01_03_2015_005_dffbe6918c003d4ade4e8ca4b107f33f
1
DEFENCE Budget Allocation Raised to `2.46 lakh cr As against the likely defence expenditure of `2,22,370 crore in FY15, the budget allocation for 2015-16 is `2,46,727 crore. The modest rise means India’s arsenal will not expand significantly (the lion’s share of the money is spent on maintaining the armed forces). Despite raising FDI from 49% to 74% for real technology transfer and hi-tech Make in India, no money has come since the last budget in June 2014. Incentives to Propel Modi’s Pet Project Customs duty has been lowered for certain inputs and components. To help small businesses access technology at low costs, income tax rate on royalty and fees for technical services has been cut to 10% from 25%. The government will appoint a committee of experts to replace multiple prior permissions needed to start a business with a regulatory mechanism. MAKE IN INDIA SKILLING BOOST National Skills Mission in the Works A national skills mission, which will consolidate skill initiatives by different ministries and standardise procedures and outcomes across 31 sector skill councils, is on the anvil. The proposed Micro Units Development Refinance Agency Bank, aimed at providing easier access to formal systems of credit to bottom-of-the- pyramid entrepreneurs, will encourage skilled or educated workers to become first- generation entrepreneurs. MANUFACTURING Domestic Production Gets a Helping Hand Excise duty on leather footwear priced over `1,000 a pair is halved to 12%. New plant and machinery installed by a manufacturer or a unit engaged in generation and distribution of power will get an additional depreciation rate of 20%. Tax benefit for persons deriving profits from manufacture of goods. The government will also launch a scheme to facilitate the faster adoption and manufacture of electric vehicles. TONY ABBOTT DOWN UNDER HE BATS FOR INDIA Although the cricketing rivalry between India and Australia is intense, Tony Abbott says India is a model citizen. His trust in New Delhi has resulted in the uranium deal sans strings. The blues that the bonding faced are fading. Even the Men in Blue are showing their mettle at the World Cup Down Under. BUDGET AT A GLANCE Binoy.Prabhakar@timesgroup.com A run Jaitley has attempted to bolster Prime Minister Narendra Modi’s Make in India project by packing his budget with proposals that are expected to help manufacturing units cut costs as well as access credit and skilled manpower. Both in terms of specific proposals such as reduc- tion of customs duty on inputs and parts and the broad emphasis on making it easy to do business and infrastructure, the budget was unwavering in its attention on Modi’s pet project. Jaitley said the first pillar of his tax proposals was to deal with black money while the second was the promotion of manufacturing and ‘Make in India’ (manufac- turing found mention 15 times in Jaitley’s speech while Make in India made it 10 times). True to his word, he announced customs duty cuts on 22 items that will make it cheaper for Indian companies to import parts to manufacture products. He sought to protect domestic makers of commercial vehicles such as trucks and buses by thrusting a higher duty on importers of such vehicles. Given that many sectors are reliant on trucks to transport goods, the helping hand here is expected to lift a number of accompanying sectors. Jaitley also sought to facilitate cheaper technol- ogy transfer to small businesses by more than halving the rate of income tax on royalty and fees for technical services to 10%. By proposing to re- cast excise duty structure on certain goods, the FM has tried to boost the manufacture of products such as tablet PCs and leather footwear. Despite Modi’s ambition to make India a manu- facturing hub, the current situation is not pretty. Manufacturing actually declined from 18% to 17% of the GDP, according to the new GDP data, while manufacturing exports have remained stagnant at about 10% of the GDP. The government seems keen to make amends. Jaitley said the government will launch a National Skills Mission to consolidate skill initiatives spread across several ministries. In the works is also a scheme called Deen Dayal Upadhyay Gramin Kaushal Yojana to enhance the employ- ability of rural youth. Now, less than 5% of the potential workforce get formal skill training. The budget has taken note of the difficulties of small businesses in accessing credit. The proposed Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of `20,000 crore and credit guarantee corpus of `3,000 crore and tax breaks for Alternative Investment Funds are expected to provide relief on this front. The only sector that failed to match the hype on Make in India was defence. “As against the likely expenditure of this year of `2,22,370 crore the budget allocation for 2015-16 is `2,46,727 crore,” said Jaitley. Defence analysts said the 11% increase in outlay is too modest to achieve the government’s ambi- tion on greater self-sufficiency in making defence equipment, including aircraft. India’s military will not have much money to expand its arsenal significantly, given that a substantial chunk of this money will go to meet operational expenditure. Amber Dubey, partner and India head of aero- space and defence at global consultancy KPMG, said the industry expected “infrastructure status” for the sector in order to attract tax incentives and to meet the capital requirements. “That has been a disappointment,” he said, adding that overall, there is nothing to write home about in defence. At least one manufacturing sector was left disap- pointed, too. Mehul Choksi, chairman of the Gem & Jewelry, Luxury & Lifestyle Forum of industry lobby Ficci, said though the FM has announced a slew of measures to curb black money, he has ig- nored one of the biggest issues faced due to smug- gling of gold. “The impact of this ‘unofficial’ supply of gold of about 180 tonnes is valued at about $10 billion, leading to a loss in foreign exchange inflow of a similar amount and a loss in revenue of over $ 1 billion on account of customs duty,” he said. FM Fires up Make in India Engine Big Boost for Manufacturing Companies The first full Budget of the Modi govern- ment has come at a time when the green shoots of economic revival appear to be tak- ing root. My impression is that the finance minister has delivered a Budget which is strong on vision, reflects clear intent to put the economy on the path of double-digit growth and has a strategy to execute chal- lenging reforms in critical areas. From a macro-economic perspective, the government has done well to meet the fiscal deficit target of 4.1%. The softening of global crude oil and commodity prices has contrib- uted in a significantly lower current account deficit. Forex reserves at $ 340 billion are at an all-time high. The government is commit- ted to keep inflation at below 5%. All these have helped the finance minister to spell out a road map for lowering fiscal deficit. The Budget clearly provides a tremendous impetus to “Make in India”. Increased in- vestment in infrastructure of `70,000 crore and a higher allocation of `2,46,727 crore for defence will clearly provide a boost to do- mestic manufacturing industry. These in- vestments would help revive the investment cycle and contribute to increasing the share of manufacturing in national GDP from 15% to 25%. As a follow up, we now expect the government to expedite announcement of the new defence procurement policy to facilitate larger private sector participation in defence production. The steps to facili- tate “ease of doing business” will further support revival of growth in the domestic manufacturing industry. Some of the key enablers to achieve manu- facturing growth include rollout of GST from April 1 next year, announcement of five 4,000 MW capacity power projects, the initial `1,200 crore allocation for the Delhi Mumbai Industrial Corridor, significantly higher in- vestments in the renewable energy sector, opening of opportunities for medium and small industries, emphasis on the housing sector and corporatisation of ports. The road map to reduce corporate tax, de- ferring the applicability of GAAR for 2 years and avoidance of retrospective taxa- tion will considerably increase confidence of domestic and foreign investors. While the finance minister did speak about the need to push exports, I am slightly disappointed that minimum alternate tax and dividend distribution tax on special economic zones have not been lowered. We hope the new foreign trade policy, to be an- nounced next month, will provide incen- tives to exporters. This Budget has a vision to propel India to double-digit growth and make the country a manufacturing hub of the world. It is also an inclusive Budget that seeks to make a dif- ference in the life of every Indian. This Budget has a vision to propel India to double-digit growth and make the country a manufacturing hub of the world BABA KALYANI CHAIRMAN & MD, BHARAT FORGE LTD by Invite PLENTY OF PROPOSALS Manufacturing units expected to benefit from specific steps such as customs & excise rejig, greater access to credit, focus on improving skills and broader impetus on ease of doing business and infrastructure THE CONTEXT Defence Can Fuel ‘Make in India’ Total Purchase ( ` Crore) 83,090 93,217 MFG REVIVAL CAN START WITH DEFENCE Replace High Foreign Defence Procurement 2012-13 2013-14 Foreign Share (%) 37 41 ...AND IT IS BECOMING LESS LABOUR INTENSIVE Share in GDP (%) Labour Intensive Mfg Capital Intensive Mfg 1970s 1990s 2011-13 6.8 9.5 11.1 SOURCE: CRISIL 5.8 6.3 5.5 MFG NOT PULLING ITS WEIGHT IN INDIA... Manufacturing Share in GDP (%) SOURCE: World Bank, 2013, For India 2014-15 China India Germany Indonesia South Korea Malaysia 32 18 22 24 31 24 *As per revised GDP data A BIG OPPORTUNITY FOR JOB CREATION IF MFG MADE COMPETITIVE $1 TRILLION Size of manufacturing by 2025 25%-30% Possible share in GDP 60-90 MILLION New jobs by 2025 SOURCE: McKinsey Dilasha.Seth@timesgroup.com New Delhi: The manufacturing sector received a huge fillip in the budget with Finance Minister Arun Jaitley proposing to rectify an inverted duty structure, making it cheaper to import inputs to domestically produce goods at competitive prices. The budget also proposed to reduce the excise duty on several items such as solar water heaters, tablet PCs and leather foot- wear to prop up domestic production and the government’s clean energy initiative. By hik- ing the import duty for commercial vehicles, the government has sent a message that it will discourage imports of goods. “…I propose to reduce the rates of basic cus- toms duty on certain inputs, raw materials, in- termediates and components (in all 22 items) so as to minimise the impact of duty inversion and reduce the manufacturing cost in several sec- tors,” said Jaitley. India’s free-trade pacts (FTAs) with Japan, South Korea and the 10-nation Asean have been blamed for the inverted duty structure, where- in the import tax on finished products is lower than that on parts, affecting the competitive- ness of local manufacturers. “The correction will give a big boost to the Make in India campaign and promote quality and competitive local production,” said Amitabh Kant, secretary, Department of Industrial Policy and Promotion. Input imports towards manufacturing of LED lamp and LED/LCD TV have been made duty free. The excise duty on solar water heater and system has been slashed to zero from 12% while that on leather footwear priced over `1,000 per pair has been halved to 12%. Tablets will become cheaper with excise duty lowered sharp- ly from 12% to 2%. In some cases, the basic cus- toms duty has been increased to protect domestic industry. The import duty on commercial ve- hicles has been doubled to 20%, which will boost Indian manufacturers such as Tata Motors. The import tariff on iron and steel has been raised from 10% to 15%. The inverted duty structure has been rejigged for eight input items such as sulphuric acid (used by fertiliser firms), magnetron (used in microwave ovens) and metal parts used in electrical insulators. Duty Lift for Domestic Units COURSE CORRECTION Inverted duty structure to be rectified FTAs with Japan, S Korea and Asean have been blamed for the inverted duty structure MODI’S IMPRINT Special Emphasis on ‘Make in India’ Project Budget 2015 Rebooting India IMPACT ON MANUFACTURING IN FOCUS Imaging: Arindam NOW FOR SOME MASALA IN OUR MANUFACTURING Incentives to boost manufacturing in India Special Additional Duty cut on import of certain inputs Deen Dayal Upadhyay Gramin Kaushal Yojana with a corpus of `1,500 crore to enhance the employability of rural youth National Skills Mission to consolidate skill initiatives spread across several ministries to be launched Customs duty on certain inputs, raw materials, inter- mediates and components in 22 items reduced to minimise the impact of duty inversion Rate of income tax on royalty and fees for tech- nical services reduced from 25% to 10% to facilitate tech- nology inflow JUST MAKE IT Excise duty on items such as solar water heaters, tablet PCs and leather footwear cut to help domestic production 5 W W W. ECONOMICTIMES. COM
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Budget - 2015 - doc 5
Transcript of 01_03_2015_005_dffbe6918c003d4ade4e8ca4b107f33f
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DEFENCE
Budget Allocation Raised to ` 2.46 lakh crAs against the likely defence expenditure of ` 2,22,370 crore in FY15,
the budget allocation for 2015-16 is ` 2,46,727 crore. The modestrise means Indias arsenal will not expand significantly (the lions
share of the money is spent on maintaining the armed forces). Despite raising FDI from 49% to 74% for real technology transfer
and hi-tech Make in India, no money has come since the lastbudget in June 2014.
Incentives to Propel Modis Pet ProjectCustoms duty has been lowered for certain inputs and components. To help small businesses access technology at low costs, income tax rate on royalty and fees for technical services has been cut to 10% from 25%. The government will appoint a committee of experts to replace multiple prior permissions needed to start a business with a regulatory mechanism.
MAKE IN INDIA
SKILLING BOOSTNational Skills Mission in the WorksA national skills mission, which will consolidate skill initiatives by different ministries and standardise procedures and outcomes across 31 sector skill councils, is on the anvil. The proposed Micro Units Development Refinance Agency Bank, aimed at providing easier access to formal systems of credit to bottom-of-the- pyramid entrepreneurs, will encourage skilled or educated workers to become first-generation entrepreneurs.
MANUFACTURING
Domestic Production Gets a Helping Hand Excise duty on leather footwear priced over ` 1,000 a pair is halved to 12%. New plant and machinery installed by a manufacturer or a unit engaged in generation and distribution of power will get an additional depreciation rate of 20%. Tax benefit for persons deriving profits from manufacture of goods. The government will also launch a scheme to facilitate the faster adoption and manufacture of electric vehicles.
TONY ABBOTT DOWN UNDER HE BATS FOR INDIAAlthough the cricketing rivalry between India and Australia is intense, Tony
Abbott says India is a model citizen. His trust in New Delhi has resulted in the uranium deal sans strings. The blues that the bonding faced are fading. Even
the Men in Blue are showing their mettle at the World Cup Down Under.
BUDGET AT A GLANCE
Arun Jaitley has attempted to bolster Prime Minister Narendra Modis Make in India project by packing his budget with proposals that are expected to help manufacturing units cut costs as well
as access credit and skilled manpower.Both in terms of specific proposals such as reduc-
tion of customs duty on inputs and parts and the broad emphasis on making it easy to do business and infrastructure, the budget was unwavering in its attention on Modis pet project. Jaitley said the first pillar of his tax proposals was to deal with black money while the second was the promotion of manufacturing and Make in India (manufac-turing found mention 15 times in Jaitleys speech while Make in India made it 10 times).
True to his word, he announced customs duty cuts on 22 items that will make it cheaper for Indian companies to import parts to manufacture products. He sought to protect domestic makers of commercial vehicles such as trucks and buses by thrusting a higher duty on importers of such vehicles. Given that many sectors are reliant on trucks to transport goods, the helping hand here is
expected to lift a number of accompanying sectors.Jaitley also sought to facilitate cheaper technol-
ogy transfer to small businesses by more than halving the rate of income tax on royalty and fees for technical services to 10%. By proposing to re-cast excise duty structure on certain goods, the FM has tried to boost the manufacture of products such as tablet PCs and leather footwear.
Despite Modis ambition to make India a manu-facturing hub, the current situation is not pretty. Manufacturing actually declined from 18% to 17% of the GDP, according to the new GDP data, while manufacturing exports have remained stagnant at about 10% of the GDP.
The government seems keen to make amends. Jaitley said the government will launch a National Skills Mission to consolidate skill initiatives spread across several ministries. In the works is also a scheme called Deen Dayal Upadhyay Gramin Kaushal Yojana to enhance the employ-ability of rural youth.
Now, less than 5% of the potential workforce get formal skill training.
The budget has taken note of the difficulties of small businesses in accessing credit. The proposed Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of `20,000 crore and credit guarantee corpus of ` 3,000 crore and tax breaks for Alternative Investment Funds are expected to provide relief on this front.
The only sector that failed to match the hype on Make in India was defence. As against the likely expenditure of this year of `2,22,370 crore the budget allocation for 2015-16 is `2,46,727 crore, said Jaitley.
Defence analysts said the 11% increase in outlay is too modest to achieve the governments ambi-tion on greater self-sufficiency in making defence equipment, including aircraft. Indias military will not have much money to expand its arsenal significantly, given that a substantial chunk of this money will go to meet operational expenditure.
Amber Dubey, partner and India head of aero-space and defence at global consultancy KPMG, said the industry expected infrastructure status for the sector in order to attract tax incentives and to meet the capital requirements. That has been a disappointment, he said, adding that overall, there is nothing to write home about in defence.
At least one manufacturing sector was left disap-pointed, too. Mehul Choksi, chairman of the Gem & Jewelry, Luxury & Lifestyle Forum of industry lobby Ficci, said though the FM has announced a slew of measures to curb black money, he has ig-nored one of the biggest issues faced due to smug-gling of gold. The impact of this unofficial supply of gold of about 180 tonnes is valued at about $10 billion, leading to a loss in foreign exchange inflow of a similar amount and a loss in revenue of over $ 1 billion on account of customs duty, he said.
FM Fires up Make in India Engine
Big Boost for Manufacturing CompaniesThe first full Budget of the Modi govern-ment has come at a time when the green shoots of economic revival appear to be tak-ing root. My impression is that the finance minister has delivered a Budget which is strong on vision, reflects clear intent to put the economy on the path of double-digit growth and has a strategy to execute chal-lenging reforms in critical areas.
From a macro-economic perspective, the government has done well to meet the fiscal deficit target of 4.1%. The softening of global crude oil and commodity prices has contrib-uted in a significantly lower current account deficit. Forex reserves at $ 340 billion are at an all-time high. The government is commit-ted to keep inflation at below 5%. All these have helped the finance minister to spell out a road map for lowering fiscal deficit.
The Budget clearly provides a tremendous impetus to Make in India. Increased in-vestment in infrastructure of ` 70,000 crore and a higher allocation of ` 2,46,727 crore for defence will clearly provide a boost to do-mestic manufacturing industry. These in-vestments would help revive the investment cycle and contribute to increasing the share of manufacturing in national GDP from 15% to 25%. As a follow up, we now expect the government to expedite announcement of the new defence procurement policy to facilitate larger private sector participation
in defence production. The steps to facili-tate ease of doing business will further support revival of growth in the domestic manufacturing industry.
Some of the key enablers to achieve manu-facturing growth include rollout of GST from April 1 next year, announcement of five 4,000 MW capacity power projects, the initial `1,200 crore allocation for the Delhi Mumbai Industrial Corridor, significantly higher in-vestments in the renewable energy sector, opening of opportunities for medium and small industries, emphasis on the housing sector and corporatisation of ports.
The road map to reduce corporate tax, de-ferring the applicability of GAAR for 2 years and avoidance of retrospective taxa-tion will considerably increase confidence of domestic and foreign investors.
While the finance minister did speak about the need to push exports, I am slightly disappointed that minimum alternate tax and dividend distribution tax on special economic zones have not been lowered. We hope the new foreign trade policy, to be an-nounced next month, will provide incen-tives to exporters.
This Budget has a vision to propel India to double-digit growth and make the country a manufacturing hub of the world. It is also an inclusive Budget that seeks to make a dif-ference in the life of every Indian.
This Budget has a vision to propel India
to double-digit growth and make the country a manufacturing hub
of the world
BABA KALYANICHAIRMAN & MD,
BHARAT FORGE LTD
by Invite
PLENTY OF PROPOSALS Manufacturing units expected to benefit from specific steps such as customs & excise rejig, greater access to credit, focus on improving skills and broader impetus on ease of doing business and infrastructure
THECONTEXTDefence Can Fuel Make in India
Total Purchase (` Crore)
83,090 93,217
MFG REVIVAL CAN START WITH DEFENCEReplace High Foreign Defence Procurement
2012-13 2013-14
Foreign Share (%)
37 41
...AND IT IS BECOMING LESS LABOURINTENSIVEShare in GDP (%)
Labour Intensive Mfg
Capital Intensive Mfg
1970s1990s2011-13
6.89.511.1
SOURCE: CRISIL
5.86.35.5
MFG NOT PULLING ITS WEIGHT IN INDIA...Manufacturing Share in GDP (%)
SOURCE: World Bank, 2013, For India 2014-15
Chin
a
Indi
a
Ger
man
y
Indo
nesi
a
Sout
hK
orea
Mal
aysi
a
32 18 22 24 31 24
*As per revised GDP data
A BIG OPPORTUNITY FOR JOB CREATION IF MFG MADE COMPETITIVE$1 TRILLIONSize of manufacturing by 202525%-30%Possible share in GDP 60-90 MILLIONNew jobs by 2025SOURCE: McKinsey
New Delhi:The manufacturing sector received a huge fillip in the budget with Finance Minister Arun Jaitley proposing to rectify an inverted duty structure, making it cheaper to import inputs to domestically produce goods at competitive prices. The budget also proposed to reduce the excise duty on several items such as solar water heaters, tablet PCs and leather foot-wear to prop up domestic production and the governments clean energy initiative. By hik-ing the import duty for commercial vehicles, the government has sent a message that it will discourage imports of goods.
I propose to reduce the rates of basic cus-toms duty on certain inputs, raw materials, in-termediates and components (in all 22 items) so as to minimise the impact of duty inversion and reduce the manufacturing cost in several sec-tors, said Jaitley.
Indias free-trade pacts (FTAs) with Japan, South Korea and the 10-nation Asean have been blamed for the inverted duty structure, where-in the import tax on finished products is lower than that on parts, affecting the competitive-
ness of local manufacturers.The correction will give a big boost to the
Make in India campaign and promote quality and competitive local production, said Amitabh Kant, secretary, Department of Industrial Policy and Promotion.
Input imports towards manufacturing of LED lamp and LED/LCD TV have been made duty free. The excise duty on solar water heater and system has been slashed to zero from 12% while that on leather footwear priced over ` 1,000 per
pair has been halved to 12%. Tablets will become cheaper with excise duty lowered sharp-ly from 12% to 2%.
In some cases, the basic cus-toms duty has been increased to protect domestic industry. The import duty on commercial ve-hicles has been doubled to 20%,
which will boost Indian manufacturers such as Tata Motors. The import tariff on iron and steel has been raised from 10% to 15%. The inverted duty structure has been rejigged for eight input items such as sulphuric acid (used by fertiliser firms), magnetron (used in microwave ovens) and metal parts used in electrical insulators.
Duty Lift for Domestic Units COURSE CORRECTION Inverted duty structure to be rectified
FTAs with Japan, S Korea and Asean have been blamed for the inverted duty structure
MODIS IMPRINTz Special Emphasis on Make in India Project
Budget 2015 Rebooting IndiaIMPACT ON MANUFACTURING
IN FOCUS
Imag
ing:
Ari
ndam
NOW FOR SOME MASALAIN OUR MANUFACTURING
Incentives to boost manufacturing in India
Special Additional Duty cut on import of certain inputs
Deen Dayal Upadhyay Gramin Kaushal Yojana with a corpus of ` 1,500 crore to enhance the employability of rural youth
National Skills Mission toconsolidate skill initiatives spread across severalministries to be launched
Customs duty on certain inputs, raw materials, inter-mediates and components in 22 items reduced to minimise the impact of duty inversion
Rate of income tax on royalty and fees for tech-nical services reduced from 25% to 10% to facilitate tech-nology inflow
JUST MAKE IT Excise duty on items such as solar water heaters, tablet PCs and leather footwear cut to help domestic production
5WWW.ECONOMICTIMES.COM
