The Confederation of Indian Industry (CII) has termed the Union Budget as 'pragmatic' under the present circumstances, while expressing concern at the increase in excise and service tax rate. Commenting by the Budget presented by the Finance Minister, CII President Mr Muthuraman said that the Budget had many growth oriented measures and has also made efforts towards fiscal consolidation. In particular, the timely focus on the infrastructure sector is welcome. An area of concern for industry is the increase in excise duty and service tax from 10% to 12%. At a time when industry is already facing huge increases in input cost, this will further add to the burden. It is possible that this may not yield the revenue that the Minister is looking for and instead result in further slowdown in growth while adding to inflationary pressure.

Sectors such as cold chain, warehouses, hospitals, fertilisers and affordable housing have been allowed investment linked deduction of capital expenditure at an enhanced rate. For the power sector, the waiver of customs duty on coal is a positive development and will help meet the demand for fuel in a country where 70% of power is still generated from it. The reduction in customs duty on equipment catering to sectors likely to witness investment namely power projects, fertilizer, mining and road construction would encourage investments though the measure is a dampener for the domestic capital goods industry.

Measures to take forward the implementation of the Goods and Services Tax (GST) included the announcement of a negative list of services and the move to harmonise the Central Excise and Service Tax. In particular, the introduction of a one-page common simplified registration form for filing returns and other steps for reducing transaction cost of exporters are welcome.

Given the current economic situation as well as the volatile political situation, the Budget can be termed as realistic and pragmatic. It is sad that the country does not, at present, have a political scenario conducive for the much needed major reforms.

Industry reactions to the budget:

"The Union Budget is a positive step towards getting the system back on track. Although big reformist measures were not proposed, still the Finance Minister has done a balanced job and has targetted growth across social classes. The middle class also gets some relief by way of an increase in income tax exemption levels, which potentially can spur demand-led growth as well. The reduction of duty on branded garments and abatements to the textile sector, although marginal, is a step in the right direction. Overall the budget aims at resilience in the context of the current political and economic scenario."
- Mr Gautam Singhania, Chairman and MD, Raymond Ltd

"The Union Budget contains several steps to increase investments in infrastructure projects particularly in power, water and the railways segments. This is a positive from KEC's perspective. However the increase in excise duty and service tax by 2 per cent will impact margins of industry across the board."
- Mr Vardhan Dharkar, CFO, KEC International

"There is nothing exciting or new in the budget for IT enabled Industry. Increase of 2 % in service tax and Excise duty is bound to affect MSME industry adversely. This will put further pressure on already sluggish Auto and manufacturing segment and in turn will affect their MSME suppliers adversely. Introduction of GST from August 12 is a welcome indication provided Government does not slip on this new date like the earlier promises."
- Mr Vikas Khanvelkar, Managing Director, DesignTech Systems Ltd (a leading CAD/CAM/CAE and PLM solutions provider in India)

"Overall the budget is a tepid budget with no big-bang measures that ensure the promised high growth trajectory that India has been waiting for patiently for the past couple of years. Although it has been promised that the GST will be effective in August 2012, it should not eventually turn out to be another failed promise as has happened in the past. One good development is allowing of ECB in sectors like road construction and the target for highways development in FY13. This coupled with increase in the tax free infrastructure bond allocation to Rs. 60,000 crores will definitely help in spurring some growth in the infrastructure sector."
- Tushar Mehendale, Managing Director, ElectroMech

The increase in the service tax rate is definitely a mood dampener for the IT industry but it may not have a significant business impact as users of IT services are essentially companies in which such services are being increasingly used in mission critical applications.
- Richard D'souza - CEO, Melstar Information Technologies Ltd

"The Finance Minister Mr Pranab Mukherjee has walked a tightrope in presenting a budget under difficult circumstances. I would have liked to see a more growth oriented, investment driven budget. The emphasis on Power and Infrastructure sector challenges and proposed reforms and measures to mitigate them should have been spelled out more strongly. The infrastructure sector can create significantly more jobs and add 2% to our GDP growth. Attracting greater FDI for manufacturing led export growth has also not received the necessary emphasis. Given the inflation pressures, supply side management for balancing growth while reining in inflation is an important priority that has not been dealt with adequately. However, the basic emphasis on Agriculture, Irrigation and Social sector needs was appropriate and on expected lines. I would have liked to see a tough minded budget aimed at mobilizing resources, widening the tax net, reducing Government expenditure, lowering the subsidies burden and encourage industrial and services sector investments by Corporate India. "
- R Ramakrishnan, Vice Chairman, Joint MD and Group CEO, Polycab Group

"We see it as a status quo budget. We were looking for more concrete initiatives that could quickly propel India's growth and more specifically, increase manufacturing from 16 to 25 percent of GDP. We hope the Government can progress on the implementation towards GST and early enactment of DTC to make this a truly favorable budget. The amendment to section 9 (transfer of shares) is a cause of concern for Eaton and other MNCs doing business in India."
- Raja Kochar, MD - India, Eaton Corporation