The consumer products and services sector has quite a bit to take home from the Union Budget 2014. Segments like processed food, agriculture, retail and consumer durables besides education have got enough attention from the finance minister.
However, the single biggest impact for the consumer sector as a whole should come from higher tax exemption limit and investment limit to prune tax further. These measures would leave more money at the hand of the common tax payer which should buoy consumer sentiment.
Kishore Biyani, Group CEO Future Group, shares a holistic view, “The consumption sector will be a big beneficiary due to the decrease in excise duty on food processing machinery and footwear, the implementation of GST and the increase in money in the hands of consumer from the income tax benefits that the FM has announced.”
“Rarely has such a pragmatic budget been presented which balances the needs of the short term and the long term,” said Biyani.
As announced in the budget, excise duty on food processing and packaging machinery for fruits and vegetables is reduced to 6 per cent from 10 per cent. The Budget also cut excise duty on footwear priced between Rs 500-1,000, cut import duty on panels and picture tubes for small size TVs and extended the concessional excise duty on automobiles by another six months.
Not every shoemaker is hailing the move though.
JJ Desai- CFO, Metro Shoes, Ltd, said, “The footwear industry was very hopeful about demand for more rationale excise duty of footwear, which would have provided impetus to the domestic manufacturing of footwear and reduced imports. However, the concession offered is small as footwear up to MRP of Rs 500 is already exempt.”
Meanwhile, the FM also reduced import duty on inputs for soap makers but on the flip side increased excise duty on aerated drinks with added sugar; so cola firms will face higher tax.
The FM also flogged the tobacco industry and hiked the tax further for cigarettes and other tobacco related products.
Agriculture sector got more than expected. Food price volatility was a big concern for which the government has allocated Rs 500 crore fund for farm price stabilisation. The government formed an agriculture infrastructure fund at a cost of Rs 100 crore. Another Rs 100 crore is set aside for development of organic farming in north east region.
Rajesh Srivastava, chairman and managing director, Rabo Equity Advisors Pvt Ltd, which is the investment advisor to India Agribusiness Fund, says, “The evaluation for the food and agri sector has been right and the macro picture in this budget is very good. The two big steps that have been taken are restructuring of Food Corporation of India and revamping of Public Distribution System. If this is handled, there will be less wastage.”
To encourage awareness among farmers, ‘Kisan’ TV channel is to be launched by DD at cost of Rs 100 crore. The government has also proposed to provide finance to 5 lakh landless farmers through NABARD. At the same time, it proposes to set up agriculture and horticulture universities.
According to Srivastava, it’s a transformational step that the finance minister wants to revisit subsidy in food and fertilisers. “There have been no investments in the fertiliser sector for the last 15 years and capital infusion has been stuck. Unless subsidy is properly reformed here, new capability will not be created,” he noted.
As far as the education sector is concerned, there is an overall focus on speed, scale and skill. The Budget has focused on job creation and also job creators by encouraging entrepreneurs.
Ashish Dhawan, former PE fund manager and now founder & CEO, Central Square Foundation, and a key person behind high profile liberal arts-focused Ashoka University, noted that most significantly, the government has announced strategic interventions for school education that will have a direct impact on improving student learning.
“We are hopeful that investment in these areas will only increase over the next five years. The increased allocation for secondary education and the Skill India programme are encouraging steps to meeting the needs of large number of young people who are coming through our primary school system without a clear path beyond. Our secondary education should activate vocational tracks to address the challenge of high drop-out rates,” he said.
The government has also committed to scaling up and expeditious implementation of apex institutions such as IITs, IIMs and AIIMS. The government has budgeted Rs 500 crore each to set up five new IITs and IIMs.
Vijay K Thadani, director of NIIT Technologies and co-founder of the NIIT Group, said, “This is a Budget of good intention. The devil will be in detail. The focus on “skills” was announced early in the Budget. The youth is the oil for modern India and there is focus on generation of job and job creation both in this budget. It is not just quantity of education, but quality is also focused by creating more IITs and IIMs.”
(Edited by Joby Puthuparampil Johnson)
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