastructure projects, actions from PM Gati Shakti to debottleneck slow-moving projects, PLI scheme for the CE industry which has the potential to make India a global manufacturing and export hub of CE, and regulatory changes that would create easy line access to low-cost funds for equipment buyers from banks, NBFCs, and digital lending players. "We expect to see measures in place to reduce cheap imports to encourage domestic manufacturers and address the volatility issues of sudden increases in input costs such as steel, fuel, etc," he added.
Anand Sundaresan, Managing Director India and Executive Vice President, Ammann Group expect continued high allocation for infra spending with many projects lined up for completion in the next fiscal year. "A step should be taken towards supporting R&D spending, by reinstating a weighted tax deduction of 200 per cent of R&D spend. They should also assign priority sector status for the Construction Equipment Industry. The GST should be reduced from 18 per cent to 12 per cent for construction equipment used in infra projects," he suggests.
For Rajesh Nath, MD, VDMA India Services Private Limited maintaining the fiscal deficit is crucial for India's growth trajectory. Given the PLI has borne good results, he suggests the scheme should be extended to other sectors also.
That said, going by the impetus given by the government on the AatmaNirbhar Bharat initiative, Puneet Kaura, Managing Director & CEO, Samtel Avionics expect the finance minister to increase the capital outlay for the procurement of new equipment from Indian defence manufacturers. This is also important given the current geopolitical situation concerning to the Russia-Ukraine conflict.
What's more? As inflation and the impact of global supply chain disruptions are the immediate issues confronting manufacturing in India and elsewhere, the cost of operations has increased several folds and the industry is looking to the budget to provide some remedy in the immediate instance. Here, Aravind Melligeri, Chairman & CEO, Aequs Aerospace feels that the Union Budget to focus on increased capital expenditure, boosting domestic manufacturing, and developing a collaborative and inclusive workforce.
With global inflation, the effects of the epidemic, and the confrontation between Russia and Ukraine and the global slump emerging as threat to the economy, Nadir Godrej, Chairman and MD, Godrej Industries Ltd feels that a more significant budget deficit is acceptable if the spending encourages development. "The type of deficit should be our primary concern rather than the overall budget deficit. Any investment that fosters progress is appreciated. To empower women, the government must put more effort into sectors like as infrastructure, skill development, education, health care, financial inclusion, and others."
Confronted with challenges stemming from rising imports, a declining market share and escalating costs, Rahul Sharma, President, Aluminium Association of India has sought government intervention for supportive measures to tide over this challenging phase. "The high cost of procuring raw materials is proving a major hindrance in attracting fresh investments. Several key inputs for the sector, such as Calcined Pet Coke, Caustic Soda Lye and Aluminium Fluoride attract high duties of 7.5 per cent, which need to be removed completely, or rationalized to at least 2.5 per cent to boost cost competitiveness."
Citing the increased cost of production due to the rising cost of raw materials, the AAI has also pointed out that at present, nearly 20% of the cost of producing aluminium arises from government taxes alone.
"The industry representatives have recommended that the necessary quality standards be imposed, along with a duty of at least 10 per cent from the current 2.5 per cent to act as a deterrent from making India a dumping ground of substandard foreign scrap."
Lalit Beriwala, Director, Shyam Steel Industries Ltd anticipates the Union Budget to focus on Fuel Transition Policy together with a stable financial support scheme for the private sector industries for the phased energy transition process to realise the national commitment as the process entails major capital investment. "Enhanced outlay in the budget for capital investment by the Central Government, particularly in the infrastructure sector for accelerated economic growth and to encourage private investment in those sectors. Extension of the provision of low tax rate of 15 per cent introduced by the Government of India under Section 115BAB of the Income Tax Act for new manufacturing companies who start commercial production by 2024 till 31st March 2025."
"Specific Policy interventions for faster mining sector reforms as a part of Ease of Doing Business and ensuring seamless availability of raw materials for the steel industry, particularly the MSME sector, and to address the issue of monopoly control over raw materials by a few big players in the sector. Special initiatives for strengthening the port infrastructures in the North Eastern region for easy connectivity with the States of the region as well as for connecting the neighbouring countries of Bangladesh, Bhutan, and Nepal. Formulation and implementation of Policy for the medium sector industries under a separate category whose turnover is between Rs. 200 Cr and Rs.10,000 Cr and to introduce for them a scheme on the PLI model," he adds.
Naivedya Agarwal, Co-Founder and CEO, Runaya feels that the companies in the manufacturing space should be rewarded for developing new technologies and adopting sustainable business practices. "Infrastructure can see a positive momentum in this year's Budget; with ease of doing business supplemented by tax reforms at the centerstage. Simplifying mechanisms like Advance Pricing Agreement, Safe Harbour Rules are foreseeable."
According to Ramanujam Komanduri, Country Manager, Pure Storage India, "the budget should focus on three pertinent aspects. Firstly, hasten infrastructure expenditures in digital technologies since technological investments are thought to have a multiplier effect on the economy. Secondly, increase spending on R&D to foster innovation and tap into the amazing engineering talent that we have in the country. Finally, enhance the focus on sustainability as climate change requires urgent attention and action and requires all of us, as individuals, organizations, and the government to pull together, utilizing environmentally sustainable technology.
The Indian packaging industry is one of the fastest growing sectors, increasing at a CAGR of ~25 per cent and anticipated to reach $200m by 2025. To position India as the global sourcing hub for plastic and increase industrialization; Pankaj Poddar, Group CEO, Cosmo First Ltd. recommends that the government should lower the imports on polymer (especially that polymer production is in short domestically), increase the custom duty on various finished plastic products including polymer films made from Polypropylene or Polyester, increase benefits under the RoDTEP from 1.4 per cent to 3 per cent, grant 3 per cent interest equalisation for exporters and interest subvention should be reassessed for a high growth path.
"Simultaneously, government should encourage the industry players by granting incentives for innovation and R&D to make the domestic plastic industry more dynamic and globally competitive. Overall, we are expecting the Union budget 2023 to be industry friendly with focus on industrialisation and technological innovation to support domestic businesses with enormous potential and become internationally competitive."
Given that the government has initiated PLI schemes for the Air Conditioner and Electronics sectors to promote local manufacturing of consumer durables, Anil Verma, Executive Director & CEO, Godrej & Boyce, feels that this has led to investments in design and manufacturing by the OEMs as well as component manufacturers. "We welcome more of such supporting measures for other categories of durables including white goods, furniture, and other products. It will foster the development of the eco-system for component manufacturers in the industry. Additional measures to support exports of durables through Trade Pacts with nations in Asia and Africa will provide a further boost to the sector. Further measures to boost consumption in the economy will have a tremendous cascading effect in propelling all round growth."
Manish Walia, Head-Automation, Delta Electronics India thinks that the budget must put more emphasis on value creation, including incentives and subsidies to produce electronics and components. "The Indian manufacturing sector has done well overall, but it is not immune to the global environment. After a great deal of success during the last fiscal year, global concerns and the downturn in the global economy have already begun to affect our exports. The home economy needs to be strengthened with measures that encourage new sources of income and create jobs because it is anticipated that the global crisis will endure for some time."
