Union Budget 2015: Taurus MF wants roadmap for manufacturing sector growth

Waqar Naqvi

The Union Budget in India, this year assumes an added significance than usual given the high expectations in the country and the till now prevalent positive sentiment as reflected in the behavior of the stock markets in this FY.

The way things stand, the crude oil prices have been low (India is one of the biggest beneficiaries given its high level of imports of crude), the US economy is recovering, the Chinese economy is slowing down, Europe and Japan are not close to recovery. The Indian Forex reserves have been rising, rate of inflation is dropping and the government is apparently committed to ensure growth. Coupled with the oft quoted Indian demographics (50% plus population below the age of 30 years, economy almost self dependent for food, high savings rate, expected increase in consumption etc) means - advantage India.

This government after assuming power has also tried to speed up matters outside the Budgetary document (Ordinances to ease the acquisition of land, increasing FDI in select sectors etc).

On the other hand, Indian manufacturing sector has remained stagnant as a contributor to the GDP at approximately 15% for more than a decade while the services sector has been the dominant variable in the GDP. This cannot sustain. If India has to seek its deserved place under the sun, the manufacturing sector needs to be robust. The pillars to achieve this include availability of capital, land, labour (availability and laws), ease of doing business (approvals etc) and a good infrastructure. All this cannot be brought about overnight. The government would do well to lay down a road map for the next few years to ensure significant boost to manufacturing in line with the “Make in India” slogan. Services sector can grow only as a derivative of the manufacturing sector.

Similarly there is scope of boosting agricultural exports. India, despite being amongst the top 2 or top 3 largest producers of various vegetables and fruits figures at an abysmal level in exporting them. These exports can earn valuable foreign exchange for the country and further help in reducing the Current Account deficit. Steps need to be initiated now at the highest level so that the quality of our produce and the hygiene standards meet the best in the world to ensure higher off take from India by the major global consumers.

Along with this more money needs to be placed in the hands of the individual investor by reduction in the Income Tax rate and/or increasing the exemption limit. A marginal reduction in the rate of Corporate tax may be the icing on the cake as well.