The Union Budget 2008-09 is being hailed as a progressive Budget that would play a role in driving economic growth by promoting consumption. However, the media and advertising industry doesn’t stand to benefit from this Budget. Even though the economy has grown at 8.8 per cent GDP in the year, the Finance Ministry hasn’t taken any bold steps in this Budget.
Sam Balsara, Chairman, Madison Communications, said, “The Government has missed a golden opportunity to take bold steps, and take pre-emptive measures to ensure that early signs of slowing down are arrested – that is not good news for advertising. I am happy with the Budget only to the extent that taxes have not been increased by and large.”
Colvyn Harris, CEO, JWT, added, “The Finance Minister has an opportunity every year to set a direction for India. I’m not getting into the consumption aspect of the Budget right now, but this is not a bold Budget, and it isn’t addressing anything more than what has been happening already. I don’t think the advertising and marketing industry is even considered for the Union Budget – I think we are too small in the scheme of things.”
Four services have been brought under the service tax net this year – including the right to use goods in cases where value added tax (VAT) is not payable. Even as the full implication of this is yet to be comprehended, some sections of the media explain that this means that development and supply of content for use in advertising purposes would be brought under the service tax net. Also, the sale of space or time for advertisement service to specifically include sale of space in business directories, yellow pages and trade catalogues, which are primarily meant for commercial purposes, have been brought under the service tax net.
Radio City’s CEO Apurva Purohit observed, “The burden of rise in advertising cost would be passed on to the consumer. Corporate advertisements garnered the maximum 29 per cent share of ad volumes of the IT sector on TV in 2006. Rise in advertising cost will bring a slowdown in the advertisement revenues to broadcasters and print media. However, it will also depend on the performance and growth potential of industries such as FMCG, pharma, telecom and software, which are involved in huge ad spends.”
P&G’s Bharat Patel said, “The Budget is clearly focussing on the increase in consumption, and this would lead to more industrial growth in sectors such as FMCG, pharma and so on – it is a very positive Budget.” When asked more on the service tax net, he replied, “The service tax shouldn’t be a bother since you can offset service tax against excise.”
Shashi Sinha, CEO, Lodestar Universal, said, “This Budget, too, sees the discrimination between print and television in terms of service tax, and it really doesn’t have anything for the media and advertising industry. However, it is the kind of Budget that would make clients happy and grow further – whether it is the auto sector or pharmaceuticals – so there are some derived benefits.”
M G Parameswaran, Executive Director and CEO, Draftfcb+Ulka, observed, “The decision to lower excise duty on a whole range of products will help in spurring demand, especially when industrial production figures are showing a slowing down. I expect a positive impetus in auto, durables, white goods, etc. Service tax is something that is now a part of the new tax regime, and the Government is reaping rich dividends from this process. I only wish the procedural issues are ironed out as we go forward.”
Budget 2008-09: A tricky balance between growth rate and political reality