Banking on aam aadmi

Increased rural incomes likely to lead to higher spends on consumer goods.

Consumer-focused industries stand to gain from this Budget, which has a strong rural focus. The government has increased outlays for electrification, infrastructure and employement though the National Rural Employment Guarantee scheme, and more than half of the revenues of the fast moving consumer goods (FMCG) sector are from rural India.

The Budget is also beneficial to cold storage and refrigeration companies such as Blue Star and Voltas as they expect an increase in business on account of the investment-related incentives given to food and agri business companies for developing cold storage infrastructure for moving agricultural produce.

Other goodies, include lowered customs duty for the LCD panels from 10 per cent to 5 per cent. LG Electronics India Managing Director Moon B Shin said the decrease in customs duty on LCD panels will enhance the market for LCD TVs. But LG did not comment if there will be an immediate effect on its product pricing. “The move to allow expenditure on in-house R&D at the proposed 150 per cent to all manufacturing entities will encourage technology development in India, reducing the import of technical know-how,” he further added.

“We welcome the initiative of the government to bring down the customs duty on LCD panels from 10 per cent to 5 per cent. This should result in bringing down the manufacturing costs of LCD TVs in the country and further fuel the growth of this segment,” said R Zutshi, deputy managing director, Samsung India.

The Budget also maintains the prevalent excise duty at 4 per cent for small electrical and home appliances and energy saving appliances such as water filters, pressure cookers, power driven pumps, compact fluorescent lamps (CFLs) and biscuits and at 8 per cent for the appliances and consumer durables industry.

Anand Shah, FMCG analyst with Angel Broking said, “Abolishment of FBT, no reversal of excise duty cuts and confirmation of implementation of Goods Service Tax by April 2010 come as a major relief for FMCG companies. No change in excise duties on cigarettes has come as a huge benefit for ITC (factored in 5 per cent excise hike in FY2010E). The MAT rate increase from 10 per cent of book profits to 15 per cent is marginally negative for companies like Dabur and Godrej Consumer which pay lower tax rates (due to facilities in excise free zone)."

“Overall a ‘welfare budget’ which will positively impact demand for FMCG in general, and Marico in specific,” said Harsh Mariwala, chairman and managing director, Marico.

“The raising of MAT will dent the bottom line of the companies,” says Aditya Agarwal, director, Emami Group of Companies.

However, “Incentivising exports and continuation of benefits in this segment are steps in the right direction. The CST should also have been abolished,” he adds.