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: It is going to be a tough balancing act for Finance Minister Pranab Mukherjee as he gets ready to present the Budget. He has not only to come up with policies to kickstart the demand, but also to make sure that the fiscal deficit of 6% of GDP does not increase further.
For Corporate India, the forthcoming Budget raises higher expectations than the previous budgets. The government’s three stimulus packages have resulted in only a partial recovery of the economy in sectors such as automobiles, cement and steel. But most of the sectors continue to feel the pinch of the slowdown. And to top it all, fears of a below normal south-west monsoon have spelt grief for the economy trying to recover from the fallout of the slowdown.
With the Left out of the coalition matrix, Corporate India wants big ticket reforms and it has all the reasons to expect one in this Budget. Expectations are that the finance minister will place an emphasis on infrastructure growth, which would boost demand and consequently consumption of steel and cement. Therefore, the sector anticipates further duty cuts as was done in the previous stimulus packages. Export-driven textiles sector expects labour reforms to improve productivity and the real estate sector wants the reintroduction of the tax relief under Section 80IB of the Income Tax Act.
* Steel
Steel consumption and production, according to the Ministry of Steel, increased by 6% and 2.4% in the first two months of the current financial year over the same period last year. This has been on the back of increased demand from sectors such as automobiles and even construction. With the thrust on infrastructure building, demand could go up. Says S K Roongta, chairman, Steel Authority of India, “We hope to see infrastructure building given a push in the forthcoming Budget.”
But there are issues that concern steel players. Excise duty brought down as part of the government’s fiscal stimuli between December 2008 and February 2009 could be revised upwards in the forthcoming Budget impacting prices straightaway. Domestic hot rolled coil (HRC) prices are already about Rs 3,000-4,000 per tonne more than international HRC prices. An excise duty hike would further increase HRC prices here. Says Roongta, “Even if revenue considerations weigh in favour of an upward revision in excise duty, the industry would like that the duty be retained at the present level for some more time. The...
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