Underlining the need for more investments in the manufacturing sector, a study has said that India can surpass China as a global production hub for consumer durables with rationalisation of tax structure and policy support from the government.
According to a study by the Federation of Indian Chambers of Commerce and Industry (FICCI) and PricewaterhouseCoopers (PwC) — conducted on behalf of the National Manufacturing Competitiveness Council (NMCC) — “despite its present lead in manufacturing consumer durables, China may become less attractive for international investments after recent changes in tax regulation, currency appreciation and demand saturation in urban markets. China’s loss may be India’s gain. India has a huge untapped domestic market as well as favourable demographics to lead its way.”
Suggesting tax rebates for high-end technology companies that set up research and development centres in India, the study has asked the government to reduce overall tax levels and simplify tax structure; and to avoid cascading effect of taxes, the government should speed up the introduction of the Goods and Services Tax (GST).
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“Consumer durable manufacturing in India is constrained by absence of a well-developed supplier base. Lack of large volumes and an ecosystem of finished goods players and hence lack of scale economies have been disincentives for significant capital investments in the component manufacturing space in India. This needs to change. Further, we have to incentivise domestic value addition and focus on developing vendor base and raw material supply” said NMCC Chairman V. Krishnamurthy.
According to FICCI Secretary General Amit Mitra, “of late, India has entered into the world map for manufacturing of consumer durable items. However, we still continue to import a large amount of these items from the world and especially from China. Time has come that India has its own manufacturing facilities for various consumer durable items.”