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Vision promising budgetWith the new government’s assurance to keep up the pace of reform, this feature aims at bringing the host of measures introduced in the Union Budget 2015-16, to develop a manufacturing-friendly environment, while analysing the challenges addressed in the budget, in discussion with the industry experts…

As per the new GDP data, manufacturing has declined from 18% to 17% of GDP; and manufacturing exports have remained stagnant at about 10% of GDP. Finance Minister Arun Jaitley envisioned this challenge and unveiled a budget that aims to ramp up growth. The industry leaders commenting on the challenges addressed in the budget are L Krishnan, President – IMTMA & MD, TaeguTec India; Ravi Raghavan, CEO, Bharat Fritz Werner; T K Ramesh, CEO, Micromatic Machine Tools

and Mohini Kelkar, Director—Sales & Marketing, GrindMaster Machines.

India as an investment destination

Foreign investors look for environments with minimum uncertainties in terms of infrastructure and other regulatory framework. They are looking to have their manufacturing hub

Maria JerinFeatures Writermaria.jerin@publish-industry.net

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in countries like India, because of the availability of low cost manufacturing & engineering white collar talents. Speaking on the investment policy, Krishnan says, “Union Budget 2015-16 clarifies several uncertain issues relating to the policy with a clear roadmap. It is directional and specifies mid-term goals of the Government of India. The positive factor is the government’s commitment to build consumer market by bringing in GST.”

On similar lines, Kelkar says, “The budget hints that retrospective taxation will not exist & this will ensure security to the foreign investor. They will get the feeling of stability, which will help in receiving more foreign investments. It is also proposed that various exemptions will be removed & corporate tax will be brought down to 25% from 30%. Such clarity & simplicity in tax laws will help not only foreign investors, but also Indians to focus on improving their operational profitability, rather than increasing the profits by working around the vague tax laws.” Highlighting on sustainable GDP growth, Raghavan opined that the macroeconomic indicators are clearly pointing towards environment of sustainable GDP growth at the outset.

“The CPI and WPI inflation indexes show downward trends, current account deficit being low and foreign exchange reserves being healthy. All these indicators will boost investor’s confidence. Enabling indications like clear roadmap for GST implementation from FY 17, medium-term clarity on corporate taxation are encouraging steps from investor sentiment perspective.”

Adding his thoughts on the budget, Ramesh said, “The union budget has a clarity and is indicating continuity from the last budget. It also indicates the indent of not harassing investors unnecessarily.” Speaking on job creation, he says, “There are no specific indications that will radically help job creation, but we have to wait for the future policy announcements.” On this, Krishnan opined, “We need to work further on land and labour law reforms for simplification.”

Ease of doing business

The government has articulated its vision to improve ranking for ease of doing business from current levels to 50 as a clear medium-term goal. Emphasising this, Krishnan says, “We

see visible activities happening in the government. However, the challenge will be to align these simplified processes with that of states and ensure that the states also simplify their processes to realise the impact of these benefits. We are optimistic.”

Opining that the budget will simplify business process, Kelkar says, “The announcement of GST by April 2016 will go a long way in enhancing business environment & will certainly simplify business process. The announced e-biz portal is expected to give certain approvals on line. Good execution of all these declarations will simplify ‘doing business in India’ and give a large boost to domestic as well as foreign investments & industry.” Carrying the thought forward, Ramesh adds, “The budget is making simplification on the ease of doing business process indirectly. But it is the proposal of indent; we have to look into the details. Indications are there to simplify the business process; we will have to see the actual translation on the ground level.”

‘Make in India’ vision

The budget is optimistic, but it misses some policy steps to

“The union budget has a clarity and is indicating continuity from the last budget. It also indicates the indent of not harassing investors unnecessarily” T K Ramesh, CEO, Micromatic Machine Tools

“The positive factor is the government’s commitment to build consumer market by bringing in GST” L Krishnan, President – IMTMA & MD, TaeguTec India

“Good execution of all declarations will simplify “Doing Business in India” & will give a large boost to domestic as well as foreign investments” Mohini Kelkar, Director—Sales & Marketing, GrindMaster Machines

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position India as a manufacturing hub and to create an environment for local production. Commenting on this, Krishnan adds, “ ‘Make in India’ is an idea and a campaign. In order to realise this vision, we need to do several reforms starting from ease of doing business, competitiveness, land availability and labour reforms. From the government’s side, the push in the defence & aerospace sectors will certainly accelerate the ‘Make in India’ campaign. However, we must realise that we are in for the long haul.”

Highlighting on the optimistic budget, Ramesh adds, “The budget is silent on ‘Make in India’; we have to wait for the future announcements, because reforms can happen at any time.” Further adding, Kelkar says, “It is difficult to do this quickly & one should not expect dramatical results in one year. The budget is one instrument, but the reforms will depend on passing the bills for amending the acts. The hon’ble Prime Minister has met most of the CEOs of top 500 companies worldwide to promote ‘Make in India’ and it shows hard work & commitment towards this campaign. Industry believes that this initiative will give boost to the Indian economy.”

Boost for manufacturing

The budget has a proposal to correct inverted duty structures & incentivise local manufacturing by correcting anomalies. Sharing his thoughts on this, Krishnan says, “This is welcome move. In the medium term, government will have to look at these aspects on an ongoing basis to correct anomalies and incentivise local value addition.” Stating her point, Kelkar believes that this is a logical step in globalisation. “This will provide level ground to Indian industry to compete worldwide & the weaker players will have to shape up or phase out,” she says. Adding further, Raghavan says, “Capital goods sector can look forward to reducing input costs as duties on essential imported parts have been slashed to 2.5% from 7.5%. Higher import duties on tax in SUV segment will help automotive manufacturing.”

Speaking on the benefits to the machine tool industry, Ramesh averred, “This is much a long awaited move, reducing import duty from 7.5% to 2.5%, particularly for inputs of CNC machines. This will directly benefit the machine tool industry.

ParaMEtErs ConvEntional HigH sPEEd MaCHining

spindle speeds, rpm 4,000 8,000 ~ 50,000

axis feed rates, mm/min 10,000 2,500 ~ 60,000

rapid feed rates, mm/min 20,000 20,000 ~ 60,000

accelerations, g -- 0.5 ~ 2.0

Inputs from Dr Nageswara Rao Posinasetti, Professor, Department of Technology, University of Northern Iowa, on the comparison of conventional and HSM parameters

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It helps in improvising cost price and will help in the direction of demand.”

Infrastructure development

The budget intends to permit tax-free infrastructure bonds for the projects in the rail, road and irrigation sectors. Jaitley has laid out plans to boost infrastructure, relying on public investment, as private investment remains week. Krishnan believes that the government’s allocation of ` 70,000 crores towards rail and road infrastructure development will go a long way in giving a fillip to infrastructure development in India. He says, “Government’s promise to clear new plug-and-play projects with all clearances in mind will dramatically improve project execution and management efficiencies, as well as help to build investor confidence.” Sharing similar views, Kelkar says,

“The budget clearly spells out investments in roads, bridges and port facilities. It seems they want to take it from 6 – 7 km per day to 30 km per day of road construction. The emphasis is on concrete roads and not the tar roads. This shows that the government has long-term views and is looking at building road network of good quality.”

Further elaborating, Raghavan says, “Higher allocation of funds for urban development & rural infrastructure will create demand pull for commercial vehicles and interest rate sensitive 2-wheeler segment. Thrust on agriculture infrastructure could help tractor segment, which is currently in significant stress. All these measures will create pull for auto and other manufacturing segments. In medium term, manufacturing segment will have positive impact due to boost to construction segment – 100 smart cities, FDI in realty, income tax concessions on home loan interest, etc. Defence and railways have received good attention in budget. Proposals such as 49% FDI in defence, 5,000 crores additional allocation of defence budget entirely on capital account will spur public & private investments. The budget for plant machinery and modernisation has been

enhanced by over 700 crores and will result in demand for machines.” According to Ramesh, the outlay for infrastructure development has not significantly increased. “Revitalise the public private partnership (PPP) mode of infrastructure development would be welcome,” he adds.

The budget way

According to Krishnan, the machine tool industry looks forward to stable, predictable growth of manufacturing sector.

“We believe that it is some distance away. However, we realise that medium to long term opportunities are exciting, and the industry is preparing for the same,” he says. Indeed, the budget is promising for the machine tool industry. Highlighting this, Kelkar opines that the import of machines has become easier and duty barrier is not there now. She asserts, “Indian machine tool manufacturers will face a stiff competition. They have to seriously review the input material cost, manpower cost, etc. Apart from this, they have to offer technologically superior products, which are also designed for high production volumes. Machine tools companies will have an opportunity to supply machines to MNCs who are setting shops in India.”

Taking the idea forward, Raghavan believes that the budget shows a positive sign from the GDP growth perspective, especially for the manufacturing sector. “We are upbeat about the growth prospects and getting ready to serve the demand pull, which the budgetory proposals will generate,” he adds. Looking ahead to a productive manufacturing sector, on a concluding note, Ramesh believes that, specifically, for machine tool industry, the significance is with the reduction in the rate of import duties that is the step in the right direction. “But for machine tool industry to do well, there must be stimulus in the other industries like white goods, automotives, infrastructure spending & general industry. Indications are good, we are waiting for the action to start,” he says. ☐

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VIEWPOINTS fOR MaNufaCTuRINg-fRIENdLy ENVIRONMENT

Ravi Raghavan, CEO, Bharat Fritz Werner, shares some points proposed by the budget for a manufacturing-friendly environment • Clear roadmap for lower corporate tax

over next five years• Reduction on taxes of royalty / technical

services for Indian market• Government has postponed GAAR

implementation by two years and has confirmed that GAAR will not have retrospective effect

• Government has launched e-biz portal to integrate required regulation permissions at one source

• Government has proposed to install a committee for preparing draft legislation to expedite clearances

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