Financial Daily from THE HINDU group of publications
Friday, Jul 09, 2004
Industry & Economy
Captains of industry give Budget proposals a cautious welcome
R. Gopalakrishnan, Executive Director, Tata Sons
Mumbai , July 8
R. Gopalakrishnan, Executive Director, Tata Sons: I think the key question for me is the ability to implement because Budget speeches are basically meant to inform the public about policy and how allocations will be made. I have a concern about how the actual implementation will happen. But you have to wait and watch.
In the past Budget speeches, Finance Ministers have given an action taken report. How many of the proposals made last year have been implemented. This year the Finance Minister did not done so. That may be because of the political change. But our track record in the past has been a strike rate of only about 50 per cent. We have not been efficient implementers of our proposals.
The Finance Minister is obviously betting on growth and therefore he is hoping that the fiscal deficit will remain under control. I think the economy did well last year irrespective of which political party was running the country. I share the view, let a running train run better.
He is taking a few risks, but they are calculated ones, like the fiscal deficit will come down to 4.4 per cent. You can argue that is a risk. A more cautious person might ask what if the growth doesn't come through? But you have to take some risks, a Budget without any risk at all is a meaningless budget.
Rajesh V. Shah, Managing Director, Mukand Ltd: The import duties on steel products were reduced by 5 per cent and excise duties, increased.
Investment in steel industry has to be encouraged and by taking some of these steps it may be counter productive in the long run, if investments slow down due to this sharp reduction.
Last year, the import duty on non-alloy steel was 30 per cent, which was brought down to 10 per cent this year. Most countries do not have such low import duties in steel and this should be looked at carefully for its long-term implications.
Udayan Bose, Chairman, Lazard India: I wish he had given a little more on manufacturing, IT. The whole world is talking about business process outsourcing, no mention was made of that. Clearly, the agenda was to look at a larger audience, the Left Front etc.
But it is fundamentally a prudent Budget, he is controlling fiscal deficit, he has at least made a commitment in Parliament that he will make zero revenue deficit by 2008-09. Under the circumstances, it is fine.
Dalal Street however works on today, tomorrow, day after, next week. There is nothing here for today, tomorrow, day after, next week. There is something for six months or after one year. There is nothing for immediate gain.
Anu Agha, Chairperson, Thermax: It is a fine Budget, not a dramatic one. Many good initiatives for agriculture, the poor. Now all depends on how it will be implemented.
Praveen Kadle, Executive Director, Tata Motors Limited: Overall the Budget, I think, was aimed at developing the agricultural and rural economy. To some extent that is good because improvement in the rural economy has its impact on the economy at large.
But talking specifically of the auto industry, at first glance it appears some of the costs may go up because of likely change to steel prices. There are some benefits on the R&D weighted average deduction on tax, but that will be marginal and as I understand, possibly for a limited period. So, the Budget is neutral to the auto industry, perhaps even slightly negative. However, he has spared transport operators from service tax, which is a good thing.
Dr J.J. Irani, Director, Tata Sons Ltd
Dr J.J. Irani, Director, Tata Sons Ltd: My initial reaction is that there would be no impact on the steel industry or steel prices. The import duty may have been reduced by five per cent, but at the same time excise duty is going up by four per cent, which will have a counter veiling effect. So, the imported material will have no impact.
As far as excise duty is concerned, it is up to the steel plants to decide whether they wish to pass it on to the customer or not.
Mr Sajjan Jindal, Chairman & Managing Director, Jindal Iron and Steel Company Ltd: It is a good Budget giving a major thrust to the rural sector and should help boost industrial demand. The Finance Minister has placed great emphasis on the infrastructure sector.
This will drive up steel demand. The increase in excise duty by four per cent to 12 per cent will have zero impact as we will pass this on to the customers. Since this is modvatable, the customers will be able to take the hike. The lowering of customs duty on steel import will also have no impact as domestic prices are lower than international prices. All in all it is a progressive budget. In any case there is very little that Finance Minister can do nowadays, except some bit of fine-tuning.
Shashi Ruia, Chairman, Essar Group
Shashi Ruia, Chairman, Essar Group: Setting up an inter-institutional lending group for infrastructure projects is a welcome decision. The same could be considered for industries like steel which provide critical inputs to the infrastructure sector. On balance, the Finance Minister has looked after all major aspects barring the requirements of quality steel manufacturers of the country.
Rise in excise duty with reduction in customs will merely encourage low quality steel being dumped into India. This perhaps needs a rethinking in the light of what the industry has gone through over the last five years.
Percy Siganporia, Managing Director, Tata Tea Ltd: The Budget, in terms of continuity, is a well-balanced effort, which continues the current economic agenda with two major initiatives.
The nurturing and fostering of rural India, the weaker sections of society and the low middle class have provided a fillip to potential growth of tea consumption after a lag of 6-8 months. The threat to balance the deficit is exemplary and sets the economy up for the next fiscal budget.
Zubin Dubash, Executive Director, Indian Hotels Company Ltd: The IIG Fund of Rs 40,000 crore, set up for investments in airports, ports and tourism, is a step in the right direction.
The increase in FDI for airlines could result in more capacity being created in the airline industry. The combination of improved airports and additional capacity in the airline industry would result in a significant increase in tourist arrivals.
One concern is the turnover tax imposed on stock market transactions. One needs to understand the effect this would have capital markets. A buoyant capital market is essential for ensuring growth in foreign business tourist arrivals.
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