International BusinessRural growth tops durable firms' Budget wish-list
With the last two stimulus packages working wonders for the packaged goods industry, players in the sector are now rooting for one more round of fiscal incentives to further boost demand in the domestic rural markets and be competitive overseas. They are hopeful the new government will meet their major demands in this Budget session.
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Over the last six months, the consumer goods industry and consumers had benefitted on account of the reduction in the excise duty from 14 per cent to 8 per cent. Both fast moving consumer goods (FMCG) companies like Hindustan Unilever and Proctor & Gamble, as well as consumer durable companies like Samsung and LG had passed on the reduction in excise duties to consumers by lowering the prices of some of their goods.
MAJOR EXPECTATIONS
* Continuation of government focus on the rural sector
* Reduction of excise duty to 0 per cent as an incentive for companies that are providing energy-efficient goods
* Simplification of tax structure and steps to encourage lending
Additionally, in its 2008-09 Budget, the government had given a huge impetus to the rural market and, for the first time during the year, the contribution from the rural sector had overtaken the urban markets for the FMCG companies. Likewise, the sector was one of the major growth drivers for the consumer durables companies also.
Dabur India’s chief executive officer Sunil Duggal says: “I expect the government to continue their focus on the rural sector with rural employment guarantee schemes and profitable supply of funds to the area. But what’s needed most is greater focus on execution of policies. This would surely go a long way in giving the rural economy and even rural demand a greater boost.”
Besides rural growth, the focus should also be on energy efficiency. Godrej Appliances’ Vice-President Kamal Nandi says: “The Budget should selectively reduce the excise duty to 0 per cent as an incentive for companies that are providing energy-efficient goods and for marketers expanding their reach to rural markets which are not connected by good roads and infrastructure.”
Other demands on the wish-list include a move towards reducing the fiscal deficit through disinvestment, simplification of tax structure and measures to encourage lending.
“I expect that industries such as export-oriented industries and real estate will be provided with fiscal stimuli. Affordable housing is an area with great potential and should be supported with the restoration of Section 80 1B,” says Godrej Group Chairman Adi Godrej. “Irritants such as the fringe benefit tax are expected to be done away with and the various surcharges on Income Tax should be done away with as a measure of fiscal stimulus,” he adds.
LG Electronics said the government should invest in R&D and manufacturing, especially in the IT, telecom and electronics sectors.
“To have an edge over the international market, development of component and raw material is essential. The government should support such industries and take out special schemes for in-house component development and R&D,” LG India’s Managing Director M B Shin says. Videocon, on the other hand, hopes for reintroduction of investment allowance.
“If such an allowance is made, deduction of a particular percentage of the amount spent on new plant and machinery would be deductible while computing taxable business profits,” Videocon group’s Vice-President (finance) P K Gupta says.