Taxation: the biggest impediment

June 26, 2014 6:22 am

 Any economy whose growth is dependent on manufacturing sector, must witness a contribution from this sector in excess of 20 per cent to make worthwhile impact on the GDP growth
 Schmalz India Pvt. Ltd. is part of the international Schmalz-Group. It assures that its vacuum components and ready to connect gripping systems ensure efficient processes in automation, ergonomic vacuum lifters. About India’s chances to become global workshop, Philip Mani emphasises on realistic view to achieve the goal.
A good inspirational goalA thriving and competitive manufacturing industry needs an excellent infrastructure that would enable it to be competitive on cost, quality and supply chain. These are the three important parameters that determine the success of the industry.
To become a global manufacturing hub is a good inspirational goal for India. However, attaining this goal needs a realistic view, considering the problems the manufacturing sector is facing today, amidst growing concerns of global economic slowdown, poor infrastructure, volatile currency fluctuations and inflexible labour laws.
Decisive factorsThere are some decisive factors that can play important roles in India’s journey to reach its goal. These include better infrastructure, reduced currency fluctuations, better labour laws, adequate resources of power and water.
Problems to deal withAny economy whose growth is dependent on manufacturing sector, must witness a contribution from this sector in excess of 20 per cent to make worthwhile impact on the GDP growth. Current taxation is such that it is often easier and cheaper to import equipment than manufacturing it locally. This is the biggest impediment for the growth of manufacturing industry.Significant improvements are required in power, ports and people issues coupled with a tariff structure. However, most states do not provide grid power and the cost of captive power to grid is 1:3, while water is a huge challenge in almost every state.
The time taken for clearances in ports is anywhere between three days to one month. These inefficiencies add to the cost and impede the ability to supply quality products on time.
Government’s lookoutThe government has to view the manufacturing sector from the macro as well as micro levels to understand the levers that would accelerate the growth of this sector and encourage capital investments both by domestic and foreign companies.
Government can improve the picture by presenting some good policies. These may include providing incentives to boost exports, focusing on infrastructure development, transparency in operations, lowering corporate taxes, simplifying tax laws, creating jobs by providing incentives to manufacturing companies etc.
Schmalz eyes on ‘automated’ future Schmalz’s main products are used for automation, which clearly is the future. Automation will find its extensive use in coming period for higher production with ergonomics and efficiency. Growth of the manufacturing sector leads the company’s growth also as more and more companies and fields will need to get automated. Aiming at tripling its business volume and value by 2020, Schmalz has already started moving towards manufacturing and reducing its imports.
Philip Mani, Managing Director, Schmalz India Pvt. Ltd.