Budget 2024: Manufacturing sector hopes high amid Centre’s ‘Make in India’ focus
3 min read • Updated: January 31, 2024, 1:15 PM
As Finance Minister Nirmala Sitharaman prepares to present an Interim Budget on February 1, 2024, the manufacturing sector anticipates favorable announcements aligning with the government's 'Make in India' focus. Expectations include the expansion of the Production Linked Incentive (PLI) scheme to encompass more job-creating sectors, such as chemical, leather, garment, handicraft, and jewelry. Additionally, there's hope for extending the PLI scheme to incentivize private investment in research and development (R&D) and deep tech sectors. The government is also expected to emphasize higher capital expenditure and may offer tax concessions, such as extending the concessional 15% income tax rate for new manufacturing units. Furthermore, calls for tax reforms and enhanced interest subsidies to boost domestic manufacturing and exports, particularly in the apparel industry, underscore the sector's aspirations for Budget 2024.
From expansion of PLI Scheme benefits to uniformity in GST rates, the manufacturing sector is hopeful of industry-friendly announcements in Interim Budget 2024.
India Inc is looking up to the Budget 2024 with high expectations. In the run-up to general elections, Finance Minister Nirmala Sitharaman will present an Interim Budget in the Parliament on February 1. While major policy changes may not be expected in the Interim Budget, the corporate sector is hopeful of some positive outcome for the manufacturing sector. Industry insiders expect more initiatives for the manufacturing sector considering the government’s emphasis on ‘Make in India’ in the past Budgets.
The government is likely to broaden the horizons of the Production Linked Incentive (PLI) scheme to more manufacturing-heavy and job-creating sectors. The possible move is in line with the government's push for ‘Make in India’ and ‘Atma Nirbhar Bharat’ initiatives.
The PLI scheme offers incentives for incremental sales from products manufactured in domestic units. It was introduced to boost domestic production and reduce dependence on imports in certain sectors.
The PLI scheme, introduced in Budget 2020, presently covers 14 sectors including pharmaceuticals, medical devices, telecom and networking products, automobile electronic products, food products, and textile products.
The government could expand the coverage of the PLI Scheme to new job-creating sectors including chemical, Leather, garment, handicraft and jewellery, according to reports.
On the other hand, India's gross R&D expenditure stands at 0.7% of GDP compared to the world average of 1.4%. Private spending on R&D has also not witnessed an increase due to the long gestation period. The extension of the PLI scheme for R&D investment in Budget 2024 would incentivise private players to increase spending in the segment. Additionally, it could further lead to more investment in deep tech sectors, which may also aid manufacturing.
The government is expected to lay emphasis on higher capital expenditure which in turn would benefit manufacturing and associated sectors. The capital expenditure outlay in Budget 2023 saw a jump of 37.4% to ₹10 lakh crore. Reports indicate that the government is likely to increase the capital expenditure in the Interim Budget.
There's also hope of a possible tax concession to incentivise the manufacturing sector. Global consulting firm EY in its Budget 2024 expectation report suggests that the government is likely to extend a concessional 15% income tax rate for corporates to set up new manufacturing units. The possible move looks to encourage private investment in the country.
The concessional tax rate was announced by the government in 2019. Under the scheme, any new domestic company incorporated after October 1, 2029, making fresh investments in manufacturing had the option to pay income tax at the rate of 15% if they began production before March 31, 2023.
The deadline was extended to March 31, 2024, in the Budget last year. Now, it is likely to receive another extension till the end of the next financial year.
The Apparel Export Promotion Council (AEPC) has sought tax reforms, calling for uniformity in Goods and Services Tax (GST). The apparel exported body also sought enhanced interest subsidies to boost domestic manufacturing and India's outbound shipments.
Positive moves in this direction could lead India becoming the global manufacturing hub for the apparel industry.