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K.R. Kim

The reduction in peak custom duty will make the final product more affordable.

THE Budget 2005 is can be said to be pragmatic and based on sound economic logic.

The overall budget must be commended for its consumer-friendliness by way of cuts in duties, tariffs and taxes.

The decision to realign the tariff structure will help local manufacturers survive under the FTA regime.

Further, the reduction in duties on air-conditioners from 24 per cent to 16 per cent is welcome since it will lend scalability to non-exempted manufacturers.

This will revive many defunct units. The measure is certainly a positive one and lends optimism to the industry. The zero custom duty on IT products will boost this fast developing sector.

The reduction of basic custom duty on ITA-1 listed items like personal computer, mobile phones and IT components is a well-considered step, although the reduction to 4 per cent leaves many asking for more.

The reduction in peak custom duty from 20 per cent to 15 per cent will encourage greater imports, enabling manufacturers to procure raw material at cheaper rates and making the final product more affordable.

However what pinches is the fact that no such incentives have been provided to exporters, who have the potential to become the backbone of Indian economy.

The reduction of indirect taxes on capital goods and certain raw material will spur domestic manufacturers and provide them with a level playing field in the FTA regime.

The absence of further increases in service tax has delighted many.

What was also a relief was that there has been no further increase in the service taxes.

However the budget has its omissions. The domestic exporters have not benefited from the Budget as there are no incentives on the exports.

The anticipated depreciation on capital investment was conspicuous by its absence.

Nor has the import tax structure been simplified as expected, and the imposition of a 4 per cent safeguard duty makes calculation more cumbersome.

And there has been no announcement on reforms in the labour policy.

(The author is President (South-west Asia), LG Electronics & MD LG Electronics India Limited)

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