If captains of industry have welcomed finance minister Jaswant Singh's Budget, it is because the government has, perhaps after quite some time, turned the spotlight on industrial growth.
Singh said in his speech that industry has stimulated overall growth. "We must, therefore, consolidate these gains and build on the robust industrial growth demonstrated in the last few quarters," he said.
Indeed, industrialist Jamshyd N Godrej, past president of the Confederation of Indian Industry, thinks the budget will encourage the manufacturing sector.
The rationalisation of direct taxes, along with the withdrawal of the surcharge on individual income tax payers can lead to buoyancy in demand, Godrej said.
Representatives of the information technology industry point out that the continuation of concessions to the industry is encouraging and the new tax measures relating to mergers and acquisitions will result in quicker consolidation in the industry.
The government has provided a host of concessions for industries like cars, pharmaceuticals, soft drinks and liquor in a bid to lower prices and push consumer demand.
The excise duty on passenger cars is to be cut from 32 per cent to 24 per cent. So car prices will tumble by 5.5 per cent to 7 per cent -- a significant drop in some cases (a Rs 10,000 drop on the A-segment Maruti 800, for example).
The customs duty on imported cars too is to be cut. As a result, a couple of companies could import a few cars. The crisis-ridden tractor industry too will benefit in the long run owing to the Budget's focus on agriculture.
But prices will not drop in all cases. Bharat Doshi, executive director, Mahindra & Mahindra, says the increase in service tax from 5 per cent to 8 per cent is a 'surprising element.'
Adds he: "We do not have a full VAT system in place and therefore the consumer will have to bear the ultimate impact of this substantial increase."
Soft drink manufacturers too say they're unlikely to lower prices, though the excise duty on aerated soft drinks have been cut from 32 per cent to 24 per cent, because the government has simultaneously reduced the existing abatement from 50 per cent to 45 per cent. Cement producers too are up in arms because the higher excise will cost the industry some Rs 600 crore.
But most businessmen agree that the Budget will help boost industrial growth, to some degree at least.
