Focus on jobs, skills and the middle class – Opinion News

By Mukesh Butani & Harsh Shukla

Encouraged with “Make in Indiamaking for the world”, Prime Minister Modi’s militant bid to establish India as a manufacturing hub found an echo in the Union Budget. Bolstered by the motto “Vikas bhi, virasat bhi”, the Budget has made a promising focus on employment, skills, micro, small and medium enterprises (MSMEs)), and the middle class.

Given the ongoing conflicts leading to supply chain constraints and increased sea freight, global growth rates are unlikely to pick up. This has resulted in protectionism and mercantilism, which is affecting India’s trade dynamics and economic stability. As the global economy struggling to cope, the trade map has fueled imports of energy and fertilizers to India.

As India moves towards an aatmanirbhar (self-reliant) approach, the new government’s Budget provided an opportunity to increase its participation in global supply chains. The proposals have laid out a roadmap for formalising the value chain by promoting financial inclusion and facilitating logistics and infrastructure support. The proposals on credit availability have cemented the much-needed support to MSMEs. The Economic Survey highlighted the challenges faced by MSMEs in the areas of formalisation and inclusion, limited access to finance, markets, technology and digitalisation, infrastructure bottlenecks and skills. The Budget has addressed these challenges with a series of measures including a credit guarantee scheme for purchase of machinery and equipment, credit support during times of stress and enhanced Mudra loans.

India has accelerated its China Plus One strategy. Amid growing trade tensions between China and the US, major companies have responded to a catastrophic shift in global manufacturing, with many looking to shift their exposure to China. So far, India has been a minor participant in global value chains (GVCs) for electronics manufacturing. Shifting parts of the value chains to India may have been encouraged by an umbrella of schemes such as production-linked incentives, scheme for promotion of electronic components and semiconductor manufacturing, and electronics manufacturing clusters. The government has announced the setting up of 12 industrial parks under the National Industrial Corridor Development Programme, which will provide “plug and play” infrastructure. This could be a game-changer and attract companies looking to set up manufacturing bases in India.

India’s tariff structure has been a bone of contention for investments and setting up manufacturing hubs. However, in a strategic move to attract GVCs to set up in India, the Finance Minister has announced duty waivers for 25 critical minerals. This will enable India to bridge its downstream manufacturing capacity gap. This would also complement the growth in technological advancements as these critical minerals form the raw materials for sunrise sectors such as electronic vehicles, green energy and semiconductors.

“With a three-fold increase in domestic production and a (nearly) 100-fold jump in exports of mobile phones in the last six years,” the finance minister said. He affirmed that the Indian mobile industry has come of age. With an aim to deepen manufacturing and boost value addition, the Budget proposes to reduce basic customs duty on mobile phones, mobile printed circuit board assembly and mobile chargers to 15%. By maintaining the momentum of domestic manufacturing, the Budget is expected to bring policy stability including incentives, attracting foreign direct investment and boosting exports.

To address the economic survey challenge of employability, the Budget has sought to empower the youth. Skill enhancement measures including upgrading of 1,000 industrial training institutes, incentives for job creation and interest subsidy on education loans figure prominently.

Budget 2024 brings to mind the words of William E Simon: “The nation should have a tax system system that looks like someone designed it on purpose.” India’s future depends on educating and employing its youth, and building a resilient global manufacturing hub. As India lays the foundation for a developed economy by 2047, the Budget resonates with the country’s desire to facilitate trade dynamism and ease of doing business. Budget 2024 has taken significant steps towards these goals as India moves towards robust growth and inclusive stability.

With the assistance of Lopamudra Mahapatra, employee of BMR Legal

Mukesh Butani and Harsh Shukla
Managing partner and managing associate, respectively, BMR Legal
Views are personal