Budget 2021: Infra push to generate demand for manufacturing sector & MSMEs

  • Industry News
  • Feb 02,21
By allocating Rs 5.54 trillion for infrastructure development, budget 2021-22 aims to generate demand for the manufacturing sector, especially MSMEs. Read, how companies are reacting to the budget.
Budget 2021: Infra push to generate demand for manufacturing sector & MSMEs

With the focus on six key pillars such as health and wellbeing, capital and infrastructure, inclusive development, enhancing human capital, innovation and R&D and minimum government and maximum governance, budget 2021-22 focuses on infrastructure investment to reinvigorate economic growth. Allocation of Rs 5.54 trillion for infrastructure development is expected to generate demand for the manufacturing sector, especially MSMEs. Here are budget reactions from the manufacturing and MSME sector. 

Dilip Oommen, CEO, ArcelorMittal Nippon Steel India; and President of Indian Steel Association

The budget is truly expansionary and progressive, striking a right balance between welfare and growth without being constrained by the fiscal deficit. The Government is fully geared up to support and facilitate the economy’s reset and strengthen the country as the business epicentre of the world. Introduction of PM Atmanirbhar Swasth Bharat Yojana in addition to the National Health Mission is commendable. Heavy spending on infrastructure and increased spending for capital expenditure creation – a 25 % rise – are welcome moves.

Asset creation in Roads, Rails, Pipelines, Textile Parks, Power sector, etc is a forward-looking initiative. Development Finance Institution (DFI) has been conceptualised and lending portfolio of Rs 5 lakh crore in 3 years is a step in the right direction. A targeted program of disinvestment to raise Rs 1.75 lakh crore can unlock value in the public sector units, as I mentioned in the pre-budget discussions. Voluntary vehicle scrappage policy will improve business sentiments. The budget truly intends to propel the goal of a 5-trillion dollar economy. If there was no reduction in customs duty on finished and semi-finished steel, it would have helped the domestic steel sector instead of some non-FTA neighbouring countries.

Bhushan Parekh, Director, SME Solutions, CRISIL

Doubling the tax audit limit to Rs 10 crore will improve ease of doing business for micro and small enterprises. This will also boost digital payments because the limit applicable to businesses with <5% transactions in cash. The 4x increase in the paid-up capital threshold of small companies to Rs 2 crore, and turnover by 10x to Rs 20 crore will ease their compliance and procedural burden.

Anil Chaudhry, CEO, Schneider Electric India Pvt Ltd 

With its extensive focus on infrastructure and healthcare, the Budget FY21-22 clearly focuses on reviving the economy. The key pillars such as health and wellbeing, capital and infrastructure, inclusive development, enhancing human capital, innovation and R&D and minimum government and maximum governance rightly identifies the core areas for sustained growth and provides considerable thrust towards an Atmanirbhar Bharat. The emphasis on further expanding the National Infrastructure Pipeline by creating dedicated financial institution, monetizing operating assets, and raising the share of capital expenditure in central and state budgets is commendable.

The proposal to offer more choice to consumers by introducing competition in the power distribution space by kick-starting Rs 3 lakh crore reforms-based result-linked power distribution sector scheme for state power distribution companies is likely to address the long hanging Transmission & Distribution (T&D) issues and give relief to the power producers, thereby ensuring health for the entire value chain. It is also good to see the government government’s focus towards ensuring smart metering, which will help cut the commercial losses in power distribution.

Further, the proposal to double the MSME allocation with Rs 15,700 crore for medium and small enterprises in FY22 will give the necessary push to the sector. 

Considering that India is well poised to play an important role in the global supply chain, the PLI scheme in 13 sectors to create manufacturing global champions for an Atmanirbhar Bharat is expected to play a crucial role. This will encourage growth in these sectors, apart from creating ample employment opportunities for the youth. Overall a growth oriented budget to support the Indian economy to bounce back in the post COVID world.

Ashwath Ram, Managing Director, Cummins India

At first glance, it appears to be a progressive budget. There is a focus on the socio-economic development of the country with an emphasis on Railways, the Power sector, infrastructure, healthcare, and enhanced digital connectivity. The voluntary policy on the scrapping of vehicles will have a positive impact and will drive the commercial vehicle and auto sector forward, the industry wanted an incentive-based scheme so we are still seeing the details. 

In addition, MSMEs and other user industries have been severely affected by the recent sharp rise in iron and steel prices. The industry will definitely receive a push by the decision to double the allocation of MSME and reduce the customs duty on some of the steel products. The focus on highways and the infrastructure investment plan will definitely give the necessary impetus to the CV and construction equipment businesses.

Ram Iyer, Founder and CEO, Vayana Network - B2B Supply Chain Trade Financing Platform

This is a great budget with a lot of growth boosting measures. In the backdrop of the pandemic and resultant fiscal situation, the government has done a great balancing act.

There are a number of steps announced to boost capex and infra; and manufacturing which will create huge trickle down benefits for the economy at large. To achieve this within tight fiscal deficit targets and without impacting the tax rates will be a herculean achievement. The key positives for businesses include:
1. Creation of a huge DFI to fund India's infra ambitions over the next 3-5 years
2. Vehicle scrapping policy will give a boost to the Auto sector in coming years
3. Launch of multiple infra and capex projects will give boost to manufacturing, steel and cement sectors
4. Further allocations for PLI in manufacturing is a great step to place India firmly in the global Supply Chain ecosystem in core sectors like Electronics
5. Smaller businesses will see more ease of doing businesses due to relaxation of audit & GST norms
6. Divestments of some PSUs and higher FDI limits in insurance will lead to entry of global players with deeper commitment to India and also boost innovation.

Sanjay Phadke, EVP – Platform & FI Business Head, Vayana Network

MSMEs generally depend upon big businesses in the supply chain and the overall buoyancy in the economy for those that deal with retail. The budget is definitely a Big Bang with far more focus on enhancing macro spending across healthcare, infrastructure and large scale manufacturing. The resultant virtuous cycle will provide a significant tailwind to MSMEs too. There are many specific measures on changes in duties, easier compliances etc that would provide support to MSMEs that are ravaged by Coronavirus crisis. There is also a strong underlying theme of digitisation and improving access to capital for those that are compliant and digital which will help MSMEs contribute in a big way towards the target of 5 Trillion Dollars economy.

Ravichandran Purushothaman, President, Danfoss India

The Union Budgets provision for doubling the MSME allocation and setting aside Rs 15,700 crore in FY22, is a testament to the nation’s resolve towards strengthening its local manufacturing base and realising its vision for a self-reliant India. Further, the Rs. 1.97 lakh crore allocated over  the next 5 years for Production Linked Incentive Schemes to create manufacturing global champions for an Aatmanirbhar Bharat Will nurture size and scale and create jobs for youth. The enhanced outlay of 1,18,101 crores announced for the development of the Roads and Highways infrastructure would benefit the corollary industries like cement, steel and transportation, showcasing potential for recovery from the slowdown presented by the lockdown. In light of the government's move towards reducing air-pollution and the impetus provided to the renewable energy sector, sustainability-oriented products can be effective drivers of maximising energy efficiency and a big contributor to reduction in air pollution which were also the key highlights from the budget today. The budget has attempted to strike a balance between supporting growth and a modest deficit reduction. The budget addresses issues of supply scarring and the demand constraints across all industries, and a set of fiscal and tax relief measures that would go a long way in boosting aggregate demand.

The Union Budget 2020-21 heralds a positive turn in the infrastructure ecosystem of the country. The proposed investment on various infrastructure development projects under the National Infrastructure Pipeline will set India on the right path towards improving the ease and standard of living across major Indian cities. Further, the investments in infrastructure will be pivotal in enhancing the nation’s manufacturing prowess, thereby acting as a catalyst in India’s journey towards becoming a powerhouse for local production.

The allocation of INR 1000 crores and 1500 crores for the solar and renewable energy sectors respectively is indeed a commendable move by the centre for achieving the nation’s targets for Renewable Energy. The budgetary allocations towards reducing air pollution is  a welcome step as it will incentivise firms to invest in low carbon technology and fasten their transition towards carbon neutrality. 

Added to this, the National Skill Development Agency’s special emphasis on infrastructure-focused skill development and the move to include young engineers in the Project Preparation Facility for upcoming projects, will play a pivotal role in addressing the issue of skill gap and job creation among the nation’s workforce.

Vikas Khanvelkar, Managing Director, DesignTech Systems

This year budget is presented during unprecedented time as mentioned by Hon. Finance Minister (FM) Nirmala Sitharaman. As expected it aims to give a boost to economy by increasing expenditure in many sectors. Hence Fiscal deficit of 6.8% looks difficult but it is achievable through ambitious divestment program announced in the budget.

Focus on health by providing Rs.64000 Crores for “Swastha Bharat” is a good move. Provision of Rs.35000 Crores for vaccination is also a very good step.

On Industrial front, extending the already announced Production Linked Incentive Scheme for electronics sector to 13 more additional sectors by providing Rs.1.97 lakh crores over 5 years is a really welcome and great move to support “Atma Nirbhar Bharat” initiative to increase domestic manufacturing. This will give a strong push to grow manufacturing sector and create job opportunities. Mitra scheme for creating world class companies in Textile field will help grow textile exports.

Voluntary vehicles scrapping scheme is also very good for automotive sector which was long awaited.

Overall, I feel the budget is in the right direction to get our economy back on track to take India to 5 Trillion Economy.

Vikas Bajaj, President, Association of Indian Forging Industry (AIFI)

This year's Union budget is positive, as well as a progressive one with a strong drive towards the country's socio-economic growth. It focuses on the Railways, Power, Health Infrastructure, Banking, Insurance and Agriculture sectors. Voluntary policy on the scrapping of vehicles will definitely have a positive effect and will drive the commercial and automotive industries forward. Furthermore, a recent sharp rise in iron and steel prices has affected MSMEs and other user industries severely. 

The positive step of reduction in customs duty uniformly to 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels would certainly contribute to better raw material prices and reduced input costs. Also, no new corporate tax has been added which is positive news as it is a tough time for the industry. The increased government attention on the highways and infrastructure sector would definitely contribute to a significant impact on the manufacturing and Auto industry and help in employment generation which is the most critical need to revive the economy.

Dinesh Patidar, Chairman & Managing Director, Shakti Pumps India Ltd

In this budget visionary approach has been adopted, health services have been given more emphasis keeping in mind the circumstances arising out of pandemic like COVID-19. The basic need of almost all sectors has been taken into consideration. Emphasis has been laid on making the complex taxation process easier and simpler. 

Steel and copper prices which are going up unnecessarily, to curb on it Custom Duty has been reduced by 2.5%  and 20% Custom Duty has been imposed on solar inverter, realizing the dream of Make in India along with making Indian power electronics units self-sufficient is a welcome step. This time most of the focus is on the formation of a regulatory institution, So that the functioning of those organizations can be made smoother. Financial assistance given to financial institutions has made to make contribution more supportive in development.

One expected & necessary thing in budget, change in taxation for middle class is missing. Going forward we expect more reforms in GST through mini budgets. Overall, this budget will prove beneficial for the improvement of the far-reaching economy.

Rama Kirloskar, Director, Kirloskar Brothers Ltd

This Budget assumes greater significance as it comes amid the Covid-19 pandemic, which has led to a massive economic disruption in India and around the world. The government’s aim to spend Rs 1.97 lakh crore on various PLI schemes over the next 5 years, is a step in the right direction. This move is likely to attract global players in the Indian manufacturing sector as the government is planning to offer plug-and-play infrastructure. The special focus on manufacturing will also assist in augmenting Foreign Direct Investment (FDI) in this sector which is undoubtedly the need of the hour.

The announcement to extend social security benefits to gig and platform workers is also a significant move considering that it now forms an important part of the economy. Minimum wages to all categories of workers will ensure economic development of the blue collar workforce and will impact around 15 million gig workers in India. The move to allow women to work in all categories and also in night shifts with adequate protection will ensure more participation of women in the workforce and further boost economic development.

The Budget 2021 also addresses the needs of the unorganized labour force, with the proposal to launch a portal to collect relevant information on gig workers, building/construction workers, among others.  This will help formulate health, housing, skill, insurance credit and food schemes for migrant workers. This proposal is indeed required to make India’s workforce future ready.

Vivek Bhatia, MD & CEO, thyssenkrupp Industries India

The Union Budget for 2021-22 presented by the Finance Minister Nirmala Sitharaman today, has introduced many reforms benefiting the manufacturing, infrastructure and automobile sector along with the announcement of additional PLI schemes. The government aims to spend Rs 1.97 lakh crore on various PLI schemes over the next five years to boost the manufacturing sector. This will attract global players in the Indian manufacturing sector, as the government is planning to offer plug-and-play infrastructure to the companies willing to come to India. In the automobile sector, the introduction of the Scrapping policy will be a game-changer for the auto-component segment. Under this policy, all private vehicles beyond 20 years and commercial vehicles older than 15 years will have to undergo a fitness test, which will provide many opportunities for the auto-component manufacturers. Besides, the holistic approach towards creating AtmaNirbhar Swasth Bharat Yojona with an outlay of Rs 64,000 crores for the next six years is a big step towards bringing back the health of the country.

For the year 2022, more economic corridors are planned to boost road infrastructure with capital expenditure at 5.54 lakh crore. Also, the government’s aim to complete 11,000 km of national highway infrastructure this year will encourage and offer a positive relief to the related sectors. With this, we have already started observing that the increased outlays in road sector, infrastructure development, railways, gas pipeline development will create major boost to the V – shaped recovery. We also expect strong growth to continue in the cement and mining sectors driven by recent policy initiatives which are further reinforced through the budget today.  Besides, chemicals and power sectors which are critical for us, should also grow strongly given the support from the government. We welcome all the policies announced in today’s budget and we are very positive that it will put Indian manufacturing sector back on an aggressive growth trajectory after a pandemic induced setback.

George Rajkumar, Country President, Grundfos India 

Grundfos India welcomes the additional allocation towards the Jal Jeevan Mission (JJM) by the Department of Drinking Water and Sanitation announced by the honorable Finance Minister. Given that the budget had a very sharp focus on sustainable economic growth of and nation overall, it was  great to see the focus on one of the crucial issues, that is urban water supply. Keeping the growing water crisis in mind, the decision to dedicate a INR 2.87 lakh crore outlay over 5 years, for the renowned JJM, which is aimed at universal water supply in all 4,378 urban local bodies, with 2.86 crore household tap connections and liquid waste management in 500 AMRUT cities is a good one. The move to include liquid waste management backed by the budget allocation of ? 1,41,678 crore for Urban Swachh Bharat Mission 2.0 is a great step forward to holistically look at sustainable water and waste water management in India. We hope that this allocation will encourage public and private players to develop innovative solutions for JJM and provide an opportunity to contribute to resolving water issues in the country through advanced water technologies. Furthermore, knowing the fact that we are rich in renewable sources, it is a rational decision to evidently level up the renewable energy allocations, by proposing an additional infusion of INR 1,000 crore to the Solar Energy Corporation of India and 1,500 crore to IREDA continuing to build on a solarized future.

Aalok Kumar, President & CEO, NEC Corporation India 

The Government's commitment to streamlining the country's infrastructure from roads to railways to shipping to waterways to build a new India is consistent and commendable. The infusion of multiple thousand crores into the construction of national highway projects and dedicated freight corridors reflects the creation of a new connected India. Linking cities through metro lines and increased access to travel facilities will also boost the much-needed employment generation. While we were looking forward to specific initiatives and encouragement for the technology industry, the continued focus on driving digital transformation using artificial intelligence, machine learning, and digital records in governance, smart cities, transportation, logistics and aviation will have a contagion impact and empower the economy in the long run. We envision India's future under the spirit of ‘AatmaNirbhar Bharat' and look forward to partnering with the Government in meeting the relevant targets.

Ashish Dhakan, MD & CEO, Prama Hikvision India Pvt Ltd 

The Union Budget FY 2021-22 is a transformative budget with positive resolve for India to grow further with a vision of the AtmaNirbhar Bharat Abhiyan that compliments the ‘Make-in-India’ initiative of the Government. AtmaNirbhar Bharat is an expression of 130 crore Indians, who have full confidence in their capabilities and skills. The Union Budget has identified the six pillars of Atmanirbhar Bharat's vision. On behalf of Prama Hikvision, we welcome the progressive and visionary budget and look forward to economic growth and stability.

The budget has sincere intent to provide momentum to strengthen local manufacturing capabilities. The Production Linked Incentive scheme (PLI) is a welcome move by the government. The review of the customs duty structure is clearly seen as a move towards promoting domestic manufacturing. We hope that the review of the custom duty structure will be done after extensive consultation with the key stakeholders.

The move to strengthen the overall research ecosystem to boost innovation and R&D in the country, an outlay of Rs 50,000 crore, is being announced for the National Research Foundation. It is a big step for accelerating innovation and R&D in India. The budget clearly shows the government's mega thrust on developing Infrastructure, Road Transport, Waterways, Airports, Railway, Metro Rail, ‘MetroLite’ and ‘MetroNeo’. It is commendable for its inclusive growth agenda, overall a gradual step toward Atmanirbhar Bharat.

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