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Budget Impact: Consumer durables marketers raise a cheer to Budget 2005

Budget Impact: Consumer durables marketers raise a cheer to Budget 2005

Author | Malini Menon & Gokul Krishnamurthy | Tuesday, Mar 01,2005 7:16 AM

Budget Impact: Consumer durables marketers raise a cheer to Budget 2005

The consumer durables sector is upbeat about Finance Minister P Chidambaram's verdict. The reduction in excise duty on air-conditioners from 24 per cent to 16 per cent has been a welcome move and durables marketers in general have lauded the budget. The implementation of VAT has also been welcomed from all quarters and is being looked at as the Government's keenness to move to a fully transparent tax regime. Here is what leading consumer durables manufacturers had to say about Budget 2005.

Ravinder Zutshi, Director-Sales, Samsung India Electronics Ltd.

It has been a positive budget that went as per our expectations. We are happy that the Finance Minister has taken steps to ensure a level playing field and competitive domestic manufacturing in the electronics and technology sector. The reduction of peak customs duty from 20 to 15 per cent is a step in the right direction. The rationalisation of the inverted duty structure on raw materials and capital goods is an encouraging move. The reduction of excise duty on air-conditioners from 24 per cent to 16 per cent is a welcome step as air-conditioners today are an essential part of people's homes.

Overall, we feel that the budget will be good for the economy especially with the proposed banking reforms, thrust on savings and the reduction of the fiscal deficit to 4.3 per cent of GDP.

T.K. Banerjee, President and CEO, Haier

The fundamental aim of this government to further the reform process has certainly been laid down. It is a balanced budget focused on growth and social justice. The proposal to enhance the competitiveness of the manufacturing sector, and the reform of customs and excise duties are very positive. The 'Bharat Nirman' proposal is a very thought provoking and constructive futuristic plan. But the real challenge is to ensure fiscal discipline and seamless delivery systems.

David Friedman, MD and President, Ford India

The basic direction of the budget is positive and the tone is consistent with the announcements made in August 2004. Increased impetus on infrastructure development will encourage economic growth. We are pleased that the implementation of VAT was reconfirmed as it demonstrates the Government's keenness to move to a fully transparent tax regime. The budget reaffirms a status quo in the business operating environment.

Salil Kapoor, Head-Marketing, LGEIL

The budget presented today can be said to be pragmatic and based on sound economic logic. To an extent it has exceeded expectations. The Government's consideration for local manufacturers, who were under threat from global trade, is obvious from the step that has been taken to rationalise duties and protect their interests. Moreover, reduction in duties on air-conditioners is a welcome gesture as it will lend scalability to non-exempted manufacturers.

Furthermore, Mr Chidambaram's announcement on reducing customs duty to nil on all IT products is a very favourable one as it will provide the necessary boost to this fast developing sector.

Certain serious omissions were also made like depreciation on capital investments was expected though it was not covered in the budget presentation. The domestic industry was expecting some impetus from Government. Simplification of import tax structure was expected but nothing was announced in this respect. The imposition of a new tax under safeguard duty has been added at a rate of 4 per cent, making the calculation more cumbersome.

Rajeev Karwal, MD and CEO, Electrolux India

The overall direction of the budget is solid and sound. The Government has continued with most of the good initiatives, which have been undertaken in the last couple of years. Specific to our industry, the peak duty cut in customs was expected and is welcome although it will affect positively various product categories such as CTVs, refrigerators, washing machines, air-conditioners, DVD players and microwave ovens.

Few things, however, would need further clarity such as VAT implementation, which will be implemented from April 1, 2005. Is the floor rate of 12.5 per cent, announced for consumer electronics and home appliances, the overall ceiling rate? Or are state governments going to put additional state levies? If that happens, prices of all home appliances will go up from April 1, 2005.

The excise duty on steel of 16 per cent, up from 8 per cent, is also not a welcome step since home appliances industry, specifically refrigerators, washing machines and air- conditioners, are already reeling under massive steel price hikes in the last 12 months.

Arun Firodia, Chairman, Kinetic Group

As far as the automobile industry is concerned, especially two-wheelers, development of the rural economy will boost demand. Prices of industrial raw materials have been increasing over the last one year. The reduction in customs duty on raw materials and components would help keep prices in check.

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