BackSanjeev Sanyal sees tax breaks, import curbs as distortions in the economy
Principal economic adviser in the finance ministry Sanjeev Sanyal says sectoral exemptions like tax breaks and import curbs introduce distortions in the economy
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New Delhi: Calling for abolishing sectoral exemptions, such as tax breaks and import restrictions, principal economic adviser in the finance ministry Sanjeev Sanyal said on Tuesday that such practices introduce distortions in the economy.
“There may be very good reasons to do this. But the moment you begin to introduce distortions, each year it will begin to distort the system over and over. There need to be a genuine discussion about unwinding all kinds of exemptions," Sanyal said in his first public interaction.
He was releasing the India Manufacturing Barometer report jointly produced by industry lobby group Federation of Chambers of Indian Commerce and Industry (Ficci) and audit and consultancy firm PricewaterhouseCoopers. Sanyal was appointed to his post in February.
“We don’t live in a world where others don’t respond to this. Others will also respond to this. Very quickly you will end up with a complicated system which has enormous costs," he added.
He was responding to a recommendations in the report where respondents from the manufacturing industry held that government should support adoption of Industry 4.0 through favourable tax incentives, skill development programmes and a data protection law.
Industry 4.0 is considered the future of manufacturing sector through automation and data exchange in manufacturing technologies. It includes cyber-physical systems, the Internet of Things and cloud computing. The report said the next wave of technological breakthroughs like mass-scale 3D printing of small components, super-critical spares and safety equipment are likely to arrive in the next 12-18 months.
Almost 48% of the respondents to a survey conducted by PwC said they had either adopted the Industry 4.0 concept at a basic level or had not made any efforts in the direction. The report said reasons for the lack of implementation included relatively low sophistication in the manufacturing process, lack of clarity on tangible benefits in previous technology initiatives, or prevalence of other organisational priorities.
However, 31% and 21% of respondents said they had either adopted the concept at an average or advanced level, respectively. “This includes those who have made significant progress in digitising their interaction with their horizontal value chains and those who have embarked on initiatives like smart factories with the help of partners," the report said.
The results for advanced level of adoption in India is slightly behind the global average of 33%, as reported by PwC’s Global Industry 4.0 survey.
However, the future looks bright, with 86% of the respondents expecting investments in Industry 4.0 to increase in the next 3-5 years. Globally, manufacturing companies are planning to commit 5% of their revenue per annum to Industry 4.0, the report said.
Lack of a digital culture and talent was considered to be the top implementation challenge in India by 63% of the respondents. This implies that organizations have to invest time in getting their teams ready for transformation rather than on selecting the right technology.
“This also means that in order to stay competitive in their industry, organisations need to start the journey early. Data security concerns are the second big implementation challenge, with 54% of the respondents citing it," the report said.
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