Budget Reactions from Mr. Manish Mandhana – Jt. Managing Director, Mandhana Industries Ltd.

Manish-MandhanaDuring his budget speech, Mr Pranab Mukherji pleaded for help from Lord Indra and Goddess Laxmi. It leaves me to reckon that with his budget also, he expects the Industry and the corporates also to look up to the almighty heavenly Gods rather than to expect any help from government!! Though his task of delivering a growth oriented budget was made tougher by the rising inflation concerns, but he could have definitely restrained from pleasing the individual tax payers at the expense of the growing and promising industry, especially sectors like textiles.

From a broader perspective, The MAT rate has been increased to 18.5 % from 18 %. At around 62 % of the full corporate tax rate of 30 %, I believe it is no more capable of being called a ‘MINIMUM’ Alternate Tax !! MAT definitely needed to have been reviewed to bring it again to the earlier level of 15 %. The largest employment provider and one of the largest foreign exchange earner sectors, Textiles, has clearly been overlooked. While we wait for the exact Allocation for TUFS scheme under budget, the TUF subsidy disbursement system definitely leaves much to be desired. There should be higher allocation and also speedy disbursement of the subsidy as the huge subsidy arrears blocks the precious working capital money. The biggest letdown comes from introduction of excise duty on branded garments & made-ups as this will hamper the growth of this rejuvenated segment and also expose the sector again to the excise department beaurocracy. With the recent unprecedented rise in yarn prices on the back of soaring cotton prices, the excise duty on cotton / polyester yarn definitely deserved rationalization. However, the budget is silent on this. There is also no information as of now on the extension of interest subvention of 1 % on export finance beyond 31st Mar, 2011, which is very important considering the recent rising interest rate scenario.

To his credit, he has been able to walk on the tight rope as far as the macro economic indicators are concerned. The fiscal deficit of 5.1 % for 2010-11 as against projected 5.5 % (in spite of missing disinvestment target) and also lower projections of 4.6 % and 3.5 % for 2011-12 and 2012-13 respectively are commendable. The FM’s stand on FII participation in equity mutual funds also will give a great boost to capital markets.

To sum it up, the budget has made me cheer as an individual tax payer, given me a sigh of relief as an investor while left me ruing as an entrepreneur !!