A group of people were travelling in a boat. One of them took a drill and began to drill a hole beneath him. His companions asked him, "Why are you doing this?" The man replied, "What concern is it of yours? Am I not drilling under my own place?" Then they cautioned him: "But you will flood the boat and drown us all!"
This story directly correlates to the state of affairs we are seeing today. Buoyed by the unprecedented growth in the economy half a decade ago, we took it for granted that the growth is here to stay, and allowed a sense of complacency and later, a policy paralysis, to drill holes in our own boat. Today, many an experts would agree to the fact that the slowdown is of our own making.
However, looking at the bright side, the government seems to have realised this, and to a great extent, has started a damage control mission. Even the Vote-on-Budget is viewed more of a damage control exercise than a slew of populist measures, and could well bring some positive vibes back to the industry.
The emphasis on the importance of the manufacturing sector with a two per cent excise duty reduction from 12 per cent to 10 per cent has been well appreciated by the industry. According to the Indian Construction Equipment Manufacturers' Association, this will certainly help the CE industry build infrastructure that has gone down by over 30 per cent in the last two years.
The withdrawal of exemption from Countervailing Duty (CVD) on six road construction equipment is also expected to bring some relief to the CE industry. However, whether the exemption from CVD will provide a level playing field for domestic and global companies that have set up manufacturing facilities here vis-a-vis the import is yet to be seen; a similar move earlier for infrastructure projects had a negative impact on the OEMs who had already set up manufacturing facilities in the country. In such a scenario, the Finance Minister´s suggestion to encourage domestic production of specified road construction machinery, and if need be, withdrawal of the exemption from CVD on similar imported machinery, is a welcome move.
Right now, the boat is moving on its own momentum. For the industry boat to row to the growth shore, other than the damage control exercises, the government also needs to accelerate project execution. Even as the CE industry is hoping that growth will return after the general elections, it is nonetheless, looking for a faster mechanism to resolve issues like financial closures, land acquisitions, environment and forest clearances, etc.