The Budget ended with a lot of hope, some faith and a lot of pain. It started with achieving a GDP growth target of 7.6 per cent versus current year’s achievement of only 6.9 per cent and a fiscal deficit target of 5.1 per cent versus current year achievement of a high 5.9 per cent. The finance minister outlined a divestment target of Rs 30,000 crore and a subsidy target of two per cent of GDP. A GST roll-out is expected only in the coming financial year assuming the network creation is on track by August 2012. And finally, there is a hopeful announcement on FDI in multi-brand retail, to build a consensus policy with the states.
The FM has placed his faith on certain measures that received unanimous applause in Parliament. One such measure is the Aadhar coverage for up to 40 crore individuals. He announced infrastructure bonds investment of up to Rs 50,000 crore to infuse traction in infra development. Plus, an increase in agricultural credit to Rs 5,75,000 crore.
But most importantly, what are the painpoints? Firstly, an across-the-board increase in excise duty and service tax from 10 per cent to 12 per cent, widening the service tax net, increase in duty on gold imports, rise in fuel and LPG prices and sadly no major relief in excise duty abatement in apparel. All of these will have a direct impact on inflation and consumption, thereby impacting both the GDP growth and revenues and therefore the fiscal deficit.
So, in summary, the Budget has more pain than hope and faith! But all is not lost. There is still a ray of hope for the retail industry with a coming soon news of FDI in multi-brand retail and GST, which could be a big game changer in terms of ease of doing business and cushioning retail prices.
Govind Shrikhande
MD,
Shopper's Stop
