Indian Budget 2013 India's Budget and the Process Industry: What Top Honchos Expect for 2013
With the budget round the corner, we asked industry veterans their expectations from it. Here are a few recommendations, suggestions that they would like to see materialize in this year’s budget…
A V Suresh CEO - Forbes Professional, Eureka Forbes
“India is going through a tough period though we have rich resource of men, market and skills. Going by the current trend it suggests that we will end the year with a GDP growth of less than 5 per cent. Blaming the global slowdown is not the answer; instead we need transparent processes in place. The government needs to spend its revenue purposefully and strengthen the Rupee. Imports have to be made less costly especially for critical components, which are most needed in the process industry.
The recently announced foreign investment has not materialized and global investors are looking for improved system governance and we need to put efforts into improving our credibility. Faster clearance of infrastructure projects is needed and industry-friendly policies are required to prop up the industrial segment. To augment fiscal, revenue and current account deficits India needs large investments complimented by bold reforms and robust growth.”
Mahesh Rao Managing Director, Nalco Water India
“India is a growing economy. The use of industrial water is closely linked to the economy of any country. As the GDP increases, so will the consumption of industrial water. In India, the industrial sector is the second highest user of water after agriculture. The World Bank says that the demand for water for industrial use and energy production will grow at a rate of 4.2 per cent every year, rising from 67 billion cubic meters in 1999 to 228 billion cubic meters by 2025. It adds that the current use of industrial water in India is about 13 per cent of the total fresh water in the country. Water supply and prices associated with it
have been emerging as the major constraints to the growth of industries.
Like in many other parts of the world, India should look at implementing incentive driven norms and stricter laws to ensure the responsible use of water. We look forward to announcements on incentives and funding for water re-use through tax measures this year. Tax credits and exemptions, as well as grants, can be used to improve the economics of investment in water reuse, while tax assessments may be used to help finance public water reuse systems or infrastructure.
The government should have a tax credit that is equal to a percentage of fixed capital expenditure on projects, or activities that reduce the consumption of potable water. This incentive can be provided under the country’s Economic Expansion Incentives (Relief from Income Tax) Act as a part of an incentive “package” for a particular project. This is already being followed in Singapore and has proved to be a successful model.”
Arvind K Goel Managing Director, Auma India & Chairman, CII Valves & Actuators Division
“At present, valves and actuator manufacturers are suffering from lack of orders on account of negative growth in the Indian capital goods sector. Power sector is one of the important drivers for this industry and delays in execution of power projects, both in state and private sector, have severely impacted valves and actuator manufacturers. Our industry would like to see clarity in policies to remove various obstacles in completion of power projects.
The industry also expects appropriate allocations in water and waste water treatment sector which are mostly in the state sector. Any steps which would encourage the growth of the industry in general, would be welcomed as it would spur the demand for the products of our industry. Export of valves has been picking up due to the inherent strength of the Indian industry to supply engineered valves to the global markets and most of the global players have set manufacturing facilities in India.
Our industry would also be looking for support in promotion of exports of valves and actuators, where the competition is with the countries like China, Korea, Italy etc. with low interest rates and virtually no infrastructure bottlenecks, faced by the producers in India.”
Jasbir Singh Vice President, Essar Projects (India) Ltd
“Budget increases the expectation of overall business sector, agriculture, manufacturing and service sectors. Macro economy call for more foreign investment, which is seriously, required in infrastructure and energy sectors. One window LLC clearance and transparent FDI laws should be considered. Tax incentives that support revival of the manufacturing and capital goods sectors should be introduced.
The Government may also consider reintroducing investment allowance to create the attraction in capital goods sector. Litigation in India is timeconsuming and increases the hidden cost for global companies
operating here. The Government should consider ways to strengthen the dispute resolution process. The objective should be to resolve disputes with a fair and open mind. New areas that should be looked at are: Government should encourage foreign investments with local companies in Shale gas exploration, the new energy source for the coming years; CBM exploration should be encouraged; there should be tax exemption for coal to methane gas plant; new SEZ areas to be indentified in all states.”
Rajesh Nath Managing Director, German Engineering Federation (VDMA)
“2012 was a very challenging period for the Indian industry and economy. To boost the industrial growth, we hope in the 2013 budget the government comes out with clear SOPs for capital equipment like reduction in excise duty. This would help to boost up sales of the equipment. Also basic customs duty needs to be lowered. This would help the Indian manufacturing industry to utilize the latest technological advancements and would lead to an increase in production and quality of products.
The envisaged projects in the infrastructure sector have to be implemented to give a thrust to the economic growth. This can of course happen only if the government takes bold steps in awarding contracts for infrastructure projects.
The government should also work towards bringing in policy reforms, especially for PPP projects to make it attractive for investors to invest in infrastructure projects in India. Besides this, there are many other pending issues related to the industry like uniform taxation, GST, clarity on some of the concessions given by government for duty free imports to name a few. We hope that the forthcoming budget would consider these issues favorably.”
Gautam Agarwal Director – Corporate, Ansapack Group
“Given the current scenario in the packing industry, several indigenous players continue to face challenges in partaking the opportunity of growth as presented in their customers or end product industries. This happens primarily in pharmaceutical packaging due to the lack of ability of the said packaging players to represent themselves as an industrial body at both the state and center. The budget could enhance support to the pharmaceutical packaging industry in the same fashion as its support players in the pharmaceutical space through additional export and pricing benefits as maybe available or through regulation of taxes directly or indirectly towards benefits provided for research based product development.
It would inadvertently motorize the growth of players who have a keen interest in the development of packaging technologies for the growing FDA approved contract manufacturers as present in India for the pharmaceutical majors. An additional export benefit towards the import of materials for conversion from regulated markets and their export back to their parent countries is a model that bodes well with our manufacturing capital. Such innovative models and solutions could be harnessed if supported by budgetary benefits.”
Mandar Phadke, CEO Abhisam Software
“Despite the pressure from various quarters, the FM should take a long term view and get the macro picture right. We do need some visionary long term thinking that should set the momentum not just for this year, but also for the entire decade and more.
Here are two suggestions:
- Simplification of tax laws, procedures and clearances that are needed for businesses - The intent should be to encourage new businesses to be set up as the birth of any new business inevitably helps create new products, markets and jobs. Hurdles should be removed. This will mean a simplification of the existing tax regimes, speeding up the move towards GST and unifying the country’s markets. These moves can remove the friction in doing business in India and also lead to increased revenue for the government by way of more entities, adding more value (and contributing more by way of total tax revenue).
- Use the demographic dividend to India’s advantage- Skill upgradation. In the next few years, India will have the largest working age (young) population in the whole world. This is a “heaven sent once in a lifetime” opportunity to rapidly move India into the group of developed countries. To do this however, the youth need to be imparted various skills via industrial training and e-learning programs. The Government should incentivize the skill development of all individuals by suitable tax breaks. Thus, individuals should get tax deductions every year for the technical training that they received that year (maybe with an upper limit). Also, companies that sponsor their employees for training, should get tax incentives to train their employees. Training should include traditional classroom as well as e-learning and m-learning. This single action will set in motion a huge skill upgradation program for the entire country. The positive effects though not visible in one or two years will certainly start showing results in the coming decade and more.”
Sajiv Nath Managing Director, Endress+Hauser (India)
“At present, India is witnessing a unique economic situation in the world - A slowing economy wherein GDP growth is reduced to 5 from 8-9 per cent level few years ago in spite of strong local demands in many promising sectors like power, energy, roads, water. Today, we are unable to fulfill consumer needs in the same sector.
Secondly, there is much higher consumer inflation level ~10 per cent p.a. in the last four years leading to high interest rates, depreciating currency (the current Indian inflation are way above the average world inflation of four per cent p.a.) Can a country with 1.2 billion people afford this imbalanced situation for long? The clear answer is NO as it would have serious impacts on the country’s ability to manage fiscal situation, thereby impacting its credit rating in the international market.
For corporates, high inflation, lower growth for a longer term only means reduced profitability and investments thereby deteriorating the country’s competitiveness as compared to other alternative investment destinations.
The Union budget is expected to bring positive sentiments back about India while ensuring we achieve a prudent fiscal balance with much lower inflation. This is possible if we improve efficiency and effectiveness in our various state funded capital and welfare programs and also increase supply of goods & services. In the forthcoming budget there should be allowances for improving the investment cycles and provide support to accelerate project executions in several industries viz. power & energy, infrastructure, water and fertilizer industries.
At present, several challenges are faced by these industries due to shortage of capital, raw materials. Stable & non adversarial tax regime is needed to build positive sentiments in the minds of foreign and domestic investors. There is a need for effective and timely execution of various state investments or welfare schemes. Besides, several PSUs have substantial cash balance, which can be utilized in initiating Greenfield projects or expansions thereby generating higher economic activities.
There should be a clear roadmap and timeframe on GST implementation – Early implementation would help in improving tax collection besides improving transactional efficiency, compliances. It’s necessary to maintain direct and indirect tax rates and improve tax collection through increasing number of tax payers and compliances. The government should provide tax incentives on energy and water saving investment programmes undertaken by corporates.”