Section 3
Sector impact and you
“Keep the giant wheel rolling” seems to be the theme of Budget 2008-09. It focuses on encouraging greater investment and stimulating consumption that would help maintain economic buoyancy.
This section analyses various budget initiatives, sector-wise, and their impact on various industries and in turn, on you…..
Infrastructure (including power, construction and other related sectors)
The government’s continuous thrust on infrastructure development (social and physical) will benefit sectors that directly or indirectly acct as facilitators of infrastructure. Social infrastructure includes education, health and other activities which aid in creating social and economic equity in the country. Physical infrastructure refers to road, electricity and so on…..
Major Initiatives
- Funding to the Bharat Nirman Programme increased to Rs 31,280 crore from Rs 24,603 crore in 2007-08, a year-on-year rise of 27.1 per cent.
- Outlay for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), a key vehicle for improving urban infrastructure, increased by 25.2 per cent to Rs 6,866 crore.
- Allocation for the Rajiv Gandhi Drinking Water Mission that focuses on supply of safe drinking water to uncovered habitations, increased by 12.3 per cent to Rs 7,300 crore.
- Corpus of the Rural Infrastructure Development Fund (RIDF) raised to Rs 14,000 crore. RIDF is an instrument to channelise bank funds towards financing rural infrastructure. Further, the budget proposes to operate a separate window under the RIDF-XIV programme (with a corpus of Rs 4,000 crore) for rural roads.
- The fourth Ultra Mega power Project (UMPP) at Tilaiya to be awarded shortly to a selected power company.
- The budget attempts to speed up the process of bringing five UMPPs to the bidding stage with the help of the respective State governments.
- An amount of Rs 800 crore provided for the Accelerated Power Development and Reforms (APDR) project.
- Creation of a national fund for electricity transmission and distribution to facilitate huge investments to improve the current state of transmission and distribution.
- Allocation to the National Highway Development Programme enhanced by 19.3 per cent to Rs 12,966 crore.
The proposed measures in the Budget would provide growth opportunities for sectors such as engineering and construction (road, highways), power & Power equipment. Besides, you can expect better physical infrastructure in the future. The results will take some time to become apparent, as these are long gestation projects.
Auto and auto components
The Budget came out with a slew of goodies for the automobile sector. The announcements are viewed as an attempt to provide the much needed relief to the two-wheeler industry, which is reeling under the problem of flagging sales.
Major Initiatives
- Excise duty on buses and their chassis reduced from 16 per cent to 12 per cent.
- Excise duty on small cars reduced and hybrid cars reduced from 16 per cent to 12 per cent and from 24 per cent to the general revised rate of 14 per cent, respectively
- Excise duty on two and three wheelers reduced from 16 per cent to 12 per cent.
- Electric cars and specified spare parts of electric cars exempted from excise duty.
Banking
The Budget announcement pertaining to the debt waiver for farmers can be best described as a ‘blessing in disguise’ for the banking industry.
Major Initiative
Though the Budget does not contain any direct measures targeted at the banking sector, a massive waiver of Rs 60,000 crore on overdue agricultural loans will help the banks to clean up their balance sheets by reducing the NPAs of public sector banks. However, the modalities of the scheme, wherein the reimbursement of the loan will take place over the next three years are awaited.
Cement
As the cement sector is in a major expansion mode, a reduction in the customs duty on project imports will help to reduce capital costs.
Major Initiatives
- In order to bring equality in the excise duty rates on bulk cement and packaged cement, the Budget proposes to revise excise duty on bulk cement. Now bulk cement will attract an excise duty of Rs 400 per metric tonne or an ad valorem duty rate of 14 per cent, whichever is higher.
- Cement clinker will attract an excise duty of Rs 450 per metric tonne.
- Custom duty on project imports reduced from 7.5 per cent to 5 per cent.
FMCG
Broadly, initiatives such as a thrust on agriculture and rural infrastructure, the waiver of overdue loans to farmers and an increase in the threshold limit of income tax would boost consumption of FMCG products.
Major Initiatives
- A reduction in the general CENVAT rate from 16 per cent to 14 per cent.
- CST reduced from 3 per cent to 2 per cent.
- The excise duty on packaged materials and breakfast cereals reduced from 16 per cent to 8 per cent.
- An excise duty of 16 per cent on coffee and tea pre-mixes removed.
Hotels
Budget 2008-09 did not offer much to the hotel industry.
Major Initiative
A five year income tax holiday to two, three or four star hotels established in specified districts having UNESCO-declared ‘World Heritage’ sites. The condition being that the hotels should be constructed and must start functioning during the period April 1,2008 to March 31, 2013.
Information Technology
The Budget was not very exciting for the IT sector, besides the proposals for slight revisions in the tax rates, however, intentions to set up 1 lakh broadband internet-enabled common service centers in rural areas and the establishing of State Wide Area Networks (SWAN) is seen as a step forward towards e-governance
Major Initiatives
- Excise duty on packaged software increased to 12 per cent from 8 per cent.
- Customized software brought under the service tax net of 12 per cent.
Pharmaceuticals and Healthcare
Budget 2008-09 has proposed several initiatives for the pharmaceuticals and the healthcare industry…
Major Initiatives
- An allocation of Rs 16,534 crore for the healthcare sector (an increase of 15 per cent over the fiscal 2007-08).
- An increased allocation for the National Rural Health Mission (NRHM) amounting to Rs 12,050 crore.
- An amount of Rs 993 crore provided for the National Aids Control Programme (NACP) and Rs 1,042 crore provided for the eradication of polio.
- A five year tax holiday for hospitals in the Tier-II and Tier-III cities.
- A reduction in excise duty from 16 per cent to 8 per cent.
- Amounts spent on R & D eligible for a 125 per cent weighted deduction.
- A reduction in customs duty from 10 to 5 per cent and a total exemption of excise duty on certain specified life-saving drugs and bulk drugs.
Metals
The overall reduction in CENVAT and excise duty on automobiles augurs well for the industry.
Major Initiatives
- Removal of excise duty on steel melting scrap and aluminums scrap.
- Export duty on chrome ore hiked from Rs 2,000 per tonne to Rs 3,000 per tonne.
Telecom Services
The telecom services sector which is reeling under its tax burden and is actually amongst the most heavily taxed in the world has not received any respite from this Budget.
Major Initiative
- Excise duty on wireless data cards slashed to nil from 16 per cent earlier.
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