BUDGET OVERVIEW FOR THE

SECONDARY SECTOR
Analyzing the Economic Landscape and Expectations for 2024-25
 OVERVIEW OF THE
SECONDARY SECTOR
Importance of the Secondary Sector:
• The secondary sector, encompassing manufacturing, processing, and construction,
is a critical pillar of India’s economy.
• It is responsible for around 14% of employment opportunities, contributes
substantially to the GDP, and drives export activities.

Economic Role:
• The sector’s development is vital for industrialization, urbanization, and overall
economic growth.
• It serves as a link between the primary sector (raw material extraction) and the
tertiary sector (services).

India's manufacturing sector is poised to reach US$ 1 trillion by 2025-26, led by

Gujarat, Maharashtra, and Tamil Nadu, fueled by investments in automobile,
electronics, and textile industries. Government initiatives like Make in India and PLI
schemes drive growth, attracting FDI and enhancing industrial infrastructure.​
 FDI INFLOW
According to the Department for Promotion of Industry and Internal Trade (DPIIT), India received a total
foreign direct investment (FDI) inflow of US$ 48.03 billion in FY23.
Between April 2000-December 2023:
The automobile sector received FDI inflows of US$ 35.65 billion.
The chemical manufacturing sector (excluding fertilisers) received FDI inflows worth US$ 22.07 billion.
The drug and pharmaceutical manufacturing sector received FDI inflows worth US$ 22.37 billion.
The Food Processing Industries received FDI inflows worth US$ 12.46 billion.
India's manufacturing sector, driven by pharmaceuticals, motor vehicles, and cement, demonstrated
resilience despite weak global demand in July-August 2023. PMI remained robust, reflecting domestic
economic strength. Capacity utilization in manufacturing trended upwards, signalling positive investment
prospects. RBI MPC maintained policy repo rate to control inflation.
In April 2021, Samsung started manufacturing mobile display panels at its Noida plant and plans to ramp up
manufacturing IT display panels soon.
Samsung Display Noida, which has invested Rs. 4,825 crore (US$ 650.42 million) to move its mobile and IT
display manufacturing plant from China to Uttar Pradesh, has received special incentives from the state
government.
Budget 2023-24
Highlights
Infrastructure Development:
• Major allocations towards infrastructure projects, including Smart Cities
Mission and Bharatmala Pariyojana.
• Enhanced funding for road, rail, and port infrastructure to improve logistics
and connectivity.

Manufacturing Incentives:
• Significant boost through the Production-Linked Incentive (PLI) scheme.
• Focus on key sectors such as Automobiles, pharmaceuticals, and textiles.

Digitalization and Sustainability:

• Support for Digital India initiatives to enhance digital infrastructure and
services.
• Investments in renewable energy projects and green technologies.
 INTERIM BUDGET
2024-25
Key Announcements:
• Continuation and expansion of PLI schemes to include more sectors.
• Increased funding for major infrastructure projects, both urban and rural.
• Enhanced focus on sustainable development goals through PLI Scheme in
automobile and white goods industry.

Allocations:
• Significant budget for digital projects to support the Digital India initiative.
• Investment in smart city projects and urban development.
.• Budget boost for PLI projects to achieve sustainable development goals.
•
 Sustainable Development Goals
2024-25
FAME- Faster adoption and manufacturing of EVs:
2023-24: 5171 Crore
2024-25: 2671 Crore
Huge Cut in Budget Allocation for upcoming year. However, In 2021-22, FAME
received only 750 crores for its projects. There has been a greater allocation of
funds towards a sustainable future from 2023 onwards.

PLI for Automobile: 2023-24: 604 Crore

2024-25: 3500 Crore
This increase comes with higher budget allocation for PLI schemes.
Advanced chemistry cell for EVs: 2023-24: 1 Crore
2024-25: 250 Crore
Total development of Automobile Industry: 5776 Crore to 6421 Crore.
Smart cities mission- sustainable development:
8000 Crore in 2023-24 to 2400 Crore in 2024- 25.
90% of Smart cities projects have been completed hence the reduction in
budget allocation.
 INDUSTRY AFTER COVID-19

1 2 3 4
RELIEF FOR MSMEs BUDGET ALLOCATION NEW SCHEMES MAKE IN INDIA

3 lakh crores Collateral-free
Automatic Loans
Global tenders to be
disallowed upto ` 200 crores
Income Tax Refund
Raising the investment limit
MSMEs attract more funds than
Heavy industries when both are
important. Since 2021, MSMEs
have been allocated 15000-21500
crores compared to 1000-6000
crores for Heavy Industries.
Many New schemes have Since its introduction in 2014,
been introduced in MSMEs Make in India has contributed a
like Marketing support steady amount to the growth of
scheme, ASPIRE etc whose industrial sector. Post Covid, the
funding can be directed in government promoted Foreign
other paths. companies to partner with
domestic companies for boosted
manufacturing and investment.
GOVERNMENT INITIATIVES

Make in India:
• Aims to transform India into a global manufacturing hub by encouraging
domestic and foreign investments.
• Focus on increasing manufacturing capabilities and export potential.
• Production-Linked Incentive (PLI) Scheme:
• Provides financial incentives to boost manufacturing in key sectors.
• Targets sectors like electronics, pharmaceuticals, textiles, and more.

Infrastructure Development:
• National Infrastructure Pipeline (NIP) for developing large-scale
infrastructure projects.
• Bharatmala project for enhancing road connectivity and logistics
efficiency.
• Smart Cities Mission for urban renewal and retrofitting.
CURRENT SCENARIO
Economic Survey 2022-23:
• Despite global uncertainties, the secondary sector showed resilience.
• Manufacturing sector grew by 5.7%, and construction sector grew by 8.3%.

Industry Performance:
• Key industries like automobiles, textiles, and electronics showed significant
recovery post-pandemic.
• Increased domestic production and export activities.

GDP Contribution:
• The secondary sector contributed approximately 29.3% to India’s GDP in
2022-23.
• Manufacturing is the largest component, followed by construction and
utilities.
Key Issues and Challenges
FICCI indicated sustained growth in manufacturing sector yet constraints like
raw material availability, global demand uncertainty, labor shortages, market
volatility, increased power costs, unutilized capacities, and high bank interest
rates were highlighted.

Infrastructure Bottlenecks:
• Despite improvements, infrastructure remains a bottleneck, especially in
rural areas.
• Inadequate infrastructure leads to increased production costs, delays, and
inefficiencies.

Supply Chain Disruptions:

• High dependence on imports for critical raw materials and components.
• Vulnerability to global market fluctuations and geopolitical tensions.

Unskilled Labour: Introduction of new schemes of guaranteed employment is

worthless without proper training on certain skills which is required in each
field.
Impact of Technology on
Manufacturing and Construction

Manufacturing:
• Adoption of automation, robotics, and AI in manufacturing processes to enhance
efficiency.
• Use of IoT for better supply chain management and production efficiency.
• Development of smart factories and increased use of 3D printing.

Construction:
• Use of Building Information Modeling (BIM) for better project management.
• Adoption of green building technologies and sustainable construction practices.
• Increased use of prefabricated and modular construction techniques.
Impact of Technology on
Manufacturing and Construction

Digitalization:
• Expansion of digital infrastructure, including high-speed internet and mobile
connectivity.
• Increased adoption of digital payment systems and e-commerce.
• Growth of IT services and software development, including AI and blockchain
technologies.
• Use of AI in manufacturing sector can replace a lot of human labour which is harmful for
the economy as it can lead to high levels of unemployment in the future.
 Budget Predictions and
Industry Expectations

Increased Funding for PLI More Incentives for Enhanced Budget for
Schemes: Digitalization and AMRUT:
Technology Adoption:
• Expanded to cover • Focus on both urban and
manufacturing of white • Support for Industry rural areas to improve
goods to reduce harmful 4.0 technologies such connectivity and logistics.
effects. as AI, IoT, and • Increased allocation for
• Continued support for automation. AMRUT project of 8000
key industries like • Investment in digital crores and urban
electronics and infrastructure to development.
pharmaceuticals. support the Digital
India initiative.
 EXPERT OPINIONS
We are optimistic about the special initiatives for the MSME sector, which contributes nearly 30% to India’s GDP. The
allocation of Rs 22,138 crores in the interim budget and the anticipated schemes to enhance supply chains and
manufacturing capabilities will significantly bolster this sector. -Agam Chaudhary, Founder & CEO Two99.

Expanding the PLI scheme is vital for driving domestic manufacturing. Addressing the Angel Tax by raising investment thresholds
is crucial for supporting startups. -Mr. Punit Sindhwani ( Founder & CEO , PAXCOM).

Sandeep Vempati, an economist with BJP, said the Union Budget 2024-25 must ensure policy continuity while introducing reforms
including ease of doing business and climate change that would align with realizing the Vision of Viksit Bharat by 2047.

Economists offered suggestions, including focusing on developing global value chains and increasing the allocation for research
and reforming the tax structure. The target should not be just the forthcoming Budget but also achieving the Prime Minister’s goal
of a “Developed India” by 2047.
 Addressing Economic Hurdles
Inflation: RBI Governor Shaktikanta Das emphasised the need to achieve a 4 per cent inflation
target, indicating that this process should be gradual and sustainable. The RBI left the inflation aim
for fiscal 2025 unchanged at 4.5 per cent. Inflation for fiscal 2024 stood at 5.4 per cent, at par
with the central bank’s forecast. Companies can expect same level of production costs as the
previous year and no real change in profits.

Taxes: Centre offered concessional corporate tax of 15% to companies setting up new
manufacturing units from October 2019- March 2024. This benefit was not extended in the interim
budget as priority would be to boost domestic manufacturing and job creation through PLI
scheme.The 22% tax rate for corporate taxes will apply for existing domestic companies and 15%
for certain new manufacturing companies. Reduction in GST rates on vehicles would make them
more affordable, boosting sales and demand. Increased incentives for Strong Hybrid Electric
Vehicles (SHEV) and EVs are essential to accelerate the transition to green transportation and
reduce pollution while achieving the sustainable development goals.