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Budget 2008-09: A tricky balance between growth rate and political reality

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Budget 2008-09: A tricky balance between growth rate and political reality

A populist Budget, bold, but could have been bolder, disappointing, exceeded expectations, positive and growth oriented, a mixed bag – India Inc’s reactions to the Union Budget 2008-09, which was presented by Finance Minister P Chidambaram in the Lok Sabha on February 29. exchange4media takes a short walk down corporate corridors to hear who is saying what about the Budget.

FICCI President Rajeev Chandershekhar said that the Finance Minister had used a formula to find a balance between the growth rate and political reality. Reacting to the Budget, industry experts at FICCI said that the Budget was bold, but could have been bolder. They felt that corporate taxes could have been reduced.

The automobile sector was happy with the Budget recommendations. Duty on two-wheelers has been reduced from 16 per cent to 12 per cent, while excise duty for small cars has been cut from 16 per cent to 12 per cent.

Ashok Jha, President, Hyundai Motors India Ltd, said, “We feel that the Union Budget 2008-09 is positive and growth-oriented, and would click the growth momentum. The reduction in the excise duty would boost import of cars. Reduction of duty for hybrid vehicles from 24 per cent to 14 per cent is a welcome decision.”

Hyundai has slashed prices of its small cars from Rs 8,730 for a no-frills Santro to Rs 19,419 for Getz Prime. For i10 the price reduction ranges from Rs 11,047 to Rs 16,324.

Maruti Suzuki India Ltd, too, has effected price cuts for its small cars – from Rs 6,500 for an entry-level Maruti 800 to Rs 18,030 for Swift diesel. S Nakanishi, Managing Director and CEO, Maruti Suzuki India Ltd, said, “In the short term, the reduction in excise duty will make small cars more attractive for customers and offset the negative impact of higher interest rates. This is an encouragement for companies like us, which are making major investments in capacity, research and exports. Overall, the Budget has some benefits for all sections of people while keeping the Government’s finances healthy.”

Karl Slym, President and Managing Director, General Motors India, felt, “As far as the automotive industry is concerned, the Budget did not fully meet our expectations. The industry expected a reduction in excise duties for all cars, which has not happened. The automotive industry is one of the growth drivers of the economy. As such, reduction of excise duty for all cars would have generated increased sales, thereby contributing to the exchequer. On the other hand, reductions in excise duty of small cars from 16 per cent to 12 per cent and for hybrid vehicles from 24 per cent to 14 per cent are welcome decisions.”

According to Arvind Mathew, President & Managing Director, Ford India, the Budget was a mixed bag for the automobile industry. He said, “Despite long requesting for rationalisation of the excise duties on the various segments, it was disappointing to see that our request on uniform excise tax has been neglected for yet another year. Reducing the excise duty on the small cars alone has actually widened the gap between small and other car segments. The excise duty on the mid-size car now stands at 24 per cent, double that of a small car, which is disappointing for the customers of mid-size and larger cars.”

He further said, “This budget primarily focuses on social sectors, health and education. On an overall positive side, the Budget offers significant income tax exemptions to the salaried, which will help put more disposable income in the hands of consumers. This will result in the growth of consumer spending, and may benefit the auto sector. To compete with the global economies, India needs a lot attention towards infrastructure.”

“The emphasis on building India into a Knowledge Society through a series of proposals – setting up three new IITs, scholarships for innovation, R&D and a National Knowledge Network to connect universities – is very welcome,” said Pradeep Gupta, Chairman of CyberMedia, a specialty publishing house, and Past Chairman of Pan-IIT Alumni India.

“The Budget has exceeded expectations in terms of rural development, education and agriculture. It is commendable that the economy has seen a growth rate of over 8.8 per cent. This budget will provide an impetus to inflation control. Specific to LG India, there will not be any major changes in terms of product pricing as there has been no major relief in duties,” said Moon B Shin, Managing Director, LG Electronics India.

”However, being a manufacturer, we are exposed to open competition with the various ASEAN countries, some relief on raw materials and intermediate goods would have made our industry competitive globally,” he added.

Gautam Hari Singhania, Chairman & Managing Director, Raymond Ltd, said, “The Union Budget 2008-09 is a stimulus package towards social, health, employment, agriculture, education and other sectors. The measures to build social infrastructure in education and health sectors are welcome. However, the increased expenditure and the pay commission recommendations have prevented the Finance Minister from rationalising the corporate tax structures.”


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