New I-T exemption limit will boost FMCG sector: Adi Godrej
Adi Godrej March 1, 2011We witnessed the presentation of an excellent Budget by the Finance Minister on Monday. The Budget proposals were an exercise in a balanced approach to all the major macroeconomic issues, especially growth. I think the Budget proposals will lead to containment in inflation, an acceptable level of fiscal deficit and a 9 per cent plus rate of GDP growth.
There was a strong indication from the FM that we should expect the introduction of GST during the next financial year. The decision to introduce the constitutional amendment for GST was backed up by the important decision not to raise excise duty which is at 10 per cent, the likely rate of central GST. Once GST is introduced it will lead to much lower rates of inflation as the indirect taxation on consumer products will come down by about 5 per cent.
The fiscal deficit would also come down as excise duty evasion would come down by upward of 90 per cent. Further GDP growth rate would go up by 1½ to 2 percentage points other things being equal. So all in all, GST would be the single most important reform post the 1991 reforms.
The increase in exemption limits for income tax is an important step in increasing consumption by the middle class and will give a boost particularly to the Fast Moving Consumer Goods (FMCG) sector.
A similar positive effect will be seen from the reduction in surcharges from 7.5 to 5 per cent. The reduction in surcharge should also be positive for the corporate sector. The disinvestment target of Rs 40,000 crore was welcome. It will help contain the fiscal deficit to a reasonable level.
Other welcome provisions of the Budget were, increase in the amount for the definition of the priority home sector for Rs 20 lakh to Rs 25 lakh; excise exemption to basic food and fuel; emphasis on the Food and Agriculture sector particularly for improved logistics and back end, and allocation of Rs 300 crore for promotion of Oil Palm cultivation.
Overall we saw the introduction of Budget proposals that were both politically and economically sound and that should help stimulate a 9 per cent plus GDP growth in the next financial year.
The writer is chairman of the Godrej Group of Industries.