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Does India need an Infrastructure Budget?
The document discusses factors that could promote industrial growth through a national infrastructure budget. It argues that replacing VAT with a Goods and Services Tax (GST) would avoid cascading taxation effects. It also stresses the importance of a strong, stable currency to reduce costs for manufacturers, as well as well-developed transportation infrastructure like ports, railways, and roads. The document recommends investing in research and development to identify areas of core competence, and provides semiconductors as an example of a lucrative industry India could pursue with the right patents and a fabrication facility.
Does India need an Infrastructure Budget?
- 1. Is a national infrastructurebudget key in promoting industrial growth? Nirav Desai January 20, 2014
- 2. 1.Scrap Value Added Tax Ithink VAT produces a cascading taxation effect that is not favorable for manufacturing businesses Whilst VAT is a consumption tax, imported goods are not subject to VAT. This makes domestically produced goods at a cost disadvantage to imported goods. All countries that started with VAT have now moved on to GST
- 3. 2. Goods andServices Tax Does not have cascading taxation effect Imposed only once in the chain: at the final point of sale Covers both manufactured goods and services Taxes both domestically produced and imported goods Canada, Ireland and other countries that started with VAT have now moved onto GST.
- 4. 3. Strong andstable currency Strong and stable currency reduces inflation This reduces cost of raw material required by manufacturing industry esp. oil, gas, coal, iron ore, etc. Stable currency provides certainty to manufacturers about input costs
- 5. 4. Well laidout infrastructure Well developed ports, railways, road networks are necessary to ensure speedy transport of raw material and goods Strong networks of roads connecting ports, airports and railways is necessary to ensure timely delivery of goods and no congestions Last mile links are often the critical bottleneck All highways need to be expressways with at least 8 lanes of traffic
- 6. 5. Identifying areasof competence Invest in R&D to setup a portfolio of patents and identify areas of core competence Make larger investments after initial tests on products are successful Set up manufacturing clusters to provide support systems to businesses Areas such as semiconductors, carbon composite materials, electronics, energy are key areas where attractive returns are possible with right patents.
- 7. 6. Case Study:Semiconductor Fabrication Facilities India does not have a semiconductor fabrication facility Manufacturing of semiconductor memories and LED displays could be lucrative if we have right patents These are high volume businesses where products with moderate levels of complexity can sell successfully Stepping stones to making more complex designs such as microprocessors and custom integrated circuits.