Whether it is being Atmanirbhar or striving for Vocal for Local, the Indian manufacturing sector forms a critical part of it. The recent measures in the Union Budget 2021 have put all eyes on the manufacturing industry. The announcements in the Budget augur well for Make in India and in turn, provide the much-needed push for more FDI in the manufacturing.
As per UNCTAD’s World Investment Report 2020, FDI in India grew by 13% to USD50 billion in 2019-20, making it the 9th largest recipient of FDI last year. The year 2021-22 also holds a lot of promising with the economy poised for a double-digit growth in FY22. The Budget coupled with other measures will certainly help and take our manufacturing potential to the next level. With the right implementation, the manufacturing sector will be a massive contributor to India’s GDP and economic growth.
Higher outlays of Rs 1.97 lakh crore in next 5 years for the PLI scheme will not only incentivise manufacturing but attract more global players to leverage their R&D and technology for manufacturing in India. This will certainly propel India closer to its ambition of becoming the next manufacturing hub like China in this decade.
Although we sit with a large fiscal deficit, the push towards the medium, small, and micro enterprises (MSMEs) will help this sector to flourish, and perhaps be a larger industry in the long run. It is indeed heartening that the 2021 outlay for the MSMEs was doubled this year, giving them the necessary succour for their recovery and growth. More exposure to MSMEs will present a huge future opportunity- to make in India and export across many sectors such as, auto components, steel and processed goods, farm equipment and textiles. These sectors have potential to achieve a large scale and attract more foreign investments in the coming years.
Further, the vehicle scrappage policy has been a long pending will benefit the automotive industry. The voluntary scrappage policy and PLI incentives among others will drive more demand and therefore more production of vehicles. The auto sector is one of the most critical sectors for manufacturing, where increase in basic customs duty on certain auto components will drive local manufacturing. EVs in India are yet to pick up and these measures will perhaps create the impetus needed to promote local manufacturing of EVs and have more foreign players invest in this growing space.
With many global players and economies now contemplating a China plus1 strategy, India remains a front-runner to attract these investments and become a preferred manufacturing destination. The Budget echoes these sentiments and a vision to become a global net exporter.
The vision of an Atma Nirbharta has been enshrined and the measures announced in Union Budget are buoyant for more FDI, coupled with the idea of ‘Nation-First’. We have communicated a message that India is ready for a manufacturing revolution and these measures will drive us closer to boost our potential and reinforce those abilities in the other sectors for growth.
While the foundation has been laid, we would now need to make concerted effort towards import localisation to bring down costs and up the ante, in terms of technology and standards.