As Union Finance Minister Nirmala Sitharaman prepares to unveil Budget 2025 on February 1, 2025, the manufacturing sector anticipates the Centre's steps to encourage sustainable manufacturing and automation. Industry analysts underline the importance of prioritizing smaller businesses over larger ones, extending incentives, streamlining rules, and expanding funding sources.

Josh Foulger, President (Electronics), Zetwerk Manufacturing Businesses, feels that the Indian ESDM sector is ready for explosive expansion, which might match the success of the Indian IT sector. "While efforts like PLI are important, a two-pronged approach - increasing value addition and actively pursuing export markets - is required to realize its full potential. We admire MEITY's efforts to create an enabling environment for this change and feel that a strong emphasis on innovation and cooperation will be critical to achieving this lofty goal," he stated.

Rajeev Singh, Partner and Consumer Industry Leader at Deloitte, believes that a streamlined nomenclature will improve compliance, reduce litigation, and increase efficiency in the sector. He stated that EV manufacturers confront hurdles as a result of an inverted duty structure, in which inputs are subject to higher GST rates than finished products.

"Streamlined refund procedures and the ability to claim Input Tax Credit (ITC) on capital goods could improve cash flow and lower production costs, particularly for capital-intensive EV startups." While the PLI scheme has effectively attracted investment, strict domestic value-addition standards and delayed reimbursements remain impediments. Relaxing these conditions and assuring timely payouts may promote greater participation, allowing enterprises to increase production and invest in new technology. The current plan, which provides lower customs duty on imported EVs priced above $35,000, is viewed as restrictive. Expanding its scope to cover lower-cost vehicles may attract more global manufacturers, increasing competition and giving consumers with affordable EV options. With aggressive reforms in Budget 2025, the automobile industry can expedite its transition to sustainability and position India as a worldwide leader in automotive innovation," he stated.

"The Union Budget 2025 provides an important chance to address significant issues in India's EV transition. To meet the ambitious goal of 30% EV penetration by 2030, it is critical to address both production and consumer-centric issues.

GST Structure Simplification

Simplifying the GST structure by imposing a flat 5% tax on EVs, components, and charging infrastructure is critical to lowering costs and stimulating growth. Furthermore, correcting the inverted GST structure on raw materials will reduce working capital pressures and promote sustainable production. Performancebased incentives for battery research and indigenous component manufacture can bolster India's Makein-India initiative, establishing the country as a global leader in EV technology. On the consumer front, initiatives like reduced interest rates on EV loans and targeted subsidies can make electric vehicles more accessible, closing the affordability gap, says Dinkar Agrawal, Founder, CTO, and COO of Oben Electric.

Ayush Aggarwal, Chief Investment Officer at SMC Private Wealth and Director at SMC Group, hopes that the upcoming budget will provide an opportunity to further strengthen and prioritize innovation, incentivize exports, and support local industries in order to build a self-sufficient and globally competitive India. 

Revamped GST Rates encouraged the government to impose a 5% GST rate for all battery technology, similar to the current framework for electric vehicles. He cited current tax inequities, such as the 18% GST rate for lithium-ion batteries vs the 28 percent tax rate for lead acid, sodium, and flow batteries.

Dash urged that the government explore gradually increasing customs duties to improve the competitiveness of domestic producers. The industry association has also called for complete support for battery component producers, which include those who make cathodes, anodes, electrolytes, separators, and copper foils. IESA has suggested a Rs 9,000 crore support scheme, similar to the PLI program, to strengthen the domestic component manufacturing ecosystem. According to Dash, this funding will allow Indian manufacturers to supply local giga factories while also exploring international potential.

Prerna Singla, MD, of Mefoh HealthCare anticipates forward-thinking policies that foster sustainability, innovation, and worldwide competitiveness. "India can become a worldwide leader in manufacturing by investing in infrastructure and skill-building efforts tailored to the industry. To ensure inclusivity, MSMEs should be given equal opportunities to bid on projects through a national website, which would benefit smaller firms. Furthermore, we anticipate that the government would conduct trade shows to highlight MSME products and services, as well as global forums for MSMEs. Prioritizing smaller firms over larger participants in programs may foster innovation, raise awareness, and position India as a global manufacturing leader," she said.

Sunil Singhvi, President of IEEMA, advocates for strong governmental support to promote growth, innovation, and sustainability. "One of the key requirements is to expand the PLI program, which intends to increase local manufacturing of critical electrical components required for large and important power projects, such as modern High Voltage Direct Current (HVDC) systems.

In addition, the sector seeks assistance in establishing in-house testing facilities by campaigning for tax breaks on imported testing equipment. This would make it easier for small and medium-sized firms (SMEs) throughout the country to utilize modern testing methods, resulting in faster and more efficient product testing." 

Rahul Garg, Moglix's Founder and CEO, feels that Budget 2025 would provide a defining chance to position India as a global manufacturing and economic powerhouse while furthering the Viksit Bharat goal.

"To increase export potential, MSMEs and the manufacturing sector must address structural problems, rationalize tariffs on essential raw materials, and invest in logistics and port infrastructure. Furthermore, skill development efforts concentrating on new technologies such as AI, robotics, and advanced manufacturing can help to create a workforce that is ready for the future and meets global demands.

Startups in sectors such as semiconductors, sustainable manufacturing, and automation have enormous potential to contribute to India's $1 trillion GDP by FY30. Dedicated finance pools, tax breaks for investors, and simplified implementation frameworks are critical to realizing this objective. Furthermore, streamlining electronic import processes while supporting domestic production is critical for high-tech innovation and competitiveness. We are certain that Budget 2025 will fuel long-term growth, foster innovation, and establish India as a resilient, internationally competitive economy," he said.