A Budget for Aam Aadmi Pradip R Kamdar, President Dear friends, The Union Budget 2008 has been presented by the Hon'ble Finance Minister. I find that it is virtually a 'Please All' Budget aiming to lift the consumer sentiment and spur consumption with fair sprinkling of doles and sops for practically all sections of the society. The Budget sends out the signals that perhaps general elections are round the corner. We, in FADA, welcome the rationalisation of CENVAT at 14%, particularly the reduction in excise duty on two/three-wheelers, buses & their chassis and small cars from 16% to 12% in the Union Budget 2008. Lowering of excise duty on hybrid cars from 24% to 14% and CST from 3% to 2% are also welcome measures. The growth of automobile sector has been flagging of late. Thrust and increased spending on infrastructure, education, health, rural and social sectors will provide fillip to the demand. Likewise, goodies doled out to the farmers in the form waiver of loans to the tune of Rs. 60,000 crores and to the middle class by way of raise in the income tax exemption limit and restructuring of income tax slabs will leave more disposable income in the hands of people resulting in the increased spending and growth in demand for consumer goods and durables, including motor vehicles. Similarly, implementation of the Sixth Pay Commission is also expected to spur consumption and, thereby, growth. On the face of it, while the Union Budget 2008 offers a lot for the auto sector, it may not work as panacea for slowdown affecting the industry, specifically for the two/three-wheeler and commercial vehicle segments. Credit crunch and high interest regime have been the major factors slowing down the growth of 2/3-wheelers and commercial vehicles in the current financial year. It remains to be seen to what extent the reduction in excise duty, the increased spending on social welfare & development schemes and the rise in disposable income levels of middle class as a result of lowering of personal tax will help revive the domestic demand of these segments of auto industry. Concomitant measures, such as, greater exposure of banks & NBFCs in auto market, easing of vehicle financing norms and reduction in interest rates are necessary to drive these segments back to the sustainable growth track. We also compliment the Government's efforts in promoting green technology through various budgetary measures. While reduction in excise duty on hybrid cars will accelerate their development and commercialisation, the lower duty on buses and bus chassis will facilitate the STUs in particular, to renew and modernise their bus fleet. We submit to the government to reduce excise duty on trucks & truck chassis and goods 3-wheelers, which have been reeling under slowdown, to 12% at par with buses, bus chassis and passenger 3-wheelers, to aid their comeback to the positive growth curve. As the experience in developed countries has shown, passenger car manufacturing is the driver of technology, industrial activity and economy as a whole. Therefore, the excise duty on bigger cars should also be rationalised at CENVAT rate of 14%. What is of concern to FADA is that while the Government at the centre has been rationalising the taxes, the State governments have been increasing taxes on motor vehicles to meet their resource requirements. It is a classic case of the Centre proposing and the States disposing. The taxes on motor vehicles at the State level, including registration fee and road tax, are not only pitched at a very high level, negating the Central Government measures for rationalisation of tax structure, but also vary widely from State to State. For sustainable growth of auto industry, it is imperative that the taxes at the State level are also rationalised and made uniform across the States. In addition, there are a number of grey areas in service tax, FBT and VAT, which have been a constant bugbear for auto retail and need to be addressed to pave the way for faster, sustained growth of auto business. The auto industry and trade and, for that matter, all other sectors of economy are faced with the shortage of talent and skilled manpower. The proposals for setting of additional institutions of higher learning, upgradation of ITI's through PPP model, introduction of Innovation in Science Pursuit for Inspired Research (INSPIRE) scheme, and the launch of world-class skill development programme under a mission to be entrusted to a non-profit corporation are, therefore, positive steps announced in budget. To sustain the high growth trajectory, it is essential to develop skills and create talent pool suiting the needs of growing economy. It is heartening to note that infrastructure across sectors - highways, power and the integrated rural and urban infrastructure programmes - continues to engage the attention of the Government. As in the past, huge allocations have been made for infrastructure development. While we, in FADA, appreciate the pious intention of the Government in improving infrastructure, implementation on the ground requires much needed thrust and policy intervention. Slow pace of road infrastructure development is a case in point. Virtually all road projects are behind schedule. Nobody will grudge the measures aimed at ameliorating the lot of small and marginal farmers, many of whom have been driven to commit suicide across the country in the recent past because of their indebtedness beyond retrieval. However, the loan waiver to the tune of Rs. 60,000 crore, without any firm indication how this largesse is going to be funded has made the fiscal prudence take a backseat. Likewise, there are a number of off-budget items in the form of the Government's liabilities on account of oil, food and fertilizer bonds, which are not part of the budget. Moreover, a huge additional financial burden is likely to result from the implementation of Sixth Pay Commission, which has not been provided for in the budget. It is good to note that FM has acknowledged that revenue and fiscal deficits are understated to that extent. Nevertheless, waiver of loans and across the board cut in taxes, save few exceptions, are likely to result in people spending and saving more. This is what the FM had intended while presenting the budget. Overall, the Union Budget 2008 is good one. The budget, offering many things for many people, should help stimulate consumption and, hence, growth that has seen moderation of late. It is notable that the dreaded budgets of the past, which were viewed by the people with a lot of apprehensions as an exercise on the part of the Government to raise resources through additional levies, have given way to benign budgets in the liberalised era, which are not mere statement of current & anticipated expenditure & receipts but contain the policy directions having bearing on the economy as a whole and the welfare of the people of the country. No wonder then, the presentation of budget is now looked forward to with a lot of expectation. Please feel free to your inputs and suggestions. With best wishes, Yours sincerely, Pradip R Kamdar