New Delhi: The budget for 2012-13 elicited mixed response from India Inc Friday, with some appreciating the government’s efforts at fiscal consolidation and incentivising growth while others criticised the hike in excise and service taxes that could translate into a price rise.
CII President and Tata Steel vice chairman, B Muthuraman called the budget “somewhat neutral to positive”.
“There are a number of positives in the budget especially for the infrastructure and agriculture. I think there is positive news. The two negatives I see, one is the excise duty increase and the service tax increase which is going to put pressure on inflation,” said Muthuraman.
Sanjay Kapoor, chief executive officer, Bharti Airtel, India and South Asia, said despite challenges, the government has been able to deliver a practical and inclusive budget for the next fiscal.
“The FM’s strategy towards fiscal consolidation will play an eminent role in containing challenges faced by the economy and contribute towards 7.6 percent GDP growth projection for 2012-13,” Kapoor said.
However, he said that since the telecom sector was already burdened with multiple and high tax levies accounting for 30 percent of the telecom services revenue, rise in service tax from 10 percent to 12 percent will increase the cost of services to customers.
G.V.K. Reddy, chairman and managing director, GVK Power & Infrastructure, termed the budget as “balanced” during challenging times. It was “positive, broad-based and an all-inclusive one that endeavours to address crucial reforms for development.”
Anup Bagchi, managing director and chief executive officer, ICICI Securities, said the budget aimed at fiscal consolidation.
“The expected fiscal deficit of 5.1 percent and full rollback of impetus during global crisis of 2008 by hiking the rate of excise and service tax rate will help in achieving it and appears highly achievable, besides providing relief to individuals by hiking tax exemption limit” Bagchi said.
N. Chandrasekaran, chief executive officer and managing director, Tata Consultancy Services (TCS), called the budget pragmatic, saying it was good for long-term, but lacked short-term punch to get growth going.
“For the IT industry, the request to exempt SEZ (special economic zone) income from MAT (minimum alternate tax) has not been granted and this is disappointing,” Chandrasekaran said.
“The focus on research and development (R&D) is good as the weighted deduction of 200 percent for R&D expenditure in an in-house facility has been extended beyond March 31, 2012 for a further period of five years,” he added.
Soon Kwon, managing director LG India, said that there were clear inflationary implications of the budget.
“With inflation and fiscal consolidation being the key themes, Union Budget 2012-2013 was expected to help consumer sentiment and control inflation but it doesn’t fulfill that,” said Soon.
“A clear roadmap for GST (goods and service tax) and DTC (direct taxes code) implementation that the industry was keenly looking forward to has not materialized,” he added.
Soon said the industry was already struggling with steep dollar exchange rate and various input cost increases over the last year.
Harsh Pati Singhania, director, JK Organisation, called the budget a mixed bag, saying the finance minister had strived to balance growth and contain fiscal deficit.
“It has sought to keep a check on subsidies to less than 2 percent of GDP in 2012-13,” said Singhania, lauding the minister’s decision to allow qualified foreign investors to access Indian corporate bond market and simplifying the process of IPOs .
Industry lobby Associated Chambers of Commerce and Industry of India (Assocham) said the budget was well-balanced and pro-active with well-defined measure to bring back the economy on higher growth track.
“The budget attempts to improve subsidy deliveries with direct transfers to bank accounts for targeted distribution. It also emphasises the need for fresh investments for capacity creation and infrastructure building on the public private partnership model,” said Assocham President Rajkumar Dhoot.
The Federation of Indian Chambers of Commerce and Industry (FICCI) said there had been no revival of investment allowance, no restoration of tax exemption on dividend income and no hike in depreciation rate.
“These had been expected as fiscal steps for improving investment,” FICCI said. However, the reduction in withholding tax on interest payable on external commercial borrowings in certain sectors and extension of concessional tax treatment on the repatriation of overseas dividends, were welcome features.