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From an ‘employment-linked’ incentive scheme to collateral free loans to micro, small and medium Enterprises, the Union Budget 2024 had a special focus on boosting India’s manufacturing prospects, which the government has identified as a crucial driver for economic growth in the coming years. In her Budget speech, Finance Minister Nirmala Sitharaman said manufacturing and services were one of the nine pillars the Finance Minister identified for generating ample employment opportunities.
As part of a job creation scheme in the manufacturing sector, Sitharam announced new ‘employment linked incentives’ for companies hiring first-time employees. Under the scheme, an incentive will be provided at a “specified scale” to both the employee and the employer directly with respect to their EPFO contribution in the first four years of employment. “The scheme is expected to benefit 30 lakh youth entering employment, and their employers,” Sitharaman said. Outlay – Rs 52,000 crore over six years
To fill the talent void and also generate initial employment for young people, the government will launch a scheme for providing internship opportunities in 500 top companies to 1 crore youth in 5 years, Sitharam said. An internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided. Companies will be expected to bear the training cost and 10 per cent of the internship cost from their corporate social responsibility (CSR) funds.
“They will gain exposure for 12 months to real-life business environments, varied professions and employment opportunities,” Sitharaman said.
This programme will be administered in two phases. The first phase will be for a duration of three years and have an outlay of Rs 19,000 crore and is expected to benefit 30 lakh individuals. The second phase will be for a duration of four years (starting after the third year of the first phase) and has an outlay of Rs 44,000 crore, where it could benefit 70 lakh individuals.
The government will also facilitate rental housing with dormitory type accommodation for industrial workers in a public-private partnership model with viability gap funding (VGF) support and commitment from anchor industries, Sitharaman said. Housing for workers at factories is a key challenge, especially for women workers who may not be able to travel long distances to come to work everyday.
In December 2022, The Indian Express had reported that the Centre was talking to multiple state governments to draw up a plan to set up dormitories and other affordable housing projects for workers working at Apple’s manufacturing facilities in a bid to draw more such plants away from China.
For facilitating term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee, a credit guarantee scheme will be introduced, Sitharaman said. “The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance,” she added.
The Budget has also earmarked Rs 6,125 crore towards the production linked incentive (PLI) scheme for smartphone manufacturing in 2024-25 and Rs 6,200 crore towards the laptop and PC PLI scheme.
With a three-fold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, Sitharaman said that the Indian mobile phone industry has “matured”. She partly addressed a long standing demand of the industry to rationalise customs duty on smartphone components and promised to carry out a “comprehensive review” of rate structures over the next six months.
She announced a reduction in the basic customs duty on mobile phone, mobile phone PCBA (printed circuit board assembly), and mobile phone chargers to 15 per cent. These components attracted a BCD of 20 per cent earlier.
“The mobile and electronics industry is elated with the announcements and will go a long way to enhance manufacturing, exports and our competitiveness,” said Pankaj Mohindroo, chairman of the India Cellular & Electronics Association (ICEA).
Before the interim Budget in February this year, the Finance Ministry had slashed the import duty on a number of components such as mechanics and die cut parts, and all others inputs of mobile phones classified as ‘others’ under HSN code 85177990, from 15 per cent to 10 per cent.
