A Responsible & Conservative Budget S P Shah, President Dear friends, The Union Budget 2010 presented by the Finance Minister on 26th February 2010 is fiscally prudent and seems policy-designed to shore up the economic growth momentum. What is good about the Budget is that while embarking upon the cautious fiscal consolidation path, the Finance Minister has stopped short of the complete rollback of the stimulus, tempted as he would have been by the decent IIP numbers and other macroeconomic data emanating of late. He has allowed the economic recovery to take root and not to rock the recovery process by wholesale changes in the tax structure at this junction in spite of fiscal compulsions. The fiscal deficit has been pegged at 5.5% for the year 2010-11 and at 4.8% and 4.1% respectively for the next two years. The Budget has sought to bring about fiscal discipline through curbs on non-plan spending without compromising on plan expenditure. The Budget focuses on broadbased, sustained, inclusive growth by way of increased outlays for infrastructure, rural development and social sector, including roads, power, rural connectivity, irrigation, health and education. That the Budget was well-received by both the industry and the common man found reflection in the Sensex that zoomed by 175 points following its presentation. The year 2009-10 had started off with cloud of uncertainties. As revealed by the Economic Survey, the 2nd quarter of 2009-10 indicated a turning point towards a favourable atmosphere when the growth rose to 7.9 per cent. This recovery came about despite a negative growth in the agricultural sector (-0.2 per cept). But this was made up by the growth in the services and manufacturing sectors. The GDP growth for 2009-10 has been projected at 7.2 per cent. To mitigate the adverse impact of agriculture, the economy should be on higher growth path and steps have to be taken for fiscal consolidation so that the economy is brought back on the 9% growth trajectory witnessed before the financial crisis. Reverting to Budget 2010 proposals, increase in excise duty by 2 percentage points in general and duties on petroleum products is likely to spur the inflationary expectations. The change in the service tax, where the activity of 'renting' per se has been made a taxable service, seeks to override the Delhi High Court ruling in this regard. What is more worrisome and spells uncertainty is that the change has been given retrospective effect from 01.06.2007. This would place huge financial burden on retail sector, as it cannot offset these taxes. FADA had also sought uniform duty on all categories of vehicles and expected the excise duty gap on small cars and large cars to narrow down by way of reduction in the excise duty on large cars and MUVs. We had also expected the higher depreciation rate of 331/3% for cars in tune with the shortening car ownership cycle and the market reality. Similarly, to give boost to the modernisation and renewal of bus and truck fleet, there is a strong case for higher depreciation at 60% for those replacing their old commercial vehicles with the new vehicles, which are more fuel efficient and environment friendly. In the interest of road safety and clean environment, we should have a tax regime that is conducive to modernisation and renewal of road transport. We hope that the Finance Minister would address these concerns at the earliest. The changes in income tax slabs are a big relief to the middle class that is reeling under high inflation and will leave more disposal income in their hands to spend and neutralise the impact of inflation to some extent. Renewed emphasis on social sector, infrastructure and rural development under various schemes together with capitalisation of banks and setting up of new banks is likely to ease further the availability of funds and accelerate the pace of economic growth, resulting in more jobs and income for the people in general. All these measures will stimulate consumption and demand, which is good for the auto market. Proposals pertaining to R&D activities would enhance the competitiveness of the Indian industry. Implications of the Union Budget 2010 with focus on automobile sector have been dealt with in detail elsewhere in this issue. I feel that since the economic recovery is steadily getting entrenched, it was a good time for a reformist budget. However, there is no gainsaying that the Budget emphasises the inclusive growth. Of the total plan outlay, the allocation for infrastructure development is to the tune of 46% of which 25% is for rural infrastructure development, while social sector accounts for 37%. Overall, the Union Budget 2010 presented by the Finance Minister is both responsible and conservative. The roadmap for fiscal consolidation is a welcome announcement. Similarly, the rollout date for GST and the Direct Tax Code by April 1, 2011 is a positive indication. Further, it is hoped that changes made in the direct taxes would leave more money in the hands of individuals, which would help boost demand and promote growth. I would now like to turn to FADA activities during the last month, which I must share with all my fellow dealers. At the SIAM HR Conclave - "Accelerating Growth through People", held on February 12, 2010, Nikunj Sanghi, Vice President, FADA participated as one of the guest speakers at the CEO Roundtable on the subject "Fishing to Farming". My compliments to SIAM for this First HR Conclave which was well organised and quiet a learning experience. Presentation of our Vice President on the subject has been reproduced in this issue for the benefit of our esteemed readers. FADA also participated at the Auto Exhibitions organised by Relio Quick in Chandigarh and Mumbai recently. The Auto Shows were well attended and wonderfully organised. Most of the manufacturers participated at these shows. During these shows, I had the opportunity of meeting the local dealers. A dealers' meet was organised coinciding with the Show at Chandigarh on 13th February 2010. These meetings provide an opportunity for FADA office bearers and local dealers to share their experiences and concerns for appropriate remedial action at the State and Central levels, besides connecting with FADA members spread accross the country. Through such activities, FADA wants to strike closer ties not only within dealer fraternity but also with all other links in the auto retail and allied businesses. As in the past, I again request my fellow dealers to start small group activities earnestly as it would be beneficial and a learning experience for all. I shall be too happy to receive your suggestions and inputs for further strengthening FADA and its activities. With best wishes, Yours sincerely, S P Shah