Macro picture robust for advertising

| Updated on March 01, 2011

The direction to move to a DTC and GST regime over the next one year, and the commitment to do so by April 1, 2012, is welcome

Mr Nagesh Alai, CFO, Draftfcb Ulka; President, Advertising Agencies Association of India (AAAI):

To be honest, the direct impact of this Budget on advertising as an industry is close to nil.

Yes, there could be some impact in the form of increased outlays for air travel costs and restaurant bills due to service tax, but those will not be something that cannot be grappled with.

But at a larger level, to a significant extent, the effect on the advertising industry depends on the macro-economic indicators, the country's GDP growth, the sectoral growth potential, the changes in the structure of the media universe, the demographic changes necessitating targeted approach, among others.  

The direction to move to a DTC and GST regime over the next one year, and the commitment to do so by April 1, 2012, is welcome. The rate of tax has been kept steady and that will give stability to businesses and hence to their marketing and advertising plans.

The Finance Minister's growth projection of 8.75-9.25 per cent in 2012-13 is encouraging. Overall, keeping the excise duty and service tax rates at 10 per cent is welcome and is a sign of stability.

There are certain concrete steps taken to keep prices of food items in check and that should help tackle inflation and keep spending power of consumers at their current level. On consumption, there are announcements which will increase the bill amount at hotels, restaurants and hospitals due to inclusion of these under service tax.

Typically, one expects an immediate reaction by consumers, and those eating out three or four times a month might choose to have one outing less.

Branded apparel is a category where the impact of the Budget will be felt. Typically, every consumer works out a personal consumption budget and sticks to that.

If my usual brand priced at Rs 1,600 goes up to say Rs 1,900 or thereabouts, I might start considering an acceptable brand priced at Rs 1,400.

Communication around these brands therefore might be an area of activity to ensure consumer retention and prevent migration.

There are some sops for jumbo films with removal of countervailing duty. But this may not have significant impact on advertising given the increasingly digitised world of communication and media.

On the whole, it is a positive and a confident Budget with a focus on fiscal management and accountability.

(As told to Gokul Krishnamurthy)

Published on March 01, 2011

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