Union Budget 2017 provides a renewed impetus to manufacturing and ‘Make in India’. For instance, Infrastructure – which is considered as a key pillar under the ‘Make in India’ program has been strengthened with a large budgetary allocation. The total allocation for infrastructure development in 2017-18 is Rs 3961.35 billion. A specific program for the development of multi-modal logistics parks, together with multi-modal transport facilities, is considered as a big boost to ‘Make in India’ initiative.
The extra impetus by the Government on initiatives like Skill Development has been proposed to provide essential support for the ‘Make in India’ sectors to thrive. The launch of SANKALP scheme to provide market-relevant training to 0.035 billion youth and STRIVE scheme to improve the quality and market relevance of vocational training is a major push to empower Indian youth with employment opportunities. This initiative should deliver a structured training for India’s youth reducing reliance on imported goods and at the same time equip them to be part of the ‘Make in India’ initiative.
Additionally,‘Make in India’ program was given a significant boost by increasing the allocation for electronics manufacturing under incentive schemes like Modified Special Incentive Package Scheme (M-SIPS) and Electronic Development Fund (EDF) to Rs 7.45 billion. Union Finance Minister Arun Jaitley while presenting the Union Budget 2017-18 in the Lok Sabha highlighted that the number of global leaders and mobile manufacturers setting up production facilities in India in the last two years have increased, which has compelled him to exponentially increase the allocation and incentives of schemes like M-SIPS and EDF in 2017-18. This move he says is an all-time high, which evidentially proves that the Government is ensuring that ‘Make in India’ is serious business.
Further, the carry forward of losses and profit linked deduction for startups for 3 out of 7 years was a welcome announcement to the startup sector, inspiring entrepreneurs to innovate and manufacture in India.
In the telecom sector, the government has proposed to impose a 2 per cent special additional duty (SAD) on imports of populated printed circuit boards (PCB) used for mobile phones. Technically, PCBs make the majority of the components in a mobile phone.
Post budget presentation CyberMedia Research (CMR) published its view in response to the all-time high Rs 7.45 billion allocated for incentives under MSIPs and EDF. CMR has deduced an estimate of profit mobile manufacturers can make with new incentive on ‘made in India’ handsets. It seems to be a win-win for all.
As per CMR estimates, in 2017, of the 270 million (27 crore) mobile handsets to be shipped, 200 million (20 crore) will be made out of India. Also, from the allocated Rs 7.45 billion incentives for electronics manufacturing in India, around 70 per cent is likely to go to mobile handset manufacturers, basis – the proportion of electronics being produced out of India. This means, as per the all-time high allocation, Government will incentivize Rs 26 per handset to be made out of India. Against this, at an average selling price of Rs 5,138, government collects revenues of Rs 617 per handset by way of various duties and taxes. That is 24 times of the incentive allocated per handset.
Commenting on the incentives announced, Faisal Kawoosa, Principal Analyst for Telecom and ESDM at CMR said, “This is an all-time high allocation and a defined one for the first time that brings in more clarity about what one can expect as incentives. However, the kind of fillip everybody wants for the mobile handset industry looking at the potential in this category of electronics, the incentive could have been more encouraging”
By Baishakhi Dutta
