FM has left India Inc a bit disappointed by not tinkering with corporate tax levels in Budget 2008. While the common man has been left with enough money in their pockets, corporates will be paying the same rates of tax this year as well as there is no change in surcharge on corporate tax.
Speaking on Budget–08, Sumant Sinha , CEO, Aditya Birla Group has a view since that this is an election year, the FM has tried to put more money into the consumer’s pockets. He also feels that the loan waiver is questionable because some part of the liabilities of the rural sector down, may translate into lower credit loan repayments in the future, which will lead to more money in people’s pockets, but also create a moral hazard problem.
In terms of consumption and investment demand, Ajit Gulabchand , CMD at Hindustan Constructions says that the FM could have done better, because there is a slowdown in India and across the world. He also says that though he has spent 20% more on infrastructure this time, in terms of percentage of GDP, he has actually planned to spend less than what he had planned last year.
Chanda Kochhar , Joint MD & CFO at ICICI Bank on the other hand feels that growth comes from both consumption and investments. So the FM is trying to make consumption faster and inclusive, she says. Kochhar also sees this consumer empowerment as an encouragement to buy more and in a way, increases the growth rate for much higher credit growth on the consumer loans side and partly even in the project investment side, with the reduction in the project import duties.
Adi Godrej ,CMD, Godrej Industries adds that this Budget will give a tremendous stimulus to Fiscal growth. The slab increase puts a tremendous amount of money in the hands of the people, somebody who was earning Rs 5 lakh, will save about Rs 45,000. "That’s a lot of money; he will be paying a little over half the tax he was paying earlier, so that will create tremendous demand for goods and services and that will lead to growth and the fiscal stimulus that we wanted out from this budget has been provided" he says.
Pawan Goenka , President- Automotive Sector, M&M feels the demand that the Finance Minister has fueled by putting money in the consumers’ pocket and also by reducing excise duty will help the industry in terms of creating growth and volume.
Gautam Doshi , Group MD, ADAG says that the FM hasn’t looked at the fiscal concessions for the export promotion zone and the export industry. "He has considered demand push, but not really a tax-based growth budget" he adds.
Ranga Iyer , MD of Wyeth adds that though the FM has really done a lot in terms of infrastructure for the healthcare sector like tax holidays and more allocations, nothing much was done for incentivising the R&D,
Excerpts from the exclusive interview with Sumant Sinha, Ajit Gulabchand, Chanda Kochhar, Adi Godrej, Pawan Goenka, Gautam Doshi, Sanjay Nayar and Ranga Iyer:
Q: In the light of possible slowdown in the global economy, has he done enough to sustain growth?
Sumant Sinha: We have to understand the philosophy of this budget, past budgets have sort of pushed investments and it did take a little bit of time to feed economic growth into the real economy. Given the fact that this is an election year, what he has fundamentally done is that he has put money in to the consumer’s pockets, the rural consumers, the farmers and also sort of changed the income-tax slabs which is actually going to put tremendous amount of money in most of the consumer’s pockets. So as consumers realize this and as they start spending, that will feed into a very immediate take into the economy, so at least on a short-term basis, India is going to be somewhat insulated as some of this extra spending funds will come into the economy.
Q: So has he done enough for the consumption demand or the investment demand?
Gulabchand: I think he could have done better, because there is a slowdown in India, there is a slowdown globally. It’s going to affect us and I think given the fact that he is also worried about inflation, a little bit more for the supply side would have helped a lot in order to balance that, so I feel he could have done a little better.
Q: Has he done enough to tackle slowing growth and also creeping inflation?
Kochhar: Growth comes from both, consumption and investments, so we just saw that he is trying to make consumption faster and inclusive. It is not just putting money in the hands of people, even the cut in excise duties, whether in two-wheeler or cars etc is going to really feed into growth, in the form of consumption, on the investment side, some amount of investments that he has talked about on the UMPPs, something on the NHAI, all these are going to be funding.
Q: Nothing concrete, the UMPP or the NHAI?
Kochhar: They are all not very large on the investment, but yes if you look at UMPP, that itself could be an Rs 1 lakh crore of investment.
Q: If it comes through?
Q: Has he done enough on the consumption side, you think he has done so much, that it can really keep India ticking because, he is put a lot of money in people’s pockets?
Godrej: I think this Budget will give a tremendous Fiscal stimulus to growth. The slab increase puts a tremendous amount of money in the hands of the people, somebody who was earning Rs 5 lakh, will save about Rs 45,000. That’s a lot of money; he will be paying a little over half the tax he was paying earlier, so that will create tremendous demand for goods and services and that will lead to growth and the fiscal stimulus that we wanted out from this budget has been provided. The 2% send back reduction rate will also go in the same direction, so I am very pleased with what this budget will do to stimulate growth.
Q: You gave the Budget, 8 out of 10, when we asked you to rate it, don’t you think you have taken corporate possibility for granted, you had a wonderful run for the last 5 years, has he taken it for granted?
Godrej: This demand growth that he has created, by increasing the slabs, will create a lot of demand for goods and services and that will maintain corporate profit, so I feel the growth rate will be stimulated, by what he has done.
Q: You haven’t wanted to miss the word in past budget, has he done enough for growth, do you think that we could be hurt by what’s happening around the world because this budget hasn’t done enough?
Goenka: Well as everyone has said here that
READ MORE ON Sumant Sinha, Aditya Birla Group , Ajit Gulabchand, Chanda Kochhar, ICICI Bank , Hindustan Constructions , Adi Godrej, Godrei Industries , Pawan Goenka, M&M, Gautam Doshi, ADAG, Sanjay Nayar, Citigroup India , Ranga Iyer, Wyeth, UMPP , NHAI
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