Will Union Budget 2020-21 stop slowdown? Industry offers mixed reactions

The Union Budget 2020-2021 announced by Finance Minister Nirmala Sitharaman on Saturday, February 1, offers income tax relief and lists a few measures that are expected to boost the slowdown in the Indian economy.

With efforts to boost the income of people and their purchasing power, Sitharaman announced the launch of an alternative personal income tax regime, which she said can help the middle-class save taxes, and also scrapped dividend distribution tax (DDT).

With a few structural reforms in GST, the budget has presented a good opportunity for a digital revolution with high focus on digital infrastructure — BharatNet project getting additional Rs 6,000 crore to boost digital connectivity and allowing the private sector to build data centres in India.

BestMediaInfo.com, in conversation with a few brands, analyses what impact the budget could have on various sectors and industries.

FMCG and retail 

Mohit Malhotra

Dabur India CEO, Mohit Malhotra, said the budget can be termed as an Incremental Budget that continues the government's focus on doubling farmer income by 2020 and enhancing the purchasing power of the consuming class in India.

However, he said the big bold steps needed to restart economic growth are missing.

Mansoor Ali

“The budget looks futuristic in terms of investments in technology, digitisation and education as a whole but there is no clarity about the critical need of providing an immediate boost to consumption and generating demand. This remains a grave concern and the bane of a slowing economy,” said Mansoor Ali, Chief Sales and Marketing Officer at Hamdard.

BK Rao

BK Rao, Senior Category Head, Marketing, Parle Products, said, “I think broadly for us — tax relief will put more cash in hands. Similarly, grassroots rural development and agricultural sector impetus means the possibility of increased discretionary spending. This is good for FMCG. I am quite optimistic about this budget, along with several infrastructure developmental projects. I believe it will trigger growth in FMCG and across sectors.”

The increased investment in infrastructure development is expected to give a boost to employment generation in the country. The long-term initiatives are expected to help improve overall consumer sentiments in the hinterland and also help improve their standards of living.

Announcing a 16-action-point plan for farmers to double their income, the government has allocated Rs 2.83 lakh crore for agriculture and allied activities, irrigation and rural development.

Malhotra said, “The big positive takeaways from the budget would be the income tax relief offered to lower income groups by slashing the rates and rejigging the slabs to reduce total tax payable by individuals. This would put more disposable income in the pockets of the consuming class, particularly the middle class, which may help push demand for consumer staples. The government allocated more money for roads and highways. This would go a long way in improving connectivity with the hinterland and help FMCG companies.”

“While this budget is good on intent, it falls short of laying down a blueprint for creating an enabling framework that would promote growth. Overall, I would call this budget a balancing act given the current fiscal situation,” he added.

Manish Sharma

Manish Sharma, President and CEO, Panasonic India, said, “From a consumer electronics industry perspective, the decision to encourage domestic manufacturing of mobiles and electronic goods in India is a welcome move while a definitive timeline would have helped further boost the industry sentiments. It is one of the vital steps towards establishing a robust, ecosystem for domestic manufacturing while also giving a boost to exports. With the NIRVIK scheme, the SMEs stand to gain financial stability. We look forward to seamless implementation of this scheme to scale up manufacturing and developing an export hub.”

Reduction in corporate tax for existing companies to 22% and for new ones at 15% and abolishment of the dividend distribution tax, Sharma said will make India a more attractive destination for investments.

Minal Srivastava

"Measures to promote affordable housing by adding Rs 1.5 lakh tax benefit will boost the purchasing power of home-seekers, which will positively impact the paint industry,” said Minal Srivastava, Vice-President, Growth, Strategy and Marketing, Shalimar Paints.

Sitharaman announced increasing customs duty on imported footwear and furniture.

Abhishek Ganguly

Abhishek Ganguly, Managing Director, Puma, said, “India currently does not have the infrastructure, capability, skillset and technology to manufacture higher-end footwear. Therefore, increasing customs duty of footwear from 25-35% may not have a significant impact on imports. Presently, at the entry price, we anyway manufacture 30% of our footwear in India, and we will continue to do so. The government should proactively promote and enable footwear factories, which can handle more technical manufacturing. This is a huge opportunity as India can definitely take a share from China and Far East — not only for domestic, but also international consumption.”

Sanjay Vakharia

Besides a few changes to the personal income tax rates, Sanjay Vakharia, CEO, Spykar Lifestyles, said, not much is seen impacting the demand and consumption story.

“The big gun announcements that the industry was expecting to stimulate the economy were missing. The absence of feel-good measures has left the budget falling short of expectations,” he added.

Auto, travel and tourism:

With no major reforms for the automobile sector in India, Budget 2020-21 turned out to be slightly disappointing as most of the expectations of the automotive manufacturers and related companies remained unmet.

Changes in the income tax slab, however, can improve the buying capacity of middle-class, thus more sales of automobiles.

Apart from this, Kenichi Ayukawa, MD and CEO of Maruti Suzuki, India, said the budget has a new direction with a stage for the private sector to invest and grow with ease and speed, and reforms in transport infrastructure, which can accelerate the growth of the auto industry.

The budget has also focused on the development of transport infrastructure, specifically on urban transportation through allocation of funds for metro-rail projects. The budget has focused on promoting tourism and travel with an overall budget of Rs 2,500 crore in the year 2020-21. The government aims to develop 100 more domestic airports under the UDAN scheme. To promote travel via railways, the government will focus on more Tejas-type trains that will connect tourist destinations in India.

To this, Ayukawa said, “The government respects job creation and wealth generation by the private sector. While the private sector does its part, the government is undertaking long-term backbone kind of initiatives like the electronics manufacturing scheme, National Gas Grid, rural sector strengthening with cold storage, Rs 1.7 lakh crore transport infrastructure projects. All these will help the auto industry. We hope the GST Council will look at lower taxation of products like cars, which have a multiplier effect on jobs in the economy. The resultant economic growth will more than compensate for the lower tax rates.”

A spokesperson from Tata Motors said, “The proposed hike in SKD/ CKD forms of passenger EVs is consistent to the 'Make in India' approach and encourages progressive localisation of electric vehicles in the country. This will drive the efforts of OEMs more towards local operations and ensure greater commitment to electrification in the country. This also, in a way, complements the phased manufacturing plan laid down by the government under the FAME programme.”

“The proposal to develop 100 more airports as well as the doubling of the airline fleet by 2024, calls for a skilled manpower development in parallel. The aim to double the fleet to 1,200 in the next three years will certainly accelerate the passenger growth rate,” said Indroneel Dutt, CFO, Cleartrip.

Nishant Pitti, Co-Founder and CEO, EaseMyTrip, said the budget will open new avenues for the travel industry, with stress on the development of archaeological sites into iconic sites with on-site museums.

The government also announced renovation of four key museums and Rs 150 crore has been allocated for the ministry of culture.

Madhavan Menon

"The Union Budget has seen encouraging focus intended to give impetus to the travel and tourism sector. India’s Foreign Exchange Earnings (FEE) grew by 7.4% to Rs 1.88 lakh crore during 2020-21, and the announcement of specialised grants to states will give a much-needed fillip to tourism-focused initiatives on a pan-India basis,” said Madhavan Menon, Chairman and Managing Director, Thomas Cook, India.

Real estate:

While the budget promotes better infrastructure for travel, tourism, airports and smart cities, real estate is hoping for better opportunities, after having witnessed a slump in growth last year.

Rajesh Mehra

Rajesh Mehra, Director and Promoter, Jaquar Group, said the budget announced a positive step for the lower and middle income segments, which should boost the affordable housing segment.

However, he added, “The sector overall hasn’t been incentivised enough to infuse capital into the sector. The affordable housing sector would need further support in the form of reduction on taxes on hardware and building material — issues touched upon but not concretely.”

Abhilash Pillai, Partner, Cyril Amarchand Mangaldas, said, “New airports will create a huge opportunity in city-side real estate developments. This will open up massive commercial and residential developments in and around these airports. The existing regulations — especially the AAI Act —should be amended to enable AAI and airport operators to monetise these city-side developments.”

Finance and insurance:

With the allocation of Rs 69,000 crore to the health sector, a boost in penetration of health insurance is expected. For a few of experts, there is a sustained focus on the ease of business, a clean and vibrant financial sector and ease of living for all.

Tapan Singhel

Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance, said, “I firmly believe that the kind of healthcare facilities in a country determine the life expectancy of its citizens. By setting up viability fund to develop and empanel more hospitals in tier II and tier III cities through PPP model under AB-PMJAY and allocating Rs 6,000 crore for the same, will allow beneficiaries to access quality medical treatment. Thus, providing a much-needed boost to penetration of health insurance. Additionally, by proposing this optional new personal income tax regime, the government will put more money in the hands of people, which should boost consumption."

MVS Murthy

MVS Murthy, Head, Marketing and Digital, Tata Asset Management, said, “Over six lakh Anganwadi workers being equipped with smartphones to upload the nutrition status of 10 crore households is a great step to leverage technology and address health care of children. Use of AI towards an endeavour to eradicate TB is yet another step towards human life enhancement.”

E-commerce and start-ups:

As India has already started seeing innovations in the space of IOT, AI, data cloud, quantum computing, the budget reflected the vision to transform India into digitally empowered society. The budget lays down a visionary roadmap on skill and education development by providing Rs 99,300 crore to boost the quality of education and proposed to start degree level full-fledged online education programmes.

Girish Menon

Girish Menon, Partner and Head, Media and Entertainment, KPMG in India, said that the focus on building a vibrant start-up ecosystem with measures to improve access to funding and IP protection will help India emerge as a global hub for technological innovation.

Kabir Siddiq

"The investment clearing cell is a good move for start-ups and entrepreneurs. The boost towards improving internet connectivity is also helpful, not just for start-ups and penetration of e-commerce but towards creating new employment opportunities as well. Internet is critical for enabling people and give them a better power to make decisions,” said Kabir Siddiq, Founder and CEO of SleepyCat.

Deferred taxation on ESOPs and income tax deduction are said to be the good reforms for the start-ups.

Kunal Bahl

Kunal Bahl, CEO and Co-founder, Snapdeal, said “The budget has accepted the start-up sector's request for ESOP taxation reforms. The higher time and turnover limits for carry forward of losses for start-ups will enable them to optimise growth decisions in formative years. Overall, Budget 2020 is a thoughtful weaving together of specific proposals to tackle varied issues. Boosting physical infrastructure, expanding digital connectivity and growing use of technology in government functioning are important building blocks for the long-term growth of the Indian economy.”

“Embracing technology through Analytics, IoT and AI augurs well for us as a 21st century powerhouse economy. Smart meters, use of solar panels alongside railway tracks benefit the households and also make us seen as a conscious consumer of green-tech. There are enough opportunities for global companies, partners and start-ups in India to actively participate in India’s continued efforts in harnessing tech for public good and welfare,” said Murthy.

However, Ankit Prasad, Founder and CEO, Bobble AI, said, “Start-up as an industry is jaded by the past. There have been issues when it comes to implementation and have been at the receiving end of the IT Department, courtesy misinformation of angel tax.”

Here’s hoping that this year will be different and that there will be no friction whilst implementing and executing the proposed policies.  

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