A Balanced Budget Nikunj Sanghi, President Dear friends, The Union Budget 2011 that all of us were eagerly looking forward to has been presented putting an end to suspense that precedes the presentation. Needless to mention, the Union Budget is awaited by one and all with apprehensions and expectations, as it is, now-a-days, not all about additional taxes as used to be the case a few years back. The Budget has come to be seen as an important policy document, which sets the tone for the Government s fiscal and economic policies. Given his constraints, the Hon’ble Finance Minister has presented a balanced Budget that seeks to reconcile the needs of Aam Admi, fiscal consolidation and economic growth. The continuing emphasis on social & rural sectors as well as infrastructure development is expected to promote the all-round growth, benefiting the auto industry as well. The marginal increase in exemption limit for personal income tax and bringing down the threshold age for tax concessions available to senior citizens from 65 to 60 and creating a new category of 'Very Senior Citizen' above the age of 80 with exemption limit of Rs. 5,00,000 are welcome measures. However, we expected the personal income tax exemption limit to be raised substantially to provide relief to the people reeling under the persistent high level of inflation, though. We also welcome the reduction in surcharge on corporate tax from 7.5% to 5% and hope that the surcharge, being a temporary levy, will be altogether in near future. Proposal to introduce direct cash payments for those entitled to subsidy in kerosene is a positive step that will help reduce adulteration of kerosene with diesel/petrol. We feel that the Government should have reduced the duties on diesel and petrol to impart a semblance of stability in their rising prices, which is a matter of concern to both auto industry and common man. We urge the Government to come up with cogent energy security measures to contain rising fuel prices, as otherwise all plans and projections will go haywire. We, in FADA, thank the Finance Minister for retaining the standard rates of customs duty, excise duty and service tax at the existing levels, particularly in view of the volatility in IIP growth, stubborn inflation and rising interest rates. Temptation to increase excise duty and service tax would have led to all-round increase in prices, fuelling the inflation further. We also welcome the proposals for incentives in customs & excise duty in the case of Electric Vehicles, Hybrid Vehicles and Fuel Cell & Hydrogen Vehicles as well as the announcement of setting up National Mission for Hybrid and Electric Vehicles. This will give a boost to the greening of vehicles, thereby reducing the dependence on fossil fuels and promoting clean environment in the long run. Similarly, the increase in weighted deduction from 175% to 200% for contribution to the national laboratories and other specified research bodies for approved scientific research programme is a positive step. On the flipside, we had hoped that the wide gap in excise duty on small and big passenger vehicles would be bridged at least, if not completely removed. The Budget does not contain any such announcement. Likewise, there is no definite date for introduction of GST in sight, although the Finance Minister has announced that a constitutional amendment bill will be introduced in the current Budget session. All said and done, the Budget, overall, is positive. The increased allocations for rural, social and infrastructure development will translate into increased pace of economic activity, which portends well for the growth of auto industry and retail trade. A word of caution! We have observed that there is no dearth of pious intentions and that successive Budgets in the recent past have provided for a significant increase in outlays for social sector and infrastructure development. However, we have not seen a significant headway when it comes to delivery. The pace of infrastructure development, particularly the road infrastructure development, remains sluggish. Likewise, the sops intended for the target groups hardly reach them. We hope that the Government will deliver on the proposals contained in the Budget 2011. If we can improve the delivery, there is no reason to doubt that the Indian economy is set to move forward fast on a growth trajectory higher than 9% targeted for the next Fiscal. The 9%+ growth is within the realm of reality as buttressed by various macroeconomic indicators and the performance of auto industry in February 2011. While we got off to a flying start in January 2011, the February sales figures boasting of 20%+ growth are encouraging and reinforce the confidence that auto market is headed for another good year of growth. While the rollback of stimulus package and hike in excise duty apprehended by many may have boosted the sales tally for the month of February, there is all-round buoyancy that augurs well for the auto market. However, it does not mean that it is a smooth sailing all the way. The challenges of wide trade deficit, stubborn inflation and rising commodity prices are still lurking on the horizon. It is, therefore, imperative that we have to be on our guard and be prepared to stand up to these challenges. Coming to the activities of FADA since my last message, the month of February saw three action-packed events of FADA - all happening on the same day and at the same venue in Mumbai on 26th February 2011. As I had assured in my previous columns, we carried forward the momentum of mega regional convention at Jaipur and a development programme for the young automobile dealers in Mumbai, organising the 2nd programme in the series on Strategic HR. The programme witnessed engrossing discussion. We are going to organize many more such programmes all over the country. You are all very well aware that FADA has instituted Automotive Dealership Excellence Awards (ADEA), jointly with Auto Monitor magazine to recognise and reward my worthy fellow dealers who have excelled in various areas of dealership management, CSR and community service. The second edition of ADEA, i.e. ADEA 2010, for which the awards presentation ceremony was held later during the day, turned out to be a very successful show in all respects. It gives me a great deal of pleasure and satisfaction that this activity, initiated last year is being carried forward with added zeal and zest, as the number of nominations received for the 2nd edition of these awards suggested. Let me clarify that it is not merely a ceremonial event or grandeur mounted to simply hog the limelight and to get mileage or visibility. Grandeur, mileage or visibility apart, the core idea behind institution of these awards is to bring forth the best practices in auto retail and CSR & community welfare activities undertaken by the members of automobile dealer fraternity so that these best practices and welfare activities could be replicated by others. At the same time, the recognition encourages the award winners to aim for higher goals and to set new benchmarks of excellence for themselves. The awards recognise not only the excellence in business but also the pioneering efforts in community service. The objective of having Green Initiative, Safety Initiative and CSR Initiative awards is to create awareness that any business cannot survive or sustain in the long run in isolation. A dealership or, for that matter, a business draws its sustenance from the environment it operates in and cannot sustain for long unless the business enjoys the goodwill & patronage of all stakeholders. It needs no reiteration that in today's competitive environment, employees' satisfaction is the single most important factor that can make or break an automobile dealership. The growth and customer satisfaction go hand-in-hand. It is the employees' satisfaction that can lead to the customer satisfaction, which in turn, leads to the growth and development of any business. Likewise, it is the quality & standard of service that differentiates and sets apart a highly successful dealership from the rest in this fiercely competitive world, particularly, as there is hardly any gap in vehicle technology available with various manufacturers, with the integration of world economy. It is, therefore, appropriate that of the six parameters, Service Satisfaction Index and Employee Satisfaction Index are also the criteria, in addition to Sales Satisfaction Index, Green initiative, Safety Initiative and CSR Initiative, for evaluation of and judging the winners. While congratulating the winners, I hope that these awards will spearhead a movement for all-round excellence in auto retail in general. I am sure, my fellow dealers will come forward in greater numbers to file their nominations when the awards for the year 2011 are announced. In keeping with the past practice, FADA also held its Council Meeting in between the programme on Strategic HR and the awards presentation function. Look forward to your valuable suggestions and inputs. With best wishes, Yours sincerely, Nikunj Sanghi