Mar 17, 2008

Union budget : What the Experts Says

Mr. Sivasubramanian KN, Senior Portfolio Manager - Equity, Franklin Templeton

The Union Budget largely maintained policy direction with the focus on agriculture and education sectors. Despite the moderation witnessed in interest-rate sensitive sectors, economic growth projections remain strong and higher tax revenues are pushing up tax-to-GDP ratio and lowering deficit projections. However, the headline expenditure numbers do not reflect off-balance sheet items such as oil bonds & fertilizer subsidies and the waiver of loans to small/marginal farmers. Vews and reactions of Mr Sanjay Labroo, President Automotive Component Manufacturers Association and CEO Asahi India Glass. The reduction in the Cenvat rate from 16% to 14% and the reduction of Excise Duty on Small Cars, Two/Three Wheelers, Buses, Hybrid and Electric Vehicles will promote growth in the automotive industry, Mr. Labroo added. The reduction in the Customs Duty on Steel and Aluminum Scrap from 5% to 0% is a very welcome step as these are critical raw materials for the auto-component sector.


Mr. Rajesh Jain, CMD, EMCO

The major announcement in the Budget about Farm Loan waiver of Rs. 60,000 Crores is a clear indication of the Government's preparation for an early election. Some of the positive directions in the Budget for the Power sector are - Announcement of Transmission & Distribution Reform Fund and Setting up of Coal Regulator. Unfortunately, the time frame for both has not been specified. Overall, I would like to give the budget 7 out of 10 and for the power sector initiatives, 6 out of 10.


Mr. Jignesh Shah, MD & CEO, MCX

The Commodities markets are global asset class and trade flows to most efficient markets which has least cost of trading. With the addition of Commodities trading tax, Indian market will become unusable for risk management. The budget has added an incidence of 12% service charge and Rs.17 per lakh for commodities trading which will increase the cost by more than 800%. This taxation was introduced in securities market with attendant benefit of long term capital gains and allowing futures income loss to be treated as normal business income loss. The commodities markets have not received these two incentives and have exclusively been burdened with transaction cost which will make our market inefficient compared to similar global markets.


Mr. Makarand Padalkar, Chief Financial Officer, i-flex® solutions

Overall the budget is neutral to positive and the finance minister has done a fine job of balancing between a long-term growth perspective and political and social needs. The budget also recognizes the importance of a knowledge society and the necessity of moving India from the analog to the digital world. It also promises a more inclusive digital future and a reduction in the digital divide. The allocation of substantial funds for various education schemes, the opening of new IITs will certainly help the IT industry to get qualified manpower even from Tier 2 and 3 towns. The use of smart cards for disbursement of funds is good for e-governance and should help minimize leakages in disbursements. The IT industry was waiting for was the extension of the STP scheme. Unfortunately, there is no mention of it at all in the budget. We believe that this was one opportunity to strengthen India's competitive position.


Mr. Arvind Mathew, President & Managing Director, Ford India

A mixed bag for the Auto Industry : Despite long requesting for the rationalisation of the excise duties on the various segments, but it was disappointing to see that our request on uniform excise tax has been neglected for yet another year. Reducing the excise duty on the small cars alone has actually widened the gap between small and other car segments. The excise duty on the mid-size car now stands at 24%, double that of a small car, which is disappointing for the customers of mid-size and larger cars. Though reduction in corporate taxes and customs duties, which automobile industry were eagerly been awaiting for, is another miss in the budget. But reduction in customs duties for project imports will benefit us and is a welcome step, especially in light of Ford India's recent expansion and growth plans. There have been no significant investments made for improving roads, ports, etc, other than focus on the power sector. This budget primarily focuses on social sectors, health and education. On an overall positive side, the budget offers significant income tax exemptions to the salaried, which will help put more disposable income in the hands of consumers. This will result in the growth of consumer spending, and may benefit the auto sector.


Mr. Baba N Kalyani, chairman and managing director, Bharat Forge

This perhaps is the last full Budget of the present Government. In spite of this the Finance Minister has displayed remarkable courage in pursuing economic reforms. There are several notable features in this budget that would contribute to a stable macro economy. However from a manufacturing industry perspective some of the most significant are reduction in Excise duty on small and hybrid cars as well as buses; reduction of CST from 3% to 2%; reduction in customs duty on project imports and critical input material like steel melting and aluminium scrap; reduction in cenvat rate from 16% to 14%; and allocation of Rs.750 crores for upgradation of 300 ITIs. Will this Budget contribute in generating further momentum in the "India Growth Story?" Clearly the answer is in the affirmative.


Mr. Bala Reddy, Chairman & Managing Director, ICSA INDIA LTD

The budget for 2008-09 is well crafted keeping the economic growth target and future in mind. A positive budget with emphasis on social (education, health care), agriculture and power sectors foster development and creates opportunities. Increased spending on existing flagship schemes and introduction of new schemes will immensely benefit the social sector. Similarly, benefits to the agriculture sector in the form of loan waiver and re-eligibility will boost the agriculture production and the overall sector's performance. Reduction of excise duties and benefits in personal income taxes will give impetus to manufacturing sector. It is encouraging to know that Rs. 8000 cr have been planned for power reforms, besides APDRP program receiving continued impetus. Additionally, the creation of a national fund exclusively for T&D reforms creates immense opportunities for companies like ICSA whose special focus is into T&D segment of the power industry.


Mr. Nirmal Jain, Chairman and Managing Director, India Infoline Ltd.

The Budget is a mix of populist measures and efforts to sustain growth. On the positive side, cut in excise duty rates and lower incidence of personal tax i.e. higher disposable income would give the required impetus to the consumer demand. On the negative side, failure to lower the corporate tax or dividend tax is a missed opportunity. Loan waiver may be a big positive for the PSU banks as possibly farmer loan NPAs get replaced by government debt which has highest security. But it will affect government finances adversely. Stock markets, a bit disappointed on increase in short term capital gain tax and non removal of surcharge on corporate tax, will soon see that fundamentals of the economy remain robust.


Mr. Karl Slym, president and managing director, General Motors India

The budget is encouraging due to its focus on agriculture, irrigation, education health care and power. Since it addresses some of the concerns of the industry in general, it should help fuel demand and economic growth going forward. As far as the automotive industry is concerned, however, it did not fully meet expectations. The industry expected a reduction in excise duties for all cars, which has not happened. The automotive industry is one of the growth drivers of the economy. As such, deduction of excise duty for all cars would have generated increased sales, thereby contributing to the exchequer. On the other hand, reductions in Excise Duty of Small Cars from 16% to 12% and for Hybrid Vehicle from 24% to 14% are welcome decisions.


Mr. Shravan Gupta, Executive Vice-Chairman & Managing Director, Emaar MGF Land Ltd

The Finance Minister clearly spelt out that the focus for Budget 2008 in his own words "Doing more and doing better". The focus, in our view, continues to be on greater good for equitable growth as well as inclusion and Mr Chidambaram has done a fine balancing act with a favorable bias towards the 'aam aadmi'. The thrust area continues to be addressing concerns of farmers, boost scope for women welfare, health, education and Bharat Nirman.


Ms. Mona Chhabra, Associate Director, Ernst & Young

Given the backdrop of rising construction costs and a tempering of selling prices, the hike in excise duty on cement could have some adverse impact on real estate developers. There is however some positive news in the form of the possibility of avoiding the incidence of double dividend distribution tax since a lot of real estate assets are held in subsidiaries.


Mr. Saminathan, MD - Pyramid Saimira Group

For entertainment industry this is a neutral budget; but simulation of debt market and harmonization of dividend distribution tax between holding & subsidiary is positive for Pyramid Saimira".


Mr. Mukund Choudhary, MD - Spentex Industries Limited

The Budget has provided relief to the agriculture sector and individual tax payer but missed out in providing something substantial to the industry. The textile industry which is already under tremendous pressure due to increasing raw material costs, obsolete machinery, appreciating rupee as well as domestic inflationary pressure has nothing to look forward to in this budget. The textile industry was expecting cuts in the customs duty and certain sops which would have helped the industry to tide over the difficult situation that it is in now. Even, the marginal increase in the allocation for TUF from Rs 911 crore to Rs 1090 crore is too little, it will not even cover the disbursement for the year".


Mr. Amar Babu, Managing Director, Lenovo

It is a known fact that our industry has been impacted due to the low abatement rate fixed by the Govt for MRP-based excise duty. We need to see the finer details on this. Uniform CST is welcome and makes the supply chain simpler to operate. The budget has not addressed the special additional duty (SAD) being levied today which is hurting manufacturing units. We are studying the impact of the reduction in excise duty from 16% to 14% for our industry.


Mr. R.Sivakumar, Managing Director - Sales and Marketing, South Asia, Intel

We are excited that the budget is focused on building the social infrastructure by increasing broadband connectivity and strengthening the education system across India. These measures are a step forward for transforming India into a knowledge society


Mr. Susir Kumar, Chief Executive Officer, Intelenet Global Services

We are happy that the government has decided to increase spending on education by 20% and with the focus on knowledge and skill development. The measures being introduced by the finance minister on skill development of the working class will help build people with the right caliber and this definitely have a positive effect on the BPO industry which is people intensive. However from an industry perspective, we are extremely disappointed as the industry was expecting the FM to extend the 10 year tax holiday under Sec 10A and 10B which is set to expire in March 2009. The BPO industry in India is still a young industry as compared to the IT industry and needs the support of the government till it reaches a phase of growth and maturity.


Mr. Nishant Fadia, Chief Financial Officer - Prime Focus Limited

The Hon'ble FM was expected to present a populist budget. But, the 2008 budget has been disappointing for the media and entertainment industry as yet again there was no sops or recognition for our sector. The Indian film and entertainment industry being one of the fastest growing sectors would have liked a tax holiday or special tax concessions. Though the Indian corporate sector is doing quite well, we were also expecting a reduction in corporate taxation, or the surcharge should have been removed.


Mr. Manoj Chugh, President, India and SAARC, EMC Corporation

Overall, the budget looks to focus on enhancing long term economic growth through stronger investments in social infrastructure. In this direction, investment in education for not only spread but also improvement of quality is encouraging. The setting up of additional IIT's and a fund for improving employability of our workforce are positive initiatives from the Finance Minister to address the manpower needs of the technology sector. Investments in excess of Rs. 800 crores in the area of building a knowledge infrastructure including broadband, SWAN and data centres will definitely enhance our capabilities and support our belief that information sharing across the country will lead to a more inclusive economic growth. We are also encouraged by the reduction in custom duties for IT hardware components, as it will lead to lower prices and higher consumption in the domestic sector.