The budget 2015 focused on bringing back the Indian economy on track without focusing how it will affect the consumption in India.
Branded as ‘Make in India’ budget, it talks of manufacturing contributing only to 10 per cent of GDP in speech. However, the major players in the country support manufacturing in India in a big way.
Commenting on the same, Piruz Khambatta, Chairman and MD, Rasna said, “At the end of almost two hours speech there are hardly any tax reforms or policy change announced to support “Make in India”. Further, taxes are the same much awaited tax reforms are pending, MAT on SEZ remain the same or increased interest cost.”
Industry also feels that there is no announcement of any reduction or special schemes for subversion, benefit for marketing brand Make in India abroad, labor law reforms are still in pipe line and across board service tax increase would only increase costs further.
However for FMCG in particular, proactive reforms to stimulate demand and drive growth will help bring growth back on track. The emerging middle class and rural India have had their consumption stymied due to their wallets getting squeezed. Increasing money in the hands of these consumers will stimulate demand and consumption of products in the F&B sector. But the increased service tax from 12.5 per cent to 14 per cent seems a hurdle in penetrating the right business by the sector as this may slow down the consumption pattern.
Sharing his view on the same, Sanjay Jain, Director, Elanpro commented, "The Budget clearly talks of a long term vision for economic growth, a vision which dreams of better amenities, infrastructure, skill development and jobs. Proactive efforts to drive demand and increase consumption will bring FMCG recovery back on track.”
Meanwhile experts believes that, service tax increase of 14 per cent would fuel inflation across the board and would affect even the common man as cost of everything would go up by 2 per cent.
Surprisingly Service Tax on freight of food stuff exempted earlier is brought back which will make all food stuffs costlier. In fact to catalyze growth and demand it was expected that excise and service tax be reduced to make it more internationally accepted levels.
“And if the Government is truly bullish on growth why it is not encouraging growth by reducing tax and increasing consumption, shared Khambatta. For example Agri Good processing industry was expecting huge tax breaks to spur rural demand. Nothing has been announced even for a sector with such importance for inclusive growth in rural areas, he added.
Sharing his view on the same, Akshay Bector Chairman & MD, Cremica said, "For the industry, in terms of reforms we need a greater push from the government in the areas of food processing and the treatment of surplus, especially in the case of perishables as it has an immediate bearing on inflation and household budgets. We have been making representations to the ministry in this regard which we hope are taken forward.”
At the same time, the industry look forward to developments in terms of food parks and factories as this will definitely help the industry make investments ahead of time to keep up with demand.