Dividend distribution tax should be abolished: L&T

Larsen BSE | NSE 10/02/12 Are Mutual Funds betting on Larsen?

Q: The government recently reduced customs duty on a host of items such as cement, raw materials and capital goods to lower the cost of manufacturing and infrastructure projects, how will this impact your company, and the sector as a whole?

A: This reduction in import duties comes in the light of inflation hitting a two year high of 6.12%. The government and RBI have taken certain measures to cool inflation.

However:
· We wonder whether this can curb inflation, which is main issue on hand. Making domestic capital goods industry uncompetitive will not boost productivity & hence not curb inflationary trend
· By and large reduction in customs duty will be helpful to industrial sector, particularly the projects under execution and will encourage private investment to infrastructure projects.
· Reduction in customs duty rate for basic metals like copper, aluminium zinc will go a long way to help engineering sector.
· "0" duty for Portland cement will help construction industry to tide over shortage of cement supply.
· Privatisation of airport and public transport system will be benefited.

Q: Your overall outlook for the infrastructure and capital goods sector?

A: World-class infrastructure has emerged as one of the most important necessities for unleashing high and sustained growth and alleviation of poverty in any economy. And with poor infrastructure to support other growth initiatives, the Indian economy continues to be a laggard when compared to its developing peers.

From a policy perspective, however, there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country. The realisation finally seems to be setting in. Considering these factors, we expect the both the sectors to grow strongly into the future. However, scale and execution capabilities will hold the key for the success of the engineering companies.

-Sakshi Sharma