Budget 2022-23 progressive & sustainable but has no major tax cuts for consumers: Cos

Union Finance Minister Nirmala Sitharaman tabled the fiscal budget for 2022-23 in the Parliament on Tuesday, focussing on four major pillars: inclusive development, productivity enhancement, energy transition and climate action. The budget, as claimed by Sitharaman, starts India’s journey towards its 100th year of independence – the upcoming 25 years of the country’s Amrit Kaal. The budget had some pleasing surprises for several industries including digital companies, startups across sectors, logistics, gems and jewellery, telcos, and solar & EV players but had no major benefits for the salaried class and respite to the OEM industries dealing with issues like silicon shortage. However, most Indian companies are lauding the budget for its progressive, sustainable, and entrepreneur-focused outlook.

Gems & Jewellery

The budget slashed the import duty on cut and polished diamonds and gemstones to 5% and on the sawn diamond to nil from the existing 7.5%, sending waves of rejoicing among the industry.

Lauding the move, Senco Gold & Diamonds CEO Suvankar Sen said, “FM’s announcement of a reduction in customs duty on cut and polished diamonds and gemstones and plan to develop a simplified regulatory framework to facilitate the export of jewellery through e-commerce are positive steps which will enable the sector to grow in the country and boost exports.  We look forward to its implementation later this year. The reduction in import duty on diamonds will help generate increased demand for diamond jewellery in the market.”

Additionally, he also recognised the initiatives announced by the FM in the direction of reviewing the Special Economic zones Act, stating this will eventually help boost the export infrastructure.

De Beers India Managing Director Sachin Jain is positive that the cut in import duties will spur greater demand for natural and real diamonds and also give an opportunity to diamond companies to boost operations and, in turn, contribute to greater economic growth for the nation. He noted, “The proposal to create a simplified regulatory framework to enable the use of e-commerce channels to export jewellery will help us seamlessly take forward our initiative to promote trade through the digital mode. This will bring down transaction costs and save time while enabling us to reach out and expand our customer base globally. Overall, we hope that the gems and jewellery sector continues to play a pivotal role in the growth of the economy ”

OEM

The OEM industry had mixed reactions to the budget. Videotex International Group Director Arjun Bajaaj said, “The GatiShakti Masterplan is a great step by the government to improve the logistics infra of the country which was much needed and we hope it can be accomplished at the earliest. The overall budget does not have a direct impact on the TV Industry. We were expecting a cut in the GST slab for TV sizes above 32”. There should have been some relief in the Income Tax Slab but the same has not been touched which is another disappointment. The Digital University Initiative is another great initiative for education taken by the government. The overall budget seems to be positive to strengthen the Indian Economy.”

Hyundai Motors India Ltd MD Unsoo Kim lauded the initiatives in the direction of clean mobility as he said, “Hyundai Motors India welcomes the progressive Union Budget announced today. The government’s strong approach towards accelerating infrastructure development, sustainability with digitalisation in every sphere of business will give a strong impetus to the overall economy while empowering consumerism in India. The vision for clean mobility creating an electric vehicle ecosystem is a positive indicator for the auto industry and for its large supply chain. The forward-looking budget will lay the modular economic structure for every section of business and society in India.”

Digital Services & Logistics

The push to the digital economy and logistics infrastructure has left the services and logistics industries quite impressed with the Budget.

Blue Dart CFO Aneel Gambhir quipped, “The focus on public investments, by expanding the National Highway network by 25,000kms, the Gati Shakti masterplan with seven engines, 100 new cargo terminals, will give an impetus to the growth of the industry and help bring efficiency in logistics operations. We must also recognize the push for utilizing and promoting a digital ecosystem, whether that be with the launch of Gati Shakti and the numerous opportunities it initiates or the adoption of eVehicles; it further streamlines systems and processes, propelling the idea of Aatmanirbhar Bharat.

The prioritization of technology is a 2-pronged strategy that also seeks to drive cleaner operations. The announcement of the special policy for battery swapping, introducing a uniform standard for EV batteries, encouraging the private sector to engage in sustainable business models and setting up additional public charging stations, have the potential to revolutionize the eVehicle industry. Moreover, eVehicles can also play a key role in last-mile logistics, a feat that can assist the industry in reducing its carbon footprint. The Government has also highlighted initiatives that will be beneficial for all by reducing the surcharge on long term capital gains.”

Mastercard Country Corporate Officer, India & Division President, South Asia Nikhil Sahni said, ““Mastercard welcomes the continued focus on digital and financial inclusion in the Finance Minister’s Budget 2022 speech. Setting up Digital Banking Units (DBUs) and bringing post offices into the core banking system, will help expand the reach of financial services to the last mile. The extension of Emergency Credit Line Guarantee Scheme (ECLGS) will boost MSME recovery and growth by providing them with liquidity and helping them meet working capital requirements. Start-ups will benefit from tax benefits that will spur further innovation and boost employment in the country.”

Hero Vired Founder & CEO Akshay Munjal welcomed the government's thrust towards upskilling the youth and digitization as he noted, “New initiatives such as digital DESH e-portal for skilling, the expansion of PM's eVIDYA scheme, and a digital university are not only innovative but also an encouraging boost to the education sector; and will provide students with equal opportunities across rural and urban regions.

While we were hoping for the rationalization of 18% GST in online education services and some tax rebate online learning programs, we are excited to see the government adopt a collaborative strategy that allows world-class universities to offer courses in financial services and technology free of Indian regulations in the GIFT city. Moreover, it is heartening to see that the Budget also included steps for the empowerment of teachers, enabling them to facilitate better learning outcomes. Finally, we are thrilled about the animation, visual effects, gaming, and comics (AVGC) Taskforce, as it has the potential to create immense employment opportunities for the youth”

FMCG

While the key FMCG players are impressed by the progressive outlook of the budget, they have some complaints when it comes to tax benefits, both for the consumers and several products in the category.

Emami Group Director Aditya V Agarwal said, “It is a balanced budget boosting overall growth with a focus on the development of manufacturing, infrastructure and agri-economy. This budget focusses on self-reliance and protection of domestic manufacturers through the change in custom and import duties. It is in perfect line with the long term goal of Atmanirbhar Bharat.  However, we would expect the government to reinstate the import duty difference between refined palm oil and crude palm oil back to 11% from the current 5.5% to keep the domestic industry viable. Further, in the time of sustainable and recycled products, imposing import duty on waste paper needs review.”

Parle Products Senior Category Head Mayank Shah recognised the government’s efforts in direction of job creation via GatiShakti but felt the government lagged in taking steps that would have eased inflation for the category.

“First of all, putting money in the hands of consumers really helps, so they go out and buy products. So that was more on the front of ensuring that the demand remained robust given that we have gone through two years of pandemic. That was something that industry expected, either by the tax cut or by increasing the slabs tax brackets or by probably increasing the standard deduction limit. Those were the things that we expected but not much has been done there. Another thing the government would have ensured on the rural front was increased allocation to MGNREGA or direct benefit transfer. In fact, they chose the other way.  In terms of rural demand, when you're talking about putting money in the hands of rural consumers by increased MSP and increased MSP allocation, it is also going to have an impact on inflation because if you increase the MSP,  that eventually is going to increase the cost of agri products, primary inputs in food processing. So procurement is going to be increased. The current challenge ahead of most FMCG companies, which is managing inflation, probably would be aggravated, so I consider it to be neutral. Probably placing this money in the hands of consumers through MGNREGA or DBT would have ensured demand to remain robust,” Shah elaborated.

Usha International Chief Executive Officer Dinesh Chhabra, however, believes that the government has managed to keep the GDP numbers growing and fiscal deficit within promised boundaries. “To further the efforts, the Union Budget 2022 – 23 has indeed offered some strong pillars for the nation’s economic recovery and growth. The various initiatives announced in line with the Government’s push towards enhanced Capital budget along with the digital thrust including the formation of digital currency, big bet on 5G internet services, E-passport, along with digital resources for upskilling of rural areas will go a long way in furthering the socio-economic development of the country. Further, the extension on customs duty exemption on steel scrap by one year will provide a fillip to new businesses and MSMEs. Contrary to the perception Government hasn’t made the budget to bring short-term election benefits, rather this budget intends to write the future of “Bharat 100”.

He further welcomed the relaxations on corporate surcharge from 12% previously to 7% now. Chhabra added, “The Budget this year has provided a much-needed boost to Indian farmers with the announcement of direct transfer of MSP to their bank accounts, allowance of farmer drones for crop inspection, etc. These initiatives will prove to be beneficial in enhancing farmer & rural incomes. We are confident that the budget allocation for FY 2022-23 will provide a much-needed boost to the growth of the Indian economy. This budget clearly indicates the Government’s intent on revival from the pandemic-induced impact.”

Mars Wrigley, India Country General Manager Kalpesh Parmar is also quite impressed by the budget, “The Budget for FY 2022-23 is setting the path for a digital economy. To build a digitally inclusive society, we welcome the focus on financial, technological inclusion and digital infrastructure spending. This will stimulate holistic development, in rural as well as urban markets. The increase in provision allocated to the Rural Infrastructure Development Fund will have a positive impact on raising rural employment and eventually consumption through higher disposable incomes. We appreciate the government for taking comprehensive plans to transition to green energy as well as the steps that the Government has been taking towards ease of doing business in India.”

Dabur India Ltd Vice-Chairman Mohit Burman said, “Despite the tough economic situation, our Finance Minister Ms Nirmala Sitharaman has delivered a highly progressive and growth-oriented Budget that will surely kickstart the manufacturing engine. With this Budget, the Finance Minister has deftly juggled fiscal deficit with the prospects of economic growth, and it clearly displays the Government’s resolve to drive long-term economic growth by putting higher thrust on capital investment, besides continuing to focus on infrastructure development and encouraging Atmanirbharta, which has the potential to create 6 million new jobs.”

For him, the biggest takeaways from the budget were the government’s focus on higher capital expenditure and investments; a continued focus on rural India with higher MSP location to farmers and financial inclusion by bringing in 1.5 lakh post offices to the core banking system; and the thrust on infrastructure development. “This would go a long way in improving penetration and driving consumption of FMCG products in the hinterland. At Dabur, we have been witnessing rural demand growing ahead of urban India, and the announcements in this year’s Budget are expected to further fuel this growth. To ride this growth, Dabur has been investing in expanding our rural footprint and today reaches over 85,000 villages. The financial support being provided to farmers to take up agro-forestry is also a step in the right direction, and will not just protect but also propagate our country’s biodiversity,” he noted. 

Raymond Ltd CMD Gautam Hari Singhania called the budget a growth-oriented and transformative one. “The union budget clearly focuses on stepping up capital expenditure while keeping at bay the fiscal deficit and inflationary concerns. The continued Capex infusion pegged at Rs 7.50 lakh crore in 2022-23, sharply stepped up by 35.4 percent should be clearly seen both as demand and supply enhancing response as it creates infrastructure capacity for future growth. This budget underlines the continuity of supply-side reforms including deregulation, simplification of processes, and production-linked incentives among other aspects—leading to overall improved ease of doing business. A stable tax and policy structure, strong support to the manufacturing sector and MSMEs is the right step towards Atmanirbhar Bharat. The intent of this government is growth and job creation across sectors, with an impetus on infrastructure development however the success lies in the execution for a sustainable economic momentum and growth.”

BL Agro Chairman Ghanshyam Khandelwal added, “The budget was as expected. We didn't anticipate the industry to take centre stage because several schemes for the FMCG sector have already been implemented in recent years. However, the mention of a rationalized strategy to improve domestic oilseed production and minimize reliance on imports was welcomed. A more promising statement was the package that centers on farmers adopting appropriate fruits and vegetables, as well as proper harvesting practices. The move will go a long way towards uplifting the food processing sector. "