“We are working on making India a manufacturing hub. But of course, it has to be Aatmanirbhar as well,” she said in an exclusive interview with ET back in April.
In the last Budget presented by the Finance Minister, which was a vote on account owing to the Lok Sabha elections scheduled for April and May, R&D received a big boost with a corpus of Rs 1 lakh crore. “A corpus of Rs 1 lakh crore will be established with a 50 year interest free loan provided. The corpus will provide long term financing or refinancing with long tenors and low or nil interest rates,” informed a senior official to ET.
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However, the major obstacle for the government to tacke in the Budget would be to hike the share of R&D in the country, which remains lowest in the world, a NITI Aayog report stated. India’s share of R&D in overall GDP is much lower compared to developed countries, and this has been a long-standing demand of industry bodies including Nasscom.In the past three decades, the Centre has made significant efforts to increase the manufacturing sector’s contribution to GDP from the present 17 per cent to 25 per cent. The semiconductor dream’s R&D goals
The government is planning an R&D wing under the proposed India Semiconductor Research Centre (ISRC) that will focus on semiconductor research which can “quickly go into industrial production”, reported ET citing sources.Read More: Read More: Income tax cut in Union Budget 2024: India’s middle-class is asking for it but may not get it
The dedicated R&D wing will be separate from other research work under the ISRC where the project gestation period is longer. According to the proposal, ISRC will focus on R&D work in developing the next generation of semiconductors, packaging and systems technologies, processes, and materials.
A senior official revealed to ET that the finer details of the scheme are likely to be announced in the full budget that is set to be presented soon. Depending on the feasibility of the scheme, the dedicated R&D centre can also be spun off into an independent entity, another official said to ET.
Budget 2024: Other plans for manufacturing industry
Apart from the manufacturing industry, many sectors under the Production Linked Incentive (PLI) scheme are urging the government for R&D incentives. In the pre-budget consultations with the Finance Minister, the drugmakers have requested to raise allocation for R&D to encourage innovation in the industry. “I think the government is evaluating on how their existing scheme is working…but industry is expecting a policy from the government to boost research and development in companies,” said HIV drugs maker Hetero Drugs’ Chairman Partha Saradhi Reddy to news agency Reuters.
Meanwhile, India’s upcoming budget may address the inverted duty structure on various goods to boost local manufacturing. The inverted duty structure means that some finished products have lower import duties than their raw materials, which discourages domestic production. The government is looking to rationalize duties on inputs for electronics, copper tubes, ferro alloys, textile fibers, and certain chemicals to correct this imbalance. This move is aimed at making local manufacturing more competitive and reducing dependency on cheaper imports.
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The commerce and industry ministry has conducted a cross-sectoral study to identify and rationalize these inverted duty structures. A list of products affected by this issue has been shared with the finance ministry. The list includes sectors like furniture, jewelry, petrochemicals, and medical equipment, which suffer from higher duties on inputs compared to finished goods. The rationalization of these duties is expected to be a significant step in the July 23 budget announcement.
Inverted duty structures create a disadvantage for Indian industries, particularly those involved in ferro alloys, aluminum, copper pipes and tubes, textile staple fibers, and some chemical preparations. This issue is further complicated by India’s free trade agreement with the ASEAN bloc, which impacts the customs duty structure due to exemptions and trade agreements. To address this, the government is focusing on sectors like woven cotton fabrics, polyester and cotton yarn, pumps and compressors, carbon electrodes, sulfur, certain acids, and taps and valves.
