Taking a pragmatic approach, Finance Minister Nirmala Sitharaman brought forward her first budget announcement, highlighting the Government’s approach to lead India’s economy to a $5 trillion target. The primary focus of the budget was to boost infrastructure and foreign investment at a time when the economy is showing signs of slowdown. It is important for us to know that Indian economy was at approx. $1.85 trillion in 2014 and within 5 years, it has reached $2.7 trillion. Therefore, the possibility of becoming the 5th largest economy in the world is there. However, substantial support to manufacturing industry and promising sectors is needed for such a feat to become reality.
In Path to Positive Impact
The final budget for 2019 brought forward a guideline for growth.
- Promised to aid in promoting agriculture through innovative zero Budget farming.
- ASPIRE scheme to develop 75,000 skilled entrepreneurs in agro-rural industries.
- Railway receiving an investment of Rs 50 lakh crore between 2018 and 2030.
- Lowering GST rate on electric vehicles to 5% from 12%.
- Announcing additional income tax deduction of ₹1.5 lakh on interest on loans taken to purchase electric vehicles.
And to support the manufacturing sector, which should be the backbone of a country, the budget brought forward a scheme to encourage global companies (through competitive bidding process) to set up mega-manufacturing plants in renewable energy sector. In a nutshell, it sure looks like that the new budget covered major requirements, and the Government’s effort should be appreciated for setting the stage for future development. But we need to highlight that more effort is needed to support growing Indian economy.
More Support Needed
Although growth is in sight, more focus on manufacturing and prioritization of promising areas are needed to unleash country’s full potential. Currently, Indian manufacturing industry has only 16-17% share in India’s GDP. Developed countries like China, the US and emerging economies South Korea, Thailand have focused on scaling manufacturing capacities as it is clear how focusing on manufacturing industries can support sustainable economic growth.
As India is currently facing trade challenges (e.g- US import tariff change), focusing on manufacturing is the only way to control prices and enhance quality of products to satisfy national demand and claim untapped/emerging export markets.
In addition, as for the prioritization of promising sectors, we must point out that the new proposal to make India an EV and solar PV Cells manufacturing hub is the step on the right direction. But, the industry needs soft loans, export credits and efforts to make solar manufacturing sector competitive.
There is an immediate urgency of solarisation in India. Why? because although, all villages and almost 100% of houses in India were announced to have been provided with electricity, lack of efficient transmission system, lack of supply monitoring system, lack of Infrastructure maintenance by DISCOMs, lack of a better payment management system, rising electricity costs have led to failure in illuminating every home in India. Solar adoption can change this scenario with more investment in extending electricity grid to rural areas and offering better payment mechanisms to empower rural India to lead the country.
Additionally, rising fuel costs, unemployment crisis urges the country to offer more support for Renewable energy growth. And the industry needs the Government to reciprocate in kind and offer further support to help this industry grow. However, the Finance minister’s announcement to shed light on the plan on “one nation one grid” for affordable power to states should be commended, what is required to pull that dream into reality is more focus in manufacturing and sustainable energy industry.