The budget 2015 has shown a lot of promise in terms of increased emphasis on manufacturing and skills development. Prime Minister Narendra Modi’s Make in India (MII) program is the driving factor behind such announcements in this year’s budget.
From the previous years’ records, Manufacturing declined from 18% to 17% of the GDP while manufacturing exports have remained stagnant at about 10% of the GDP. Given thefact that manufacturing has not accounted for a significant portion of the GDP in the previous years, the focus on manufacturing has been the key highlight of budget 2015.
In the table provided below, we examine the highlights of the budget which could have potential impacts on the manufacturing and skills development sector. The proposals which could affect the manufacturing industry are tabulated below alongside its impact in the industry.
|Customs duty cuts on 22 items||This will make it cheaper for Indian companies to import components to manufacture products. Hence, the cost factor on account of the final products will be reduced and Indian products will have an upper hand in the local market|
|A higher duty on importers of trucks and buses||This proposal is aimed to protect domestic makers of commercial vehicles. Domestic firms will have the advantage of price competitiveness in the market|
|Cheaper technology transfer to small businesses. This has been enabled by halving the rate of income tax on royalty and fees for technical services to 10%.||The small businesses will be able to develop new products with the help of foreign firms owing to a lesser tax burden as compared to the previous tax requirements|
|Recast excise duty structure on tablet PCs and mobile phones.
Mobile phone manufacturing gets 11.5% duty advantage if manufactured in India and tablets get 10.5% duty advantage if manufactured in India
|These proposals are aimed at boosting the share of Indian companies active in the manufacturing of mobile phone and tablets. As this industry is growing rapidly and India is keen on improving its internet penetration, such duty cuts are a welcome move|
Skills development initiatives
Today less than 5% of the potential workforce gets formal skill training. As the economy grows and the job creation in various sectors improves, it is important that adequate skills are imparted to the youth. This in turn will ensure that the growth of the economy is benefited by the overall population. Further, the finance minister has noted that the employability skills gap is impeding the progress of India’s industry sector. This is largely because of the uncoordinated initiatives between the Centre and the states and disjointed efforts from various organizations, the private sector and educational academies.
A total budget of Rs.689.68 Billion has been allocated for all schemes related to skills development and education. Among other financial aids, the proposed Micro Units Development Refinance Agency (MUDRA) Bankwith a corpus of Rs. 200 Billion, credit guarantee corpus of Rs. 30 Billion and tax breaks for Alternative Investment Funds are expected to provide relief to the industry. These steps are important as smaller firms find it difficult to raise capital and the lack of money is often a reason of imparting proper training to the employees.
Some of the important proposals and its impact are tabulated below:
|National Skills Mission||Consolidate skill initiatives spread across several ministries|
|DeenDayalUpadhyayGraminKaushalYojana||This initiative is to enhance the employability of the rural youth.|
|Pradhan MantriVidya Lakshmi Karyakram||Authority to administer and monitor the front-end of all scholarships as well educational loan schemes. This will ensure proper utilization of the funds.|
|The focus on higher education through up-gradation of 80,000 secondary schools and ensuring that they are within a 5-km reach of students||To make sure that no student misses school due to lack of funds, is noteworthy.|
|NaiManzil, a scheme that would enable youth without the school-leaving certificate to get employment.||Tries to remove the current ‘negative’ perception around vocational training and employable skills development. It also urges the industry to give stipends to the students who works as trainees. This implies that the government has given serious thought to making skills development a reality .This practice is prevalent among developed countries as well|
|The Budget announcement of setting up a Self-Employment and Talent Utilization (SETU) mechanism||It will encourage entrepreneurship in the country. SETU will be a techno-financial, incubation and facilitation programme to support all aspects of start-up businesses, and other self-employment activities, particularly in the technology-driven areas. An amount of Rs.10 Billion is being set up initially in the NITI Aayog for SETU. This will finally result in generating billions of dollars in value but also millions of jobs for the unemployable youth.|