India is well known for world’s highest monthly addition of telephones of the order of 10 million plus and also for a very large demand for electronic goods. From roof top everybody in the Government speaks loudly about encouraging local manufacturing, but the facts on ground are different. Given this background, let us see what ails the manufacturing sector and what can be justifiably expected in the budget from Government.
First let us face the fact that it is a question of choice by the Government. Because of international pressures we have accepted ZERO DUTY in WTO for import of all electronics. There are certain issues within India for infrastructure, interest rates, comparatively no availability of financial assistance, disharmony between Centre and State Government policies, absence of sustained and suppotive Government policy, reluctance of the states to come forward with more progressive industrial policies, keeping revenue angle in view, as also state politics. All these have resulted in the lmost negligible incentive for local manufacturing. There is also the issue of red tapeism.
The basic question to be raised is” What is Central Government’s role in prescribing polices for indigenous manufacturing except for giving a license, when every other thing vests with the states - local taxes, infrastructure, labor laws, electricity, power, roads, transporter associations, labor unions etc. etc?” While the As Central Government’s policies are good and conducive, the real challenge lies in implementation of polices and state level interventions.
Due to various reasons, whenever industry is established everybody starts demanding their pound of flesh - whether land, building, labor, power, municipal taxes etc. Whenever it comes to the question of synergy with state governments, the less said the better. It is left to the fantasy of the states to lay and prescribe rules and regulations for any and all things required for industries.
When we talk of the Budget, the usual answer is call for cuts in duties and taxes. Frankly speaking, not much is asked on that count, except a general demand for abolition of excise duty, sales tax, VAT etc..
We are not against tax concessions, but what we need more than that is Government’s willingness to bring parity in domestic taxes as a whole for manufacturing with other countries especially those countries with whom our industry has to face competition global markets and with whom our Government loudly goes on signing FTAs and tax concession treaties. Do we realize that the WETO/ITA/FTA etc. are for promoting international trade, but are we overlooking domestic industry for the same? Pat comes the reply, “Government is opening up the economy for you and the entire world market is at your door steps”. Shamelessly we go on saying that. What world market, when we cannot give the domestic industry the same preferential treatment, same taxes, same speed of decision and same policy sustenance over a period of time? In India, the Government is great every year at the Budget or even without Budget we can tamper any concession or policy announced few months back. Then how can our industry compete globally?
So leave aside taxation, other factors like power and infrastructure requirements, speedy clearance of goods at customs, bottlenecks at port of call, mass of paper work, lack of skilled workers, encouragement of R&D, etc require urgent attention.
Coming to the encouragement of the industry in the present economic meltdown, the industry has suffered because of meltdown: increasing foreign exchange rates, cancellation of orders, loss of jobs etc. We always touch peripheries. Why cannot we abolish Excise Duty/ST for five years? Why cannot we free industry from inspectors for three to five years? Why cannot we give industry incentive for foreign exchange rates which have sky rocketed?