Market Overview India: Budget 2017 - Roadmap for the Year

India’s finance minister, Arun Jaitley presented what was one of the most awaited budgets on Feb 1st 2017. The Indian economy stands at the brink of major changes with the move towards GST – The Goods and Service Tax – a system of indirect taxation combining all current forms of taxation into one single system.

The demonetization policy has already had a major impact on the economy and is expected to continue doing so, with an increased focus on a cashless economy. The government remained positive with the budget, pouring money into infrastructure and tweaking taxes in small yet positive ways.

Effect on manufacturing

While Mr. Jaitley did not directly make any substantial proposals towards promoting the governments pet ‘Make in India’ concept, he did assure a more stronger focus on clearing the bottlenecks in the manufacturing project. “India has moved to no 6 in the world’s largest manufacturing countries from no 9, and we are viewed as an engine of global growth,” said Jaitley during his budget speech. The ‘make in India’ concept is an effort by the government, launched in 2015, to promote India as a globally competitive manufacturing hub, and to address more efficiently its own manufacturing needs.

“We are also creating an ecosystem to make India a global hub for electronics manufacturing. Over 250 investment proposals for electronics manufacturing have already been received since we launched Make in India,” further stated Jaitley.

The budget also proposed a reduction in custom duties on inputs and raw materials with a view to cutting costs in industries such as chemicals and fertilizers, minerals, renewable energy and most vital, the automobile industry.

Good news for foreign investors

One of the other major announcements made by Mr. Jaitley during the budget was the elimination of the FIPB board (Foreign Investment Promotion Board), which is good news for investors and foreign companies wishing to invest and bring their businesses to India. According to Jaitley, this move comes with a view of easing the inflow of Foreign Direct Investment into the country. “Over the past three years over 90 per cent of the FDI has come through the automatic route because of the substantial measures the government has taken regarding foreign investment. Thus, it makes sense to do away with the FIPB,” stated Jaitley.

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