PRE-BUDGET PANEL DISCUSSION. ‘Revive demand to boost manufacturing sector’

The government should enhance the purchasing power of common man by leaving more money in his hands and revive overall demand to boost manufacturing sector.

The eminent speakers at the BusinessLine ‘Count Down to Union Budget, 2017’ on Thursday were unanimous in their call for improving ease of doing business, reviving demand and renewed focus on sectors that help in job creation.

Seshagiri Rao, Joint Managing Director, JSW Steel, said the Budget should tweak the tax structure to help consumers spend more. This will not only spur demand but also improve the capacity utilisation of manufacturing sector, which has expanded production capacity in anticipation of robust demand.

Of ₹16.33 lakh crore of taxes government collect annually about 65 per cent is mopped up through direct taxes while the rest comes from indirect taxes.

Globally, more taxes are collected from indirect tax payers leaving money in the hands of consumers to spend, he said.

The GST rate of 17-22 per cent being discussed is much high and with so many State government taxes, levies and royalty on mining kept out of GST will push of cost further, said Rao.

Satendra Singh, Head of Strategy and Business Development, Global Manufacturing Operations, Nokia, said the government plans announced in every Budget sounds exciting but implementation is the major issue. Nokia has developed base station in India for launching 4G technology but the roll out is happening now.

Inconsistent policy measures such as introduction of 10 per cent duty on companies operating in Special Economic Zone posed a major challenge and scared away investments, he added.

Ullas Kamath, Joint Managing Director, Jyothy Labs, said the government digital push would bring about 25 per cent of the un-organised sector on the mainline and block their ability to under cut the market in long run.

The incident of tax on consumer goods is among the highest. On a bottle of shampoo prices at ₹100, the tax component alone accounts to ₹40 and makes the company wonder whether they are selling the shampoo to the consumer or the government, said Kamath.

K Krishna Moorthy, Chairman, India Electronics and Semiconductor Association, said the Budget should focus on providing special incentives to sector that can generate employment, the plank on which this government came to power.

Lalit Kanodia, Chairman, Electronics and Computer Software Export Promotion Council (ESC), said the country has lot of potential to develop design for electric cars at a cost 15 per cent lower than the US and some incentives to this sector can unleash lot of potential for India.

The tax holiday of 10 years given to IT sector helped companies make about 800 acquisition overseas and establish as significant player. Such targeted incentives is the need of the hour, he said.

Jiten Divgi, Managing Director, Divgi TorqTransfer Systems, said the company has been selling auto components to China from its factory in North Karnataka much before the ‘Make in India’ was conceptualised and the margins for this product are much better if it is sold in China than India.

Sachchindanand Shukla, Group Chief Economist, Mahindra & Mahindra, said the fresh investment by the private sector will not happen unless the issue of excess capacity built by the industry is not tackled by improving the demand.

While the power companies claim that there is surplus capacity, there are village without electricity supply and in some places the supply is not consistent.

“Banks are flush with funds but there are no takers because in almost all sector the capacity utilisation is much low and so the cost of production is higher, leading to losses. Hopes the Budget addresses this issue,” he said.

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