I see this Budget more as a Statement of Intent by the Finance Minister because there isn’t too much he could have done in six weeks. The real test will be if he is able to deliver against his intent. It’s in the implementation not the rhetoric, that we, as a country, often fail and it remains to be seen whatever this Finance Minister will be any different, in that respect.
My analysis of the Union Budget 2014 is as follows:
Overall: I think this budget puts more money in the pockets of the common man though increased income tax exemption limits, through Rs. 50,000/= additional relief u/s 80C and Rs. 50,000/= additional relief on Housing Loans for self-occupied properties. It also focuses on growth for the industry overall and gives impetus to the manufacturing sector, all of which will eventually result in increased advertising, directly or indirectly.
Winners & Losers: The changes in customs and excise duties will work favorably for the FMCG industry, who tend to be large advertisers, particularly those involved with manufacturing soaps and oils, as their input costs will go down. Like-wise mobile hand set manufacturers, PC makers, real estate industry, footwear makers and others will benefit. This should result in increased advertising spends from these sectors, over a period of time.
On the other hand, soft drink manufacturers may probably curtail their spending due to the increased input costs.
Regional TV, Community Radio and Digital India thrust: The Finance Minister has introduced a Kisan TV channel, which could develop into a medium for reaching the rural audience, if it does well. Likewise, the potential of the North East markets is huge and having Aruna Prabha TV channel may help open up those markets. The Finance Minister also announced steps to develop Community Radio Stations, which augers well for reaching deeper. He further announced Rs. 500 crore towards Digital India, which would help drive broadband connectivity to the village level. All these bode well for our industry. Coupled with reduced customs and excise duties on Cathode Ray Tubes, small sized LEDs, LCDs, etc., it should all help drive media reach deeper and wider.
Service Tax: This is an area where I think the Finance Minister has not applied mind adequately. On the one hand he is speaking of a major digital thrust. All government departments are to be enabled for transacting business by 31/12/14, Digital India, Connectivity etc. On the other hand he has removed Digital and Mobile advertising from the Negative List i.e. there will now be Service Tax of 12.36 per cent imposed on them. To me this is a dichotomy. The Finance Minister must reconsider this.
What’s worse is that there is ambiguity about other media in the negative list now, due to lack of a clear direction. While print is still clearly in the negative list, some tax advisors have opined that OOH, ambient and cinema will also now not remain in the negative list. That will be truly detrimental and I hope this is reconsidered.
Moreover, I don’t think the industry minds paying reasonable taxes. What the industry abhors is the tedious procedures, unnecessary harassment by the tax departments and ambiguity, which leads to corruption. I hope procedures will be clarified and simplified to address this.
Given all of this, on balance, I still feel the Budget will be favorable to our industry, though I would caveat it with what I began. I see this Budget as a Statement of Intent by the new government. It’ real test will be whether they are actually able to deliver what they promise.
Ashish Bhasin is Chairman & CEO South Asia, Dentsu Aegis Network and Chairman Posterscope & psLIVE Asia Pacific.