And the Budget speaks…

The speculation of the budget 2010-11 has paved way for insightful viewpoints regarding retail and the real estate industry. Let us find out what is in store for both the retail and the retail estate industry.
Retail-Business-Practice

With the union budget presented on 26th February, the assumptions and guesswork from the budget have finally come to an end. However, speculations are still on to find out the repercussion the budget will have on the players, consumers and the industry as a whole. It is a mixed bag of both the positives and negatives for the retail and real estate industry.  

Retail industry reactions
The retail industry is happy with the fact that the disposable income in hands of the customer will see a rise. As the spending power will increase, it would create ripples in the sales figures of the retailers. The retail stalwarts tagged the budget as a ‘balanced’ one. After observing the budget closely, Adi Godrej, Chairman Godrej Group says, “I feel this is a very clever and balanced budget. The increase in the Income tax slabs and the additional expenditure in rural India will create consumer demand, resulting in strong economic growth. The benefits provided to R&D will have a long term positive effect. There are certain drawbacks from the point of view of industrial production. The two per cent hike in excise duty and increase in the MAT rate to almost 20 per cent (including surcharge) are clear negatives. However, the containment of the deficit at 5.5 per cent of GDP is a positive feature. I feel the Finance Minister will be able to better this number, as his estimates of income from divestments and 3G auctions seem to be understated. I rate the budget seven on ten and feel that it is growth oriented.” DPS Kohli, Chariman, Koutons Retail India Ltd says, “Overall, it has been a mixed budget for us. New tax slabs and rates have been introduced which would offer relief to 60 per cent of tax payers providing them with greater disposable income. This would provide the necessary boost to consumer spending in the country, a pre requisite to unleash the true growth momentum of the retail sector. In addition, reduction of surcharge on domestic companies that the FM has announced is sure to accelerate the expansion plans for the retail players at home. However, industry status continues to delude the retail sector. This is a disappointment since this is the first step in truly reforming the sector and organising this highly unorganised sector. The hike in the excise duty is also not favourable news for us since this might directly affect the quality of production.”  

The incentive provided for the availability of more money for the rural sector is also welcomed by the retail industry. Sunil Duggal, CEO, Dabur India articulates, “I would term Pranab Mukherjee’s Union Budget 2010-11 as a perfect balancing act that seeks to achieve fiscal consolidation while not losing sight of the growth momentum and the growth engines. It is a fit case of prudent economics by the FM. He has stuck to the UPA Government's “Inclusive Growth” theme by continuing its focus on the ‘Aam Aadmi’ and doling out more money for rural India, thereby giving the economy that much-needed tailwind to surge ahead.” Talking of the effect on the rural sector he adds, “While there may not be any direct upsides or downsides for the FMCG industry in this Budget, the higher allocation for rural spending, decision to expand the National Rural Employment Guarantee Scheme, credit support to farmers the increase in subvention for timely repayment of crop loan from one per cent to two per cent would surely go a long way in putting more money in rural pockets and ensuring that rural demand continues to power ahead.” 

Real estate talks
The real estate industry was expecting a few considerations from the budget which did not come through. However, the schemes that have been announced are worthy for them. “We appreciate the decision of FM to continue the stimulus package. The budget is focused on the overall infrastructural development of the country including the rural sector. However, the FM has not considered the real estate sector’s major recommendations such as status of infrastructure to the industry, extension of tax exemption/tax rebate under section 80 IB up to March 2011, ECB for real estate etc. This would have helped the country to focus on meeting the housing shortage in the country as well as improving the overall GDP of the country,” says Navin M Raheja, MD, Raheja Developers Ltd. The common man seems to have benefited from the budget, which is a point being emphasised by everyone. Pradeep Jain, Chairman, Parsvnath Developers Limited, said, “I personally feel that the budget was for aam-admi, it is good for each and every individual in the society, the budget is supportive for the tax payers as the extension of limit will help in reducing burden on individual tax payers. I am sure that the budget tabled today will induce renewed sense of optimism over the country's growth. It is good for all public in general and for infrastructure sector, food processing units and the large support to the rural development including PPP projects, education and health etc.” Commenting on the effect the budget will have on the growth in the economy, Shravan Gupta, Executive Vice Chairman and Managing Director, Emaar MGF Land Ltd says, “This year’s budget invokes immense confidence and the markets have fittingly responded. The FM was right in acknowledging the need of the hour is a return to the growth path and efforts towards putting the economy back on track with a GDP of nine per cent. Significantly, it is an inclusive growth budget that has the potential to work as a booster for the economy. Effectively, this would lead to growth in infrastructure, industrial activity and employment generation.”  

Therefore, it is easy to comprehend that the retail and real estate industry seems to be in conjunction with the budget. They will now chalk down their plans according to the budget and its specifications for the year ahead.
 

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