This will be the first full budget which the current government will be tabling and since we have the majority government in place , the expectations are high and the industry is looking for a revival which will kick start the economic activity.
India continues to be a consumption driven economy and to have rapid economic growth, it is important to remove the burden on India’s infrastructure which is one of the country’s weak spots affecting the economic growth. Infrastructure deficit is widely considered to be one of the factors that could severely impede India’s economic growth. The present policy makers have recognized this and have made concerted efforts to accelerate infrastructure development. In infrastructure sector, it's the Power and Real Estate sectors where maximum copper gets consumed in form of power equipment which includes transformers and wire & cables. These sectors are key elements in playing out the India growth story.
Currently there exists large demand supply gap in power generation - The Government of India has planned to add 88,000 MW of generation capacity during XII year plan by 2017. This will in turn create requirements for T&D with growth in Power Generation and demand to evacuate power generated. The investment in T&D sector is estimated to be around Rs 70,000 Cr to provide estimated annual growth of 20% in transmission capacity.
This is going to be a big driver for Transformer industry as we expect demand will not only come from fresh power addition but also from replacement of old distribution transformers. Nearly 40-50% of the distribution transformers are in need to be replaced if we wish to cut down on out T&D losses estimated to be around 3-8 %. It's estimated that for each 1 MW additional power generation capacity, 7 MVA transformer capacities are required. The transformer market is our largest market for copper in India and has an estimated manufacturing capacity of over ~300 to 350GVA which is 140% more than the ~250GVA transformation capacity anticipated to be added by end of XIIth Plan.
Real Estate – is another sector which needs urgent attention from the Government. It's anticipated that the rate of urbanisation currently around 2.8% is going to put a lot of pressure on the urban centres which need to keep pace with the influx of migrant population. It's expected that by 2020 we will have more than 500 million people staying in large or small urban centres. Government needs to encourage affordable housing in a planned manner to prevent mushrooming of slums in the big metros where the infrastructure is getting stretched. Lower interest rates and government spending either in PPP model or itself is very much the need of the hour. REITS has not taken off as planned and anticipated by the Government. Creation of twin cities can be another way to address the growing demand.
We feel that bringing in GST is going to have major bearing on future growth but the government needs to do a thorough study to ensure that the tax percentage does not go up from the existing levels. This will further help to make the system more transparent and plug the leakages in revenue collection and with free movement of goods across the country it will be really beneficial to drive Make in India theme.
Another point that I would like to highlight is that if we want India to grow and be considered an economic power , we need to push the contribution of manufacturing from current 12.5% of GDP to over 25%. The Make in India theme should also put in place a strong system for monitoring compliance to the highest quality standard which will help to wean away the loss to the exchequer in terms of Cost of Poor Quality which is true for any sector. The infrastructure which we intend to put in place should be robust and have the provision for future expansion. There can be a lot of learning from the way the Delhi Metro project has been executed.
About ICA India:
The International Copper Association India is a member of Copper Alliance and the Indian arm of the International Copper Association, the leading not-for-profit organization for the promotion of copper worldwide. ICA India is driven by the same objective as that of its parent organization, which is to ‘defend and grow markets for copper based on its superior technical performance and its contribution to a higher quality of life worldwide’. ICA India contributes mainly through its catalytic role, accelerating changes and transforming the long-term markets for Copper in a sustainable way through its major initiatives such as electrical safety and energy efficiency. ICA India’s activities focus on helping end users to better understand and appreciate the positive attributes of copper.