Could have done better: India Inc

Away from television studios and the spotlight, Indian CEOs are admitting that the Union Budget announced by the finance minister P Chidamba...

Away from television studios and the spotlight, Indian CEOs are admitting that the Union Budget announced by the finance minister P Chidambaram fell short of their expectations. Though the Budget has many positives like giving an impetus to infrastucture and rural economy, increase in minimum alternate tax MAT, service tax and continuation of fringe benefit tax has come as a big dampener.

8220;We have to say something positive on TV but the fact is that the Budget did not heed to our main demand of dropping the fringe benefit tax and litigations on this issue will continue,8221; says a CEO on conditions of anonymity. 8220;On the contrary, the government has increased the minimum alternative tax by 2.5 per cent and service tax by 2 per cent,8221; he added.

India Inc had made vociferous demand to the government to drop or amend the FBT but the finance minister chose to ignore the demand. 8220;The FBT should have been abolished. The litigations and paperwork will only grow,8221; says Y P Trivedi, a Mumbai corporate lawyer.

Increase in service tax from 10 per cent to 12 per cent was another complaint. 8220;Widening of service tax net and increase in rate by 2 per cent would have an adverse impact on our cost structure,8221; rues Percy Siganporia, Managing Director of Tata Tea.

However, on the positive side, corporate India says the continued emphasis on rural infrastructure along with focus on increasing credit to the farmers would result in improving the purchasing power in rural India, thus boosting demand of FMCG products, TVs and motorcycles. 8220;The government should have reduced the excise duty on motorcycles to 8 per cent,8221; says Rahul Bajaj, who will have to now face more competition from cheaper small cars. Excise duty on cars was reduced from 24 to 16 per cent by the finance minister today.8217;8221;The budget is excellent as increasing rural income means more sales for us,8221; says Chairman of Videocon group, Venugopal Dhoot. 8220;Giving infrastructure status for production of plasma and TVs is a big plus for us. With the focus on infrastructure, the country is poised to become third-largest economy in the years to come,8221; he adds.

A major positive feature of the budget is the clear signal given by the Finance Minister on introduction of a comprehensive goods and services tax by 2010. 8220;The nationwide goods and services tax will help create a national common market,8221; says Wockhardt Chairman Habil Khorakiwala. But he hastily adds that a major disappointment was that the increasing R038;D expenditure by the Indian companies did not receive any incentives.

Agrees Kiran M. Shaw, Chairperson of Biocon Ltd. The industry was asking for a five-year weighted tax deduction, lower duties on R038;D Consumables and equipment8212;to be on par with other competing nations; and duty-free import of enabling technologies to promote collaborative R038;D. 8220;Unfortunately, this year8217;s budget has completely ignored industry8217;s recommendations,8221; she said.

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The finance minister also failed to touch upon the issue of privatisation and did not pursue the policy of reforms of PSUs and disinvestment.

The high expectations of corporate India may be grounded, but CEOs say they will continue to maintain the high levels of profitability as the economy is growing at an healthy rate of 8.1 per cent and in fact will reach 10 per cent in the years to come.