A
Budget Reflecting Continuity
Binod Agarwal, President
Dear friends,
The Union Budget 2006 presented by the Finance Minister
on 28th February passed off without creating brouhaha usually
associated with the event. This augurs well for the industry
and the common man, who now feel assured of continuity in
the tax and economic policies of the Government. The Union
Budgets in the past used to be marked by a great deal of
uncertainty and apprehensions in the minds of people. The
fact that it no longer surprises or shocks the industry
and the people, reflects the robustness and maturity of
Indian economy, which is evident in the economic survey
of the Ministry of Finance tabled in the Parliament a day
earlier.
The revelation of the Economic Survey that the economy during
the year 2005-06 is poised to grow at 8.1%, is music to
our ears. What is heartening to note is that the manufacturing
and services sectors are growing at 9.4% and 9.8%, respectively.
With investment rate, savings rate and tax-to-GDP ratio
going up and fiscal deficit and inflation under control,
the economy appears to be on a strong footing. However,
there is a flip side to an otherwise bright scenario. The
performance of core sector and agriculture sector is not
something to cheer about, while continued uncertainty over
international crude oil prices is a cause of worry. The
pace of infrastructure development and, in particular, the
development of power sector, ports and roads, leaves a lot
to be desired. These issues need to be addressed with a
sense of urgency to sustain the current virtuous cycle of
growth and to achieve the aim of 10% GDP growth as targeted
in the Economic Survey and the Budget presentation.
Coming back to the Union Budget 2006, we, in FADA, welcome
the proposal to reduce the excise duty on small cars from
24% to 16%. However, we feel that excise duty on all cars,
irrespective of their size and engine capacity, should be
pegged at the identified Cenvat rate of 16%. This excise
duty differential may discourage some of the global car
players, who wanted to undertake manufacturing of world
class cars in their portfolio in India. This differential
also goes against the objective of simplification of tax
structure. As has been said in this column by my predecessors
and me, the car industry has to be viewed from the larger
perspective of its enormous potential for employment generation,
technology upgradation and spin-off on other allied sectors
as well as economy as a whole. We hope that the Finance
Minister will remove this distinction and rationalise excise
duty on all cars at 16%.
Reduction in peak rate of customs duty and setting out the
roadmap for introduction of GST by 2010 are positive steps.
A single tax replacing a multiplicity of levies will go
a long way in removing the hurdles in the faster growth
path. In this context, the announcement that the CST will
be phased out is re-assuring. CST is incongruous with the
scheme of VAT. Abolition of CST coupled with bringing in
the uniformity in VAT legislations across States, will help
remove barriers to dispersal of industrial and trading activity,
leading to the common Indian market.
Responding to the concerns of industry and trade, the Finance
Minister has made changes in the FBT by rationalising the
valuation of some of the 'fringe benefits'. FBT is a major
irritant and does not fit in the scheme of an uncluttered
tax regime. Another bugbear, namely, Banking Cash Transaction
Tax also continues to stay in the statute book. We feel
that these taxes, which have added to the complexities and
are a cause of irritation, should be, removed altogether.
Hope, the Finance Minister will address these concerns of
industry and trade at the earliest.
In the backdrop of economy doing exceptionally well, it
was the time to take bold initiatives and to move to the
next stage of reform process. There is no mention of labour
reforms and disinvestments of PSUs in the FM's speech, perhaps,
due to the political compulsions of the present Government.
We hope that these reforms will continue to engage the attention
of the Government with a view to speeding up the growth
process by optimisation of resources and efforts.
I am happy to note that the road development programme is
up and kicking and that the deadlines have been laid down
for the completion of the Golden Quadrilateral and the East-West
North-South corridors. Announcement that it is proposed
to build 1000 kms of access-controlled expressways is also
gratifying.
Barring a few omissions, the Budget on the whole is positive
and growth oriented. Renewed emphasis on rural, agriculture
and social sectors, including education, health, irrigation,
sanitation and food processing, as also on infrastructure
development and urban renewal programme, with significantly
higher plan allocations for these activities under Bharat
Nirman, Jawaharlal Nehru National Urban Renewal Mission,
NHDP programme and various other programmes & schemes, are
likely to spur the economic activity that will lead to employment
generation, higher levels of income and greater demand for
goods and services.
Before signing off this message, I would like to touch upon
the major activities of FADA in the last month, for the
information of our esteemed members. I am happy to inform
that the pilot project of FADA Academy launching training
courses, in association with Ind Search - a reputed management
& technical institute in Pune, to turn out trained Service
Supervisors, Spare Parts Supervisors and Sales Executives
for catering to the manpower requirements of automobile
dealerships and their workshops, is on track. The first
batch of students is already undergoing the courses in these
streams of manpower requirements of dealerships. We shall
be starting similar courses in other parts of the country
in not too distant future. We invite members and automobile
dealers who own institutional land or are running management/technical
institutes at various places in the country for a tie-up
with FADA for starting these courses in their cities/towns.
Members interested in joining hands with FADA may write
to the undersigned for further discussion in this regard
and firming up the arrangement. Needless to mention, with
the phenomenal growth of automobile industry and expansion
of dealership network, the availability of trained manpower
to manage and operate dealerships is getting acute with
each passing day. Such courses will attract a large number
of candidates interested in making their career in automobile
dealerships.
As mentioned by me in the previous issue, I have embarked
on the 'Contact Members' programme in right earnest. We
had a regional meeting at Lucknow on 17th February 2006
wherein a lot of issues of concern to automobile dealers
came up for discussion. On the heels of Regional Meeting
at Lucknow, a Regional Meeting-cum-Open House Session was
organised on 18th March 2006 at Kolkata, coinciding with
council meeting of FADA. The meeting witnessed a lively
interaction with Mr Sumantra Chowdhury, Principal Secretary
(Transport) and Mr S N Sarkar, Additional Commissioner of
Police, Govt of West Bengal, who were present at the meeting.
The interactive session with the West Bengal Government
officials was followed by an Open Forum wherein a panel
of Regional Managers of Maruti Udyog, Tata Motors and Hyundai
Motor India put across their views and perspective on wide
ranging issues raised by the automobile dealers.
I shall welcome your suggestions and inputs for further
strengthening FADA and its activities.
With best wishes,
Yours sincerely,
Binod Agarwal |
