The government has placed renewed thrust on infrastructure development that includes rural electrification and improving road connectivity.
The Finance Minister has proposed a 5% security surcharge on income tax. Dividends have been subjected to tax at the receivers end. Also, rebate under Section 88 has been reduced to 10% for individuals who fall under the income levels of Rs 150,000 to Rs 500,000. Rebate has been removed for individuals whose income is above Rs 500,000.
Interest rate on all administered interest rates has been reduced by 50 basis points.
Peak customs duty reduced from 35% to 30%.
Budget Impact
It is estimated that close to 80,000 villages in India do not have electrification facilities. If the government considers rural electrification seriously, demand for colour televisions (CTVs), refrigerators and other durables could increase significantly in the coming years. Though the government seems to be serious on this front, past track record is far from impressive.
Interest on durable loans might fall in the current fiscal on account of reduction in interest rates. One of the key reasons for the rise in durable demand in recent years has been affordability.
Durable manufacturers, notably CTV manufacturers, would benefit to a large extent in light of the reduction in peak customs duty. This could more than offset the fall in prices on account of increased competition.
Imposition of surcharge and reduction in Section 88 benefits might dent consumer confidence. This could have an adverse impact for the durable industry.
Industry wish list
Mr. Rajeev Karwal, President, CETMA
Reduction of customs duty on CPT (colour picture tubes). The customs duty on CPT should be brought at par with other components.
Customs duty on capital goods for electronic industry should be brought down to 5%, as no indigenous capital goods Industry exists.
Customs duty on basic raw material such as copper, aluminium, plastics should be brought down to 10%.
Reduction in customs duty on set top box to 5% for use with DTT, DTH & Cable TV.
B&W TV and its non-dual use components should be exempted from excise duty.
Radios, low value audio products and other low value consumer electronic products should be exempted from excise duty.
Abatement on MRP for excise purposes on CTV should be increased from 35% to 40%, as is applicable to other consumer durables.
Mr. Naishadh Parikh, Managing Director, Amtrex Hitachi Appliance Limited
Currently penetration of AC in homes is less than 1% in India. The biggest growth deterrent is high tax component at more than 50% of the MRP of AC’s.
The industry has explained to the government the need to correct the anomaly and rationalise the high excise duty (presently 32%) & low abatement of MRP (presently 40%).
Currently, AC industry attracts the peak customs duty at 35% on major raw materials & components, which need to be brought down and rationalised in line with any revision in the structure of import duties with respect to WTO commitments.
Key Positives
Penetration of durables continues to remain sluggish when compared to other developing economies.
Rising income levels, consumption patterns and urbanization are some of the key factors that would result in higher growth in sales.
Easy availability of finance has stimulated consumers to buy durables.
With agricultural sector performing well in the current fiscal, demand is expected to increase.
Key Negatives
Higher import duty on colour picture tubes has been a cause of concern.
Threats of cheaper imports from China and other South East Asian countries.
Exchange schemes and pricing-play by some manufacturers have had a negative impact on top players.
The industry is highly competitive. As a result, realisations have been under pressure.
