Budget 2011: Jeopardizes Consumer Cos

The frustarted garment manufacturers are preparing ground to stage a strike the coming week in protest of the rise in the excise duty
Jeopardized Consumer Cos

A play safe budget by the FM that made most happy left consumer companies fretting over their rising input prices for which there has been a marked  wrestle  between them and the retailers for quite some time. Further, the announcement of measures that will make branded apparel, air travel, eating out, hotel accommodation and health check-ups costlier brought frowns on the faces of the middleclass. Retailers will have to bear the brunt of this cost if the rising cost of manufacturers are passed onto them(Due to levy of excise duty by 10 percent on branded clothes) which they will ultimately pass onto the middle class that is already crumbling under the pressure of rising cost.

 

Another reason of frustration was non announcement of any FDI plans for multi brand retail which was awaited eagerly. Apropos, some succor came by way of allocation of substantial funds for farm development, approval of 15 more mega food parks, recognition of cold chains and post-harvest storage as an infrastructure sub-sector, need to review Agricultural Produce Marketing Act and introduction of investment linked deduction to businesses engaged in fertilizers are promises to challenge inflation.

 

Reactors

 “The inclusion of specific items in exemption list of excise duty will reduce gap between wholesale and retail prices and improve supply chain”, Prashant Khatore, Tax Partner, Ernst & Young.

 

“Finance Minister announced the steps to roll out GST and the measures to be   taken to remove bottlenecks in the supply chain distribution which should help in curtailing the food inflation”, Ms. Chavi Hemanth, Secretary General, IDSA.

 

“This is archived at a very wrong time when cotton prices have already gone up by 15 % and taking other costs in account will increase the overall cost by 35 % which will be really bad for all. The government should actually consider taking back this decision”, Shailesh Chaturvedi, CEO, Tommy Hilfiger, Apparel brands.

 

“Retailers were hoping to receive industry status recognition, witness a further liberalisation of FDI, have the service tax on rented properties repealed, etc.  That being said, the Budget did focus on--

 

Addressing the issues of food inflation and bottlenecks in the production and distribution of produce--Allocations ought to increase farm production, enable farmers to access greater funds and raw materials (eg., seeds, fertilizers), reward those who pay back loans in a timely manner with the interest subvention, establishment of mega food parks and encourage the further development of the storage capacity and cold chains.  Suggestion that states assessment of the APMC Act will hopefully result the act being repealed, thereby freeing the food supply chain from some levels of intermediaries, reducing final retail prices for consumers and distributing more fair wages to farmers”, says NV Sivakumar, Leader, Retail Consumer Products, PWC India.

 

At the time, this article was going for printing; the grumbling garment retailers had already gone on a one day strike to oppose increased excise duty on garments. Let’s see what happens?

 

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