MUMBAI: The maiden Union Budget 2003-2004 by Finance Minister Jaswant Singh has received an overwhelming response from apex industry associations. Surprisingly, both FICCI and CII have avoided any reference to media and entertainment industry in their post budget reactions. FICCI had propogated the cause of the media industry and made several representations to the concerned ministries

Following are the reactions from FICCI, CII , MAIT and Nasscom.

Budget is a well-conceived and constructive blueprint; will take the country to a higher growth trajectory: FICCI President

Congratulating the union finance minister on the well-conceived and constructive budget proposals Federation of Indian Chambers of Commerce and Industry (FICCI) president Dr A C Muthiah highlighted three historic aspects in this year’s budget : “Rationalisation of tax structure in general and introduction of VAT in particular, emphasis on development of infrastructure with initiation of new projects on airports, ports, roads and railway and the introduction of fiscal consolidation measures including cash management system in the government departments. These progressive and historic steps show the sincerity with which the problems of the day has been addressed to.”

Jaswant Singh’s maiden budget is “a well-conceived and constructive blueprint for taking the country to an altogether higher growth trajectory,” observed A C Muthiah.

Advertisement

“It is progressive and growth oriented with its major thrust on infrastructure building, fiscal consolidation, rationalisation of excise duty structure,” he pointed out.

“The budget should help spur job creation in the country with its focus on employment intensive sectors like textiles and small-scale sector”, he added.”This budget would surely give rise to a feel-good factor,” Muthiah felt.

FICCI welcomed the finance minister’s five-pronged strategy underlying the entire budgetary exercise. The budget has fine tuned a host of measures and incentives to promote finance minister five priorities, namely, poverty alleviation, infrastructure development, agricultural growth and diversification, thrust on industrial sector and fiscal consolidation.

FICCI believed that the budget contained features which give critical push to the overall growth rate. The finance minister has chosen several thrust industries and had given specific concessions which should spur their growth like textiles or housing. These should now be able to create much large level of demand.

FICCI complimented the finance minister for providing a framework for a smooth transition to the value added taxation system. By providing to pick up the losses to the states on account of introduction of VAT for three years, the finance minister had disarmed the main opposition to introduction of VAT and that too through a process of consensus.

Advertisement

FICCI president Muthiah summed up his views: “The proposed infrastructure projects will stimulate demand and help pick up of manufacturing activity in core sectors. The benefits given to the textile sector is in line with the submissions before the government by FICCI textile task force. Retention of tax sop on interest payment on housing and 100 per cent depreciation granted for drinking water projects for housing sector are innovative steps. For the pharmaceutical sector also there had been reasons to cheer. The benefits granted to the sector at par with IT sector will boost the prospects of Indian pharmaceutical sector substantially. Telecom will benefit from the duty cuts and also from the decision on hike in FDI in the sector. Also welcome is the decision on FDI ceiling in banks and voting rights.”

On agriculture while welcoming decisions to allocate funds for high tech scheme in horticulture and price stabilisation of plantation crops like coffee, tea and rubber Muthiah said:”The steps are too few and too small for a boost to agriculture sector which is critical for generation of employment and also achieving the 10th plan target of 8 per cent growth rate.”

FICCI was hoping major concessions in agro-processing to take India to global levels particularly since India is a global leader in production of fruits and vegetables. The country currently processes only two per cent of its fruits and vegetables production and this underlines the importance of agro-processing.

As regards taxation proposals FICCI president Muthiah was happy with a number of positive steps initiated : continuation of tax benefits under section 10A & 10 B for EOUs, EPZs, SEZs, abolition of long term capital gains on listed securities and exemption of dividend tax in the hands of shareholders, removal and reduction of surcharge on income tax , further rationalization of excise and customs duty structure, simplification of direct tax law procedures and tax administration and also removal of budget day restriction on movement of goods.

Finance Minister’s proposal for reforms of tax administration will be particularly welcome – measures like one page return form and electronic filing will immensely benefit the common man, added Muthiah .

Advertisement

For capital market the budget proposals are encouraging. On the positive side is the proposal that dividend income should be exempt from taxation at the hands of the shareholders.

“Had FICCI suggestion on MAT and investment allowance been accepted, there could have been a further boost to capital market. This would also have contributed even greater spread of the “feel-good” factor that the budget has created.” Dr Muthiah said. “For industry reduction of peak tariff from 30 per cent to 25 per cent without the disabilities like labour, infrastructure, interest, tax structure etc being completely removed may prove a dampener. Also the rise in service tax without making the same VATable should have been avoided,” felt FICCI President.

Budget will set a sensible, reform-driven fiscal framework for sustained economic growth: CII

CII president Ashok Soota has wholeheartedly praised the maiden union budget presented by finance minister Jaswant Singh. “We at CII expected a growth oriented, reformist budget from the Finance Minister. But we couldn’t imagine the extent to which he would take the reform process forward,” said Soota. “This Union Budget 2003-04 takes into account almost all of CII’s recommendations, and in fact has exceeded all our expectations”, said he.

Soota’s praise for the Budget was echoed by CII vice president Anand Mahindra and CII director general Tarun Das.

Advertisement

“Not only does this Budget set a sensible, reform-driven fiscal framework for sustained economic growth, but it is also written in simple, no-nonsense, and wonderfully constructed language”, said Mahindra. “I am delighted to see so many reform measures – covering direct as well as indirect taxes, infrastructure, reduction in interest rate on small savings, and several other areas. Personally, the automobile industry is delighted that excise duty on motor vehicles and MUVs have been reduced from 32 per cent to 24 per cent.”

A delighted Tarun Das said, “This budget is a class act. It balances economic and political needs; creates an environment for entrepreneurial growth; and is sensible as it goes forward on tax reforms and rationalisation”.

CII is happy with virtually all the key elements of this Budget. In particular, CII is delighted with:

Halving the corporate surcharge – with the hope that the remaining half will become history in the next Budget.

Eliminating the dividend tax in the hands of the recipient, and instead levying a 12.5 per cent dividend payout tax in the hands of the corporates – more or less as it was before last year.
Eliminating long term capital gains tax on listed securities.

Advertisement

Giving importance to manufacturing by helping consolidate recent gains through a creative fiscal package.

The major fiscal reform package for textiles, apparels, garments and made-ups.

Reduction of duties on tyres, aerated waters, PFY, air conditioners and motor vehicles from 32 per cent to 24 per cent – something that CII has been asking for in the last three budgets.

The boost to tourism by withdrawing expenditure tax and by extending infrastructure status under section 10(23G) of the Income Tax Act.

The importance given to the healthcare sector by not only reducing customs duties on medical equipment and allowing 40 per cent depreciation on some of these, but also by giving his sector infrastructure status.

Advertisement

Reducing the peak rate of customs duty from 30 per cent to 25 per cent. CII believes that India now has competitiveness in manufacturing to deal with a peak rate of 25 per cent.

Major initiatives in infrastructure, involving 48 new road projects, rail projects, and renovation and modernization of Delhi and Mumbai airports, and the Jawaharlal Nehru Port Trust, Navi Mumbai and Cochin sea-ports.

100 per cent depreciation on plant, machinery and buildings related to water supply and water treatment plants.

Maintaining 10A and 10B, and 80IA and 80IB benefits.

CII is also delighted with this Budget’s reforms on the personal income tax front. “Eliminating surcharge on people earning taxable income up to Rs 8.5 lakhs is a step in the right direction,” said Soota. “I also applaud the finance minister’s decision to give more tax breaks to the elderly.”

Advertisement

“Education lies at the core of growth”, said Mahindra. “And, in this context, the finance minister’s tax break of up to Rs 24,000 per year for the education of two children will go a long way”, said Mahindra. He also applauded the Budget’s attempts at giving a fillip to agriculture, while recognizing that this is a state subject.

While CII expressed concern about the almost Rs 10,000 crore overshooting of the fiscal deficit – resulting the deficit rising to 5.9 per cent of GDP – Das felt that India will see over 6.5 per cent GDP growth next year, which should reduce the deficit burden going forward.
Rating

9/10
ion Budget 2003-04 is growth oriented: MAIT

MAIT, the apex body representing the hardware training and services sector of the IT industry in India welcomes the Budget as it benefits the IT industry in all aspects.

MAIT executive director Vinnie Mehta believes that :

Advertisement

1. The union budget 2003-04 is growth oriented. Focus on infrastructure spend, modernisation of ports, construction of new airports, simplification of procedures for exports and imports and reduction in transaction costs, introduction of VAT by 1 April 2003 – all send very positive signals of a positive and conducive business climate. 

2. The government has announced removal of excise duty of pre-loaded software (operating systems amonsgt others). This was introduced last year in month of July (with retrospective effect from 2000). This will positively impact prices of computers, which will fall by Rs 500-600.

3. The government has announced the continuation of income tax benefits for investments in R&D and new product development. This is a welcome move, as this will give impetus to design activities, technology development and IPR creation in the industry.

4. The continuation of income tax exemption under 10A/10B for exports earnings will benefit the hardware exporters as well.

5. Duty phase-out, as per India’s commitment under the IT agreement of the WTO will come into being. All components listed in the IT agreement will attract nil customs duty.

Advertisement

6. Customs duty of capital goods for IT/Telecom manufacturing has been rationalised, and will now attract 15 per cent instead of 25 per cent .This is to align the duty structure of capital goods with that of finished goods. Under ITA, finished goods are in the slab of 15 per cent customs duty for FY 2003-04.

7. The excise duty on IT products continues to remain at 16 per cent. MAIT had strongly recommended that this be brought down to 8 per cent to counter the grey market, which today is over 50 per cent of the total PC market. The reduction would also mean PC prices dropping by about 5 per cent points, a very significant reduction for a price sensitive market like India.

We are delighted that the government is sticking to its commitment: Nasscom President

“Restoring tax benefits was the main concern for the industry. We are delighted that the government is sticking to its commitment. The world market is going through tough conditions but we are doing well. It is good that these tax breaks are being restored, otherwise the growth momentum of our industry would have been lost,” says Nasscom president Kiran Karnik.

Advertisement