Budget 2012: Mixed reactions from the industry | SupportBiz


Budget 2012: Mixed reactions from the industry

The die has been cast. But India Inc feels that more needs to be done to stimulate the economy in tough times like these.

SupportBiz captures industry reactions from across the country.

Dr Arun Singh, Senior Economist, Dun & Bradstreet India says: “Despite expectations of a reform-oriented budget to boost the growth of the domestic economy, the government failed to provide not only a reform agenda on subsidies or FDI front but also effective timelines on the much anticipated Goods & Services Tax (GST) and Direct Tax Code (DTC). 

“However, the focus on mobilization of funds for the infrastructure as well as thrust on the coal, power segments is positive as it indicates the government’s intention to mitigate the imminent issues which are impeding industrial activity. While the measures taken in the direct as well as the on the indirect tax front would enable revenue mobilization for the government which was much required, the non-divulgence on the social sector programme also enlivens as during this year the government would require to channelize its funds towards other productive areas. Further, the much realistic high fiscal deficit target set by the Government, given the lesser avenues for expenditure rationalization and expected lower revenue mobilization would ensure that the economic agents would set their expectations on the right path. Thus, given the minimalist nature of the budget, it could be rated as below average.”

Satya Prabhar, CEO and Founder, Sulekha.com says: “Overall, the budget gives a feeling of brick-and-mortar sensitivity in an era where subsidies in technology infrastructure is crucial to growth. Absence of specific subsidies in the cost of internet access a critical concern. This is a key growth requirement, considering the fact that India is amongst the weakest in internet penetration. We hope that the PPP in infrastructure as a part of the 12th Five Year Plan will give a fillip to technology/telecom infra investments.”

Varun Goel, Head - Equity PMS, Karvy Private Wealth says: “The fiscal deficit number has been penciled at 5.1 percent for FY13. The provisions for fuel and fertilizer subsidies look inadequate and the fiscal deficit number would be closer to 5.5 percent in absence of meaningful hikes in auto fuel prices. The government borrowing program at INR4.79 lakh crore is quite high and would result in further hardening of bond yields.

“There was a lot of talk on boosting infrastructure activity but no concrete provisions have come in. A positive step for the power sector was abolishment of five percent import duty on coal. This move will be positive for most of the power generating companies. As far as the market is concerned, budget is a non-event. The market will start focusing on Q4 FY12 earnings which start from 10th April and RBI policy in the third week of April.”

Devanshu Gandhi, MD of Vadilal Industries, says excise duty to hit common man badly: “Although not been as per the expectations, the 2012-13 Union Budget seems to bring some good news for the power & infrastructure sector. This will directly or indirectly benefit almost all the industries. 

“However, the two percent increase in excise duty will not only add to the already high inflation but will also hurt the sentiments of industries. The agriculture sector would benefit from the exemption of five percent custom duty on import of agricultural equipments which could indirectly be advantageous for the agriculture sector. Moreover, introducing GST and making it operational from August 2012 came as the most important announcement from the FM for all industries as well as the entire economy.”

Rajamannar Ramaswamy, Group Managing Director, Inno Group opines that service tax will hit the common man: “Increase in central excise duty and similar increase in service tax from 10 percent to 12 percent will hit the common man badly as these will in turn increase the price of day to items and services. With spiralling land prices and increase in the cost of materials and labour, housing has already become a costly proposition. In such a scenario, a reasonable increase in the deduction for home loan interest paid as well as on principal repayment would have given a big boost to the sector. While the govt talks about reducing the housing shortage across segments, there have not been any proactive measures in the budget to support this cause. 

“The basic exemption limit has been increased to just INR2 lakhs for the individual tax payers. However the finance minister has doubled the tax free infrastructure bonds that can be issued to INR60,000 crores for the current FY. This will definitely help the infrastructure sector to mop up the required resources which badly needs long term funding. The taxability of indirect transfers has unfolded again through clarificatory and retrospective amendments in the provisions codifying the source base taxation involving cross border transactions. This will significantly affect FDI which have come in, based on the existing tax frame work. This sort of retrospective amendments will shake up the confidence level of the Investors in the Indian tax regime and the governmental policies which will have a bearing on further FDI.”

Dr Amarnath Ananthanarayanan, CEO & MD, Bharti AXA General Insurance says: “This is a "status quo" budget. There is no big bang reform propelling India to the next stage of growth. Getting the fiscal deficit down to 5.1 percent while predicting a 7.6 percent GDP growth looks very hard in the absence of a stronger path to reforms in the current macro-economic scenario both within and outside India. 

“From a general insurance perspective there is very little the budget offers. For this sector, we were expecting more reforms especially on the enhancement of the 80D income tax benefit with a lot more increment for senior citizens as well as removal of service tax for micro-insurance, senior citizen policies and women centric policies.”

Rishi Gupta, CFO - FINO says that the continuation of the Swabhimaan campaign and focus on the SHG sector will be good for financial inclusion: The much anticipated and awaited Budget 2012-13 turned out to be “business as usual” with no major changes or path breaking efforts. It was more a continuation of last year's budget. 

The decision to further subsidize interest rate for SHG sector to four percent and enlarging the corpus is a positive step towards improving access to credit in rural areas. Proper nurturing of SHG groups helps promote rural entrepreneurship and build assets.

Introduction of a new law for micro finance institutions (MFI) is welcome; though we don’t have much information to say about its effectiveness.