The Union Budget of India was introduced by India’s Finance Minister on 1 February 2021. Amid the extraordinary global economic turmoil induced by the COVID-19 pandemic, the budget was introduced with specific focus on providing a boost to the Indian economy and to inch closer towards the Prime Minister’s vision of ‘Atmanirbhar Bharat’, a vernacular term meaning ‘Self-reliant India’.
One such scheme unveiled in the budget is the unique ‘Production Linked Incentive Scheme’ (PLI Scheme). It is intended to make Indian manufacturing companies an integral part of the global supply chain, to gain core-competence, and to foster cutting-edge technology. At the same time, customs duties on imports of certain products were recalibrated to incentivise domestic manufacturing and reduce dependence on imports.
The Government committed INR 1.97 trillion over a period of five years to the PLI Scheme. Under this scheme, manufacturers of 13 specific goods, including mobile phones, pharmaceutical products, automobile and auto components, textile products, and so on, would be incentivised. The Government proposes applying the benefits of the scheme to eligible manufacturers based on a percentage of the value of their production beyond certain threshold production and investment targets. We await details of the scheme. The scheme is meant not only to propel India to move closer to the dream of ‘self-reliance’ in these sectors, but also to make India a hub for manufacture and export by attracting global investment.
The Basic Customs Duty on import of certain products, such as electronics, auto components, textiles, and so on, has been increased to promote domestic manufacturing and to reduce India’s dependence on imports. The change is also aimed at protecting domestic manufacturers from the harmful dumping of cheap imports. Such dumping hurts domestic industry.
A new levy, the Agriculture Infrastructure and Development Cess (AIDC), has been introduced on imports of certain specified products such as fruits, pulses, fertilizers, and so on. The purpose of this levy is to finance agriculture infrastructure and other developments in the country, which would in turn provide to local manufacturers a world-class platform for undertaking production.
The steps described above are intended to create a conducive environment for indigenous manufacturers. As well, the focus on capital and infrastructure investment should play a major role in attracting global investment and consequently paving the way for Atmanirbhar Bharat.
Dinesh Kumar B
dineshkumar@bdo.in