Swallowing the Rollback pill Finance Minister Yashwant Sinha finally did what he does best. Under pressure from ruling alliance constituents the FM chose to rollback some of his tough measures aimed at shoring revenues. In the bargain, the office of India's Finance Ministry stands undermined. Ajit Dayal says: "B" is for... Budget '03: From zero to hero Budget 2002 - A refresher on what happened last year Understanding the Budget Views on the Indian Economy ) Key Sector Quotes Aluminium Banks (Private) Banks (PSU) Cement Fertilizer FMCG Food Media MNC Pharma PSU Shipping Software (Large) Software (Others) Telecom A V Birla Ambani Tata Market Commentary Over the years: Budget 05, Budget 04, Budget 02
Ms. Kalpana Morparia - Executive Director - ICICI "On a scale of 10, I would rate the budget as 7 for ICICI Bank and below 5 for the overall markets. A higher rating for the bank is on the back of measures announced for reducing the bank's liability, increasing provisions, resolution for bad loans and higher depreciation for new investments in expansion. All these are good developments for the bank. However, by introducing the dividend tax, the FM has given a blow to the debt mutual funds. This would impact sentiment of the capital markets."
Mr. Harsh Mariwala, Managing Director, Marico Industries Ltd. “The Union Budget 2002-03 is a movement in the right direction, but the magnitude of the steps is too small. Elimination of Special Excise Duty on some of the FMCG items is a welcome move. The agricultural reforms especially those relating to micro credit and new initiatives of employment generation will help rural demand. With expected growth of 6% in agriculture sector, we are hopeful of better demand from rural consumers. However, certain issues remain un-addressed like tax discrimination between branded and unbranded goods has not been removed. While import duty of consumer goods has been lowered, the disparity between imported and domestic goods continues in the form of MRP-based excise only for domestic goods. Customs duty on edible oils could have been rationalized.”
Mr R. K. Kanga, GM Finance, Tata Power “I am not happy with the budget. It fell short of a lot of expectations. We expected infrastructure companies, especially power, would be removed from the MAT, which has not happened. Neither has LNG been given an infrastructure status. Also, we had hoped that duties on imported naphtha, coal, LSHS and other imported fuels will be brought down. This would have helped power companies reduce their costs and thus made power cheaply available. Even this has not happened.” “On the personal taxation front, I believe that the FM was a bit harsh. However, on the positives, the decline in diesel and petrol prices is a good sign. Also, if the government honestly implements its infrastructure development plans, it will be a big positive. But past record gives us no hint of such confidence. On a scale of 10, I would give the 2002-03 budget not more than 4.”
Mr. Ashwin Dani, VC & MD, Asian Paints (India) Limited The budget is not likely to provide any stimulus to demand. The administrative reforms that the government has announced for the financial, infrastructure, and agriculture sector will be beneficial for the country, but unfortunately it will not stimulate demand. The custom duty reduction from 35% to 30% will benefit the paint industry considering that around 30% of raw materials are imported. However, depreciation of the rupee will reduce the benefit. The paint industry was expecting major housing sector initiatives to be announced. But as far as housing sector is concerned, only some strategic initiatives were announced.
Prakash Bajpai, President & CEO, Hughes Tele.com Possible exemption of FII investments from the calculation of current Foreign Investment ceiling of 49% i.e. FDI at 49% + FII investments beyond that. In his speech, the Finance Minister did not specify which sectors would be allowed this exemption. We will have to wait for the budget document to know its applicability to the Telecom sector. An increase in investment ceiling will help the industry to access more capital. While the Finance Minister did not mention it in his speech, the budget notifications appear to remove the anomaly in customs duties for some of the equipment imported by Basic, Cellular and Internet service providers by reducing the duty payable by Basic service operators to the 5% level (from 15% earlier) applicable to Cellular, Internet & Paging service providers. Reduction in duties will reduce network costs.
