Arab Today, arab today india inc unhappy with 2012 budget
Last Updated : GMT 21:53:08
Arab Today, arab today
Arab Today, arab today

India Inc unhappy with 2012 Budget

Arab Today, arab today

Arab Today, arab today India Inc unhappy with 2012 Budget

Mumbai - Arabstoday

While opposition political parties slammed Finance Minister Pranab Mukherjee’s budget, many in India Inc were also unhappy with his proposals. Top industrialists and trade-related bodies were worried that the hike in indirect taxes would further fuel inflation, resulting in continued tighter monetary policy by the Reserve Bank of India. Mukherjee hiked the excise duty and service tax from 10 per cent to 12 per cent, resulting in a chorus of protest from the corporate world. “The budget is not going to stimulate the economy,” said R.V. Kanoria, president, Federation of Indian Chambers of Commerce and Industry (FICCI). B. Muthuraman, president, Confederation of Indian Industry (CII), was also critical of the budget, pointing out that the excise hike would spur inflation. R.N. Dhoot, president, Associated Chambers of Commerce and Industry of India (Assocham), was disappointed with the marginal increase in personal income-tax exemption limit. He was hoping it would have been raised to Rs250,000, instead of Rs200,000. But Pawan Goenka, president, automobile and farm equipment sector, Mahindra & Mahindra, said Mukherjee had delivered a budget with good intent. “The budget has clear emphasis on key areas of infrastructure, agri development, healthcare and education. The finance minister surely has set the priorities right,” he added. From the macroeconomic perspective, the accelerated growth forecast of 7.6 per cent in FY13 and the attempt to control the fiscal deficit to 5.1 per cent are steps in the right direction, he added. However there is some level of apprehension on whether these targets can be achieved. He pointed out that the automobile industry was relieved that the minister did not take any retrograde step like imposing a tax on diesel vehicles. “The excise duty hike was in a way expected and we will have to pass on the price increase to the consumer. However, with all the surcharges and special levies, the top excise duty rate is as high as 29 per cent. I believe this is simply too high.” Goenka did not expect any “major depression in demand growth as a result of the budget”. According to D.R. Dogra, managing director and CEO, CARE ratings, Mukherjee has presented a fairly pragmatic budget given the constraints. “The budget has not exactly put a leash on expenditure but has tried to rationalise subsidies on fertilizer and oil, though we need to see if they do work out at the end of the day,” he said. G.V.K. Reddy, chairman and managing director, GVK Power and Infrastructure Ltd, found the budget “positive, broad-based and an inclusive. It endeavoured to address crucial reforms for development and was growth-oriented and aimed at sustaining the growth impetus seen in 2011”. Vsevolod Rozanov, president and CEO, MTS India, felt that while many systemic elements had been set right in the budget, the telecom industry continued to face numerous challenges. The increase in service tax from 10 per cent to 12 per cent would raise the cost of ownership of a mobile phone. “From a global perspective, the telecom industry in India continues to attract the highest tax rate of 23 per cent,” he pointed out. “The telecom industry is clearly getting squeezed on account of such outflows and what makes the situation all the more difficult is the hesitation of banks to lend money to operators. All this naturally has a deep impact on the roll out of voice and data services for the common man, especially in the rural areas.” The real estate sector also had a mixed reaction to the budget. According to Anuj Puri, chairman and country head, Jones Lang LaSalle India, the sector does not have much to cheer about. “To begin with, it is difficult to see the raising of the personal income tax exemption limit from Rs180,000 to Rs200,000 as anything more than tokenism,” he said. “It is certainly not relevant for the aspiring Indian middle-class home buyer. The expected exemption limit of Rs300,000 would have had some significance. That said, the one per cent tax rebate for home loans of up to Rs1.5 million on homes costing up to Rs2.5 million will prove beneficial for developers in this segment.” Exempting proceeds from the sale of a residential property from capital gains tax if they are invested in equity or equipment of an SME definitely provides homeowners with more reinvestment options, said Puri. Previously, the only route for exemption was purchase of another property or tax saving bonds. “At the same time, this move could also result in a lowering of sales volumes on the secondary sale market.” The increase in the service tax rate from 10 per cent to 12 per cent will increase the cost of production for developers, who are already reeling under high input costs. It follows that this increased burden will be passed on to end users, he added. Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt Ltd, said the budget was as per expectations, which were low. “No bold economic announcements were made which is the need of the hour.” However, the budget did have some positives including ECB for low cost housing projects besides road construction and power; extension of interest subvention scheme for low cost housing; investment of up to Rs50 trillion in the 12th five year plan, with half of this from private sector for infrastructure development. “Overall the budget was a balancing act when bold steps were required,” said Magazine. Brotin Banerjee, managing director and CEO, Tata Housing, found the budget to be a mixed bag for the real estate sector. “The government’s initiative to make affordable housing available to a larger section of society has only been met partially,” said Banerjee. “Initiatives such as external commercial borrowing for the affordable and low-cost housing segment will help the sector to tap long-term funds and help ease the liquidity in the sector. Extension of the one per cent interest subvention scheme for affordable housing will help the buyers to avail a loan limit of Rs2.5 million.” 

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