Investment allowance will boost capex in mfg sector: CMIE
Mumbai: The government move to provide investment allowance of 15 percent to manufacturing companies will give the much-needed push to the industry as well as the economy, says Centre for Monitoring Indian Economy (CMIE).
Finance Minister P Chidambaram in the Union Budget, 2013-14, has proposed to provide allowance of 15 percent to manufacturing companies that invest more than Rs 100 crore in plant and machinery between April 1, 2013 to March 31, 2015.
"This is expected to spur investments in the manufacturing sector, which slowed down substantially in the last two years. It will also give the much needed push to the industry and the economy," a recent report by CMIE said.
The growth in output of manufacturing sector slumped from 9 percent in FY11 to 3 percent in FY12 and has now gone down further to a mere 0.7 percent in the first nine months of this fiscal, it noted.
"The investment demand in India has been depressed for the last two years. This is reflected in the slowing growth of GFCF (gross fixed capital formation), fall in production of capital goods, a dramatic fall in announcement of new projects and a consequent slowdown in bank credit," CMIE said.
The economic think tank said 250 manufacturing projects worth Rs 3.1 lakh crore, with investment of over Rs 100 crore each, are scheduled to get completed in FY14. Another 158 projects worth Rs 1.8 lakh crore are expected to be completed by FY15.