ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Budget 2021–22 and the Manufacturing Sector

The growth rate of manufacturing value added has been declining continuously since 2016–17 and it had become negative in 2019–20, even before the intensification of the Covid-19 crisis, suggesting that the budget needs to address the structural weaknesses of the economy. The 2021–22 budget has largely adopted the supply side corrective measures in the form of increased capital expenditure on infrastructure. The potential of infrastructure investment in reviving the sector and the implications of the proposed resource mobilisation for financing the increased capital expenditure are discussed. In the context of increased global fragmentation of production, the feasibility of promoting domestic production through tariff protection is also discussed.

Recently, the manufacturing sector has been getting increasing atten- tion of both analysts and policymakers. Programmes like Make in India, Production Linked Incentive Scheme (PLI), a part of Atmanirbhar Bharat, were introduced to accelerate its growth and export. Given the Chinese experience, it is believed that India too has the potential to become the factory for the world. The developments, like increasing wage rate in China and the recent Covid-19 pandemic that affected the image of China in the world as a reliable trade partner, faded the attractiveness of China as a destination of manufacturing investment. These factors encouraged the commentators to argue that it is the propitious time to embark on a strategy to accelerate the growth of the Indian manufacturing sector, as India can be an attractive location preferred by the investors.

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Updated On : 28th Feb, 2021

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