How India Inc Reads Budget 2011

Written by admin on September 4th, 2011

Chanda Kochhar, MD & CEO, ICICI Bank

The Union Budget for FY2012 is a growth oriented budget that seeks to build on India’s strengths and to address the challenges that we face. In line with this approach, the budget seeks to build on our growth drivers through infrastructure and social sector development, address challenges of food inflation and of fiscal management and to promote inclusive growth.  
Overall, the budget focuses on areas requiring significant investments, while seeking to take forward the process of fiscal consolidation. The priority accorded to achieving greater economic inclusion and addressing the challenges that we face will stand the economy in good stead as it reverts to a sustained high growth path.

OP Bhatt, SBI chairman

The budget has highlighted some challenges in the Indian economy which need to be tackled urgently. One challenge is fiscal consolidation and the imperative to build fiscal credibility by sticking to the 13th Finance Commission`s roadmap for deficit reduction and ensuring stability of the growth process. With recovery gaining traction, the rollback of the fiscal stimulus measures, already begun last year, has been taken forward. While the unwinding of the stimulus measures would to some extent push up excise duties and consequently input costs, the budget has created space for spending by tax reforms and rationalisation while taking growth concerns on board together with making the growth concerns socially inclusive. As an innovative approach to financial inclusion, the Government is espousing direct transfers as a means of reaching out to the large number of population below the poverty line.

The budget has moved into inflation control mode by focusing on management of the supply side and being in sync with a tightening monetary policy. The thrust to rice producing Eastern region, pulses, coarse grains, edible oils and vegetables along with support for storage and transportation will improve agricultural supplies.

The FM has thus presented a finely nuanced budget against the background of growth gaining traction but inflation also getting more entrenched while material economic and policy risks abound in the global economy. The budget has sought to give a fillip to the growth momentum, catalyse investment in infrastructure, power and rural sectors, while at the same time ensuring fiscal consolidation. In sum, the budget is development oriented with a range of growth promoting initiatives.

Neeraj Swaroop, regional chief executive, Standard Chartered Bank

This was an important Budget as the Indian economy is facing a variety of socio-economic issues which needed to be addressed. The finance minister has touched upon several key issues such as the fiscal deficit, infrastructure development, and social spending. It has also supported growth by not raising taxes and raising the exemption limit on personal income. For the financial sector, steps to raise the limit on foreign institutional investments in infrastructure bonds and to allow these institutions to invest in domestic mutual funds are hugely positive for encouraging international capital flows into India.

Sajjan Jindal, VC and MD, JSW Steel:

Finance Minister has struck a fine balance between growth and inflation and has also given a strong indication of continuing on the reform path. FM has rightly resisted the temptation to increase the excise duty thereby giving out positive signals to the industry and to the India growth story. The re-assurance on the fiscal deficit trend as well as revenue deficit will go a long way in creating a positive frame of mind.

The hike in export duty on iron ore fines and lumps to 20% advalorem is most welcome. I am sure that this will lead to greater value addition at home and encourage the domestic steel industry. By forming a task force of Group of Ministers for addressing the issues of corruption, state funding of elections, transparency in public procurement and contracts the FM has shown the courage to tackle the root cause of the malaise of black money.

Habil Khorakiwala, chairman, Wockhardt:

The budget has a major focus on agriculture, infrastructure, education and banking and finance but it is a disappointment for healthcare which is a key sector that requires a major thrust from the government. The decision to implement 5% tax on hospital and diagnostic services will make healthcare more expensive. Tax on life insurance service providers could be negative for insurance companies.

While the finance minister`s decision to lower the surcharge tax limit on corporate tax to 5% from 7.5% is a positive step but he has marginally increased MAT from 18% to 18.5%. The lower fiscal deficit target is commendable. The cut in many import duties can act as a step to check inflation. The GDP target of 9% looks good and realistic given the growth.

Kiran Majumdar Shaw, chairman and MD, Biocon

The Minister has totally excluded the promising Biotechnology sector, failing to make provisions for the funding the industry requires. Incentivising R&D by providing a 5-year tax holiday on products developed in-house, venture funding, zero duty on R&D equipment, and a longer tax-free allowance for biotech SEZs are steps that have been totally ignored. No steps have been taken to enable scientific and technological advances or boost innovation. The government is failing to back its pronouncements with actual steps, leaving the pronouncements as mere rhetoric.

This Budget has not taken any imaginative decisions that can make a difference to India, its citizens and its industry. I would rate this budget no higher than 5.5 on a scale of 1 to 10. The UPA government will have to do a lot more to supercharge India and enable inclusive growth.

S Ramesh, President, Finance and Planning, Lupin

The FM`s Budget, simply put, is long on intent but short on content – while the strategic focus of the budget on various matters such as fiscal consolidation is explicit, the process by which it will translate into a tangible outcome is still to be made unequivocal. The Budget has little for the pharma industry- Whilst the weighted deduction on R&D is a necessary fiscal incentive given to the entire sector in several parts of the globe, there was also a need to incentivize exports through fiscal measures to maintain the sector`s global competitive situation which unfortunately is not the case with the MAT introduction on SEZs and the phasing out of EOUs.

Bafna Mahaveer Chand, CMD, Bafna Pharmaceuticals

The pharma industry was not very happy with the Budget proposals. It was expecting lots of incentives and tax reliefs for the future growth and to be competitive in the domestic as well as overseas markets. The industry now hopes for some relief measures to be included before the passage of the Budget.

Vinita Singhania, president, Cement Manufacturers Association and MD, JK Lakshmi Cement:

From the perspective of the cement industry, the budget has been quite a disappointment.The disappointment gets compounded because the Finance Minister in his speech had mentioned relief to the cement industry by way of changing the basis of levying of excise duty. We believed for a moment that the industry`s long pending demand of abatement on the excise duty has been finally heard by the government. However, on going through the fine print we found that the effective excise duty on cement has actually been increased by making it a combination of ad valorem and specific duty. The specific component is very much on the high side and this will result in the duty going higher by over Rs 80 per ton or about Rs 4 a bag at the current prices.

Govind Shrikhande, CCA and MD, Shoppers Stop

This was supposed to be a transition budget as explained by the honorable finance minister. But looks more like a `khatta` budget. Although it has a lot of announcements on GST, DTC, UDI- it has very little to show for the retail industry. As expected, Retail FDI was given a miss, although the trailer (Economic Survey Report), highlighted the positive impact of FDI in retail. No announcement on withdrawal of service tax on rental. But the big shocker has been, the introduction of a 10% mandatory levy on branded apparel. The industry is already facing challenges in pricing, because of increase in input costs, including doubling of cotton prices. This will only add to the cost push further. The minimum impact of all these, would be between 10% to 15% on retail prices. This would definitely impact the demand of garments. The few positives of the budget are – cut in surcharge on taxes by a company, raising of tax limits on individual taxes, focus on infrastructure.“

Mehul Choksi, CMD Gitanjali Gems

For the gem and jewellery industry there is a negative aspect. 1% central excise levied on branded jewellery will hamper the growth of the modern organised sector of the jewellery industry. It should be reconsidered. Also the introduction of MAT will add to difficulties currently being faced by SEZ developers and units in the zones.

Sandeep Reddy, MD, Gayatri Projects

The finance minister`s budget for 2011-12 is expected to boost investment in the infrastructure sector, which will trigger economy on a growth trajectory to achieve 9% of growth rate. We welcome, the government`s move to spend Rs 2,140 billion as budgetary support for the infrastructure sector in 2011-12 and endeavour to set up an infra debt fund to promote foreign investment in the

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