In Budget 2021, Union Government has conveyed its firm resolve towards well-merited infrastructural development by enhancing capex by a remarkable 34.5% to INR 5.54 lakh crore. Besides, it envisages as much as INR 2 lakh crore of support to states and local bodies for bolstering their capex plans. This reprioritization of public spending towards infrastructure investment is slated to catalyze the much-needed demand expansion for the capital goods industry that has seen a rather long winter of slowdown. Roads, new Economic Corridors, Railways, Metro, Urban and Rural infrastructure have all got keen focus in the Budget. These infrastructural investments will lead to a significant increase in additional demand for skilled workforce, said Sunil Chaturvedi, Chairman Capital Goods Skill Council in a personal interview with SkillReporter team.
Referring to the FICCI Capital Goods Committee report on Opportunities for Capital Goods Industry with Indian Railways and Metros, released last year, he highlighted the vast opportunities for the capital goods sector under the ambitious construction projects, such as high-speed rail and dedicated freight corridors. These provide new business opportunities for the Indian industry. The report identified specific manufacturing opportunities worth INR 28,000 crore for the industry across various areas such as rolling-stock manufacturing, sub-assembly or component manufacturing, machinery and tool manufacturing, and project execution.
He said, “With the introduction of high-speed rail networks and metros, the urgent need of reskilling and upskilling of existing workforce will only multiply. A new stressed assets resolution mechanism, disinvestment and strategic sale of select state-owned enterprises and sustained focus on Atmanirbhar Bharat are all medium to long-term steps that would directly and indirectly trigger investment cycle and help create larger capital goods demand in the economy and thereby create significant additional demand for skills. This conjures up prospects for better skilled manpower sourced either as fresh entrants or re-training of previously engaged ones.
Driven by infrastructural demands, India is witnessing growth in cement, steel, mining, power and many other sectors paving the need for larger jobs creation.
Rationalisation of tariffs in key raw materials namely, metals for the Capital goods sector. Tariff of 7.5% on semis, flat, and long products of non-alloy, alloy, and stainless steels, exemption of duty on steel scrap for a period up to 31 March 2022, removal of anti-dumping duty and countervailing duty on raw materials used in manufacture of CRGO steel, reduction of duty on copper scrap from 5% to 2.5%, will help in providing level playing field for the industry. These duty readjustments will also rejuvenate many of the MSMEs which will be able to realign themselves with emerging supply chain landscape. The budget has also proposed to review more than 400 old custom-duty exemptions this year through extensive consultations, and from 01 October 2021, a new revised customs duty structure, free of distortions is expected to be in place. The Capital Goods Sector can also hope to benefit from the review of numerous exemptions, he told SkillReporter.
More importantly, many of these exemptions became perpetual in nature, which encourage imports of capital goods at concessional duty which ended up frustrating the efforts of the local industry. Budget suggested that any new customs duty exemption, henceforth, will have validity up to 31 March following two years from the date of its issue. This will also hopefully provide more level-playing field to the domestic capital goods sector. A reduction in import Besides reviewing these exemptions, FICCI has been suggesting to also review certain FTAs that have resulted into duty distortions for the capital goods sector. In some cases, FTAs have resulted in duty inversion for capital goods sector where raw materials/components are imported at certain duty whereas the related capital good is at zero duty. However, the key lies in time-bound and effective implementation of major infrastructure projects across sectors, and we hope the resolve inherent in Budget 2021 will help accelerate ground momentum, he added.
A robust capital goods sector is at the heart of an industrialized economy which India aims to emerge as, soon. And for capital goods sector to embrace this breakout growth and embrace Industry 4.0 and beyond, its crucially important to address the most formidable challenge of adequately skilled and competent manpower to support this evolution. We are deeply committed from the side of CGSC to make this happen.
This publication is based on a discussion between Mr Sunil Chaturvedi, Chairman, Capital Goods Skill Council & Chair, FICCI Committee and SkillReporter Team.
