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?

Sriperumbudur, Tamil Nadu, is referred to as the Shenzhen of India and is considered an icon for India’s manufacturing industry. Come on, all the units there are majority foreign owned. Even so if you talk to the companies there from the core of the heart, they too have several sufferings: lack of airport, slow clearances, local state labor laws, access to Industrial Area, availability of power, cargo clearance, water, hospitals etc.

When you ask any thing from the Government it is bound to have an affect on government’s revenue. Who is willing top forgo revenue? So we need real emphasis on local manufacturing and not getting lost up in revenue angle or revenue loss.

The entire world has seen the Nano experience in West Bengal. What is our response? Let somebody answer who is responsible for manufacturing industry establishment and what was done in case of Nano? That gives the answer.

Coming to rural area development, which is another area always on top of the agenda of all governments and political parties. Let us ask who is interested in removal of digital divide and promotion of rural areas? When it comes to taxes/duties, spectrum…we treat everyone as equal. Why cannot we say No EXCISE DUTY and TAXES for services in rural areas? Why can not we say no licenses required for rural areas? Why can not we say no inspector for rural areas? Also even after fifty years of independence we do not have a coordinated approach for rural development of power, water, roads municipal services etc.

So in one word We want Action from Government.

About author:
Mr NK Goyal is the President of the Communications and Manufacturing Association of India (CMAI); Chairman Emeritus of the Telecom Equipments Manufacturers Association of India (TEMA); Senior Vice President, Himachal Pradesh (HP) Chamber of Commerce and Industries and is actively involved in policy formulations and development of industrial policies specially related to the telecom and IT sector. Mr Goyal is also a Director on the Board of Directors of National Fertilizers Ltd. (NFL) and a former Director of the National Institute of Entrepreneurship and Small Business Development (NIESBUD). He has served the Government of Himachal Pradesh in various posts for more than 21 years, including as General Manager (Development) of Himachal Pradesh State Electronic Development Corporation Ltd. He has also served as President (Operations) for a telecom solution provider company and as a consultant to a telecom multinational.

Mr Goyal, a Post Graduate in Science with 38 years’ experience in telecom/IT, has presented papers internationally on topics of public concern such as waste, radiation, telecom, IT, manufacturing, global peace and well being, excellence in performance, etc.

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Tags : Budget 2009/10, Budget, NK Goyal, CMAI, India, electrinic goods, manufacturing sector, government, duty, infrastructure, interest rates, government policy, local taxes, labor laws, electricity, power, roads, transporter associations, labor unions, land, building, labor, power, municipal taxes, excise duty, sales tax, VAT, WETO, ITA, FTA, foreign exchange rates, order cancellation, loss of jobs, Nano, Wet Bengal, municipal services, rural development, NIESBUD, telecom, IT