Pawan Goenka, president, automotive & farm equipment sectors, M&M on Pranab Mukherjee's budget.
Against the backdrop of some signs of an economic deceleration, the Finance Minister Pranab Mukherjee delivered a Budget with a good intent. The Budget has clear emphasis on the key areas of infrastructure, agri development, healthcare and education.
From the macroeconomic perspective, the accelerated growth forecast of 7.6% in 2012-13 and the attempt to control the fiscal deficit to 5.1% are steps in the right direction. However, there is some level of apprehension on whether these targets can be achieved or not. There are certain assumptions on subsidy reductions but it is not clear that how the fertilizer and petroleum subsidy will be reduced.
Though, there has been no big announcement on the rural side, the package of initiatives focusing on farm productivity, transportation efficiency, warehousing and micro-irrigation are all positive signs and augurs well for the overall economy. The R200 crore outlay for agriculture research may look to be a small amount but if used correctly — it will go a long way in improving farm productivity — which is so critical for the Indian agriculture. Similarly, the national mission on food processing will create job opportunities and also open up opportunities for exports.
Specific to automotive industry, the industry is relieved that the FM did not take any retrograde step such as imposing a tax on diesel vehicles. The investments which were so far in not committed due the petrol-diesel dilemma should now start flowing in.
The excise duty hike was in a way expected and we will have to pass on the price increase to the consumer. However, with all the surcharges and special levies, the top excise duty rate is as high as 29%. I believe this is simply too high! Going forward, we do not expect any major depression in demand, but if any, it should wear off with time.
The Budget has some very well thought of initiatives such as the R5,000 crore venture fund by SIDBI with the objective of aiding the Micro, Small and Medium Enterprises (MSME). This should help the financing to the auto ancillary industry which is in need of funds for modernisation.
Other positive steps are extension of weighted deduction of R&D by five years, introduction of weighted deduction for skills development and reduction in duties for hybrid and electric vehicle components.
On the concerns side, is the inadequacy of the initiatives to provide the push to manufacturing, for achieving the targets laid out in the National Manufacturing Policy, of achieving 25% share of GDP in the next 10 years. I would have liked the Budget to lay out some concrete steps in this direction. I would have also liked to see a more definitive statement on timeline for the goods and services tax (GST).
Overall, the Union Budget neither had surprises nor any big announcements but it has the necessary caution and intent to revive growth in the economy.