While the Union finance minister is busy giving finishing touches to the Budget, corporates are thinking ahead. They are gearing up to respond to the Budget proposals. After the Budget is presented in Parliament and the Finance Bill is made public, the company finance departments comprising chartered accountants and tax experts will immediately swing into action and calculate implications of the provisions of direct and indirect taxes in their respective sectors. The annual exercise has a lot of relevance for the industry as excise and customs duties have a significant impact on price levels of products and services.

Says Kris Gopalakrishnan, CEO and managing director, Infosys Technologies Ltd, ?Our finance department assesses the impact of the budget on our business and we take an appropriate action based on this assessment.? He adds that the budget is important since it may propose policy changes that impact their businesses as well as profits and losses.

This year?s budget has a special relevance for the IT sector because the looming US recession and the rupee appreciation are taking a toll on its profit margins. A firming rupee has led to a deceleration in the growth of the bottomline of IT companies and the net profit growth rate has plummeted to 12-30% in the current fiscal from 40% in Q3 of FY07.

While Gopalakrishan will log on to the Internet to read the budget fine print, Ramaswami Subramanian, founder and managing director, Subhiksha Trading Services, will watch the live telecast and interact with his senior managers to analyse the impact of the budget on the retail industry and on his company. Subhiksha is one of the largest retail chains in the country. He adds, ?Though the budget is more important at a macro and mood setter level rather than for business plans and strategies as the government has substantially liberalised the marketplace, our senior management team will keep a close watch on the impact of various moves and proposals.?

Subramanian is upbeat about this year?s budget as retailing in India is on its way to become the next boom industry. Driven by changing lifestyles, strong income growth and favourable demographic patterns, the Indian retail industry is expanding at a rapid pace and organised retailing, which currently accounts for 4% of the total market, is expected to grow significantly. India has one of the largest number of retail outlets in the world. Out of 20 million retail outlets in the country, nearly 5 million sell food and related products. In fact, this year too, India has topped AT Kearney?s annual Global Retail Development Index for the third consecutive year, maintaining its position as the most attractive market for retail investment. The industry accounts for 10% of GDP and around 8% of the total employment in India.

At pharma giant Ranbaxy, the budget proposals will be analysed by senior executives from corporate affairs, marketing, R&D and finance departments. Says Malvinder Mohan Singh, CEO & MD, Ranbaxy, ?Together with my in-house team, we will make a summary note that will assess the broad impact of the budget on the company?s operations holistically. However, once the budget proposals are available in detail, further analysis and study will be done to develop a macro strategy.? Singh will spend the first half of the day to follow the budget and do the analysis.

Similarly, in the banking space, Rana Kapoor, managing director and chief executive officer, Yes Bank, says his management team comprising sectoral specialists from finance, pharma, infrastructure and engineering will analyse the implications of the budget proposals on various sectors. He feels that that the banking sector is not directly affected by the policies announced in the budget, but is generally a benefactor of the proposals. ?The banking sector leverages these announcements to refine its growth strategies. However, any impact on direct taxation has an impact on the employees of the bank,? he adds.

Since the banking sector has a significant role in pushing up the growth rate of the rural economy, Kapoor expects this year?s budget to provide significant impetus to agriculture and agro-based industries. ?Likewise, all segments of hard and soft infrastructure, which have now begun to restrict India?s full economic potential, are expected to receive major thrust in the budget,? he adds.

Typically, it takes around six-seven hours for the finance department of the company to do the first-cut analysis of the budget. The various implications of the provisions of new taxes ? direct and indirect?are calculated and the senior members of the company are briefed duly. Then the final presentation is made in a couple of days to the senior management of the company and the management decides if any changes need to be made in the prices of the products.

Apart from the internal finance teams, companies often take advice from external consultants on legal issues pertaining to the various budget provisions. Since many Indian business houses have a global footprint, they take advice from external consultants to analyse the larger implications to take appropriate action. The budget provisions, however, do not have any immediate impact on the product line of the company as starting up a new project is a long term-strategy. ?However, if any special provisions are announced to encourage new business opportunities or if tax incentives are offered?like the one for setting up Special Economic Zones?then corporates swing into action immediately and draw up the blueprint for foraying into new business,? says a financial consultant.

Taxes still remain the most important part of the budget for companies and any change is tax structures post-budget means a host of calibrations in the accounting process and often companies have to deploy additional human resources. Subhash Goyal, chairman, STIC Travel Group, says the government?s introduction of Fringe Benefit Tax (FBT) in the 2005-06 budget was of big concern for most companies in the country as it required extensive and complicated documentation process and companies had to deploy extra manpower to track the various heads of expenses that attract FBT. Goyal further adds that the government should maintain continuity in the tax structure for a longer period to enable business to grow.

In fact, the FBT imposed two years back has been a source of dissatisfaction between the industry and the government. Even last year before the budget various industry associations had requested the government for a reduction or removal of FBT, but the finance minister did not make many changes in the structure. The FBT was imposed with the intention of taxing the perquisites provided by an employer to his employees, in addition to the cash salary or wages paid and certain expenditures of companies like the ones on sales promotion and business travel. Though the industry had objections to FBT, it was a high revenue earner for the government. The government collected revenue worth Rs 5,121 crore from April 2007 to January 15, 2008, as against a total collection of Rs 3,108 crore during the corresponding period of 2006-2007.

The biggest fallout of the FBT was that many business houses had to cut the travel expenses of their executives. Pradeep Jain, chairman, Parsvnath Developers Ltd, a major real estate company, says that travel expenditure incurred by company executives is an integral part of business development in a competitive business environment. ?The imposition of FBT is an additional cost on most companies and it is a major hindrance to business development,? he says. He adds that since employer?s contribution to superannuation fund, provisions of hospitality, travel expenses and sales expenses do not directly benefit the employee, corporate India should continue to lobby with the government for the removal of FBT under these heads.

After the final analysis of the budget provisions, corporate chiefs interact with their industry associations to lobby with the government for various waivers. Thus within hours of the presentation of the budget, the finance ministry is flooded with a host of representations from various industry organisations seeking changes in either excise or customs duty rates. There is a rush of appointment seekers to explain their points of view to the ministry and lobby for changes in the duty rates on goods, which either they manufacture or those, which reduce their competitiveness. And if the Union finance minister thinks that the representation is justified, the waivers are worked out.

The budget is an important day not only for Indian companies, but also for global multinational companies operating in India. The Indian budget is keenly observed in the US and Europe. American companies account for around 37% of the turnover of the top 20 firms operating in India. And with the country?s GDP growing over 8%, and more and more foreign companies are lining up new projects and investment proposals in India, the budget is surely a mood setter for them.

However, over the years various policy announcements by the government have not been just confined to the budget day alone, business houses in the country are continuously adjusting and reinventing their business strategies throughout the year. The budget also sets the pace for various macro economic trends for corporate India to diversify their business.