From The Economic Times 17 March 2012
He's attempted to put more money in your pockets by nudging tax exemption limits upwards. But that will still prove to be loose change when you consider that the finance minister hopes to shore up revenues by making almost everything you set out to spend on more expensive. In already inflationary climes, that's not going to help bump up consumption.
"The signals are not good considering consumer demand is anyway low due to recurrent price hikes on account of commodity inflation and other macroeconomic conditions," says Manish Sharma, managing director, Panasonic India. "Demand will get dampened and we expect the (consumer durables) industry growth to be hit by 10-15% this year, after last year's dismal singledigit growth rate," he adds.
Here's why Sharma is so downbeat. The FM's income-tax proposals will save a maximum of Rs 22,660 for individuals. Now counter that with the relative havoc his move to tax all services (except those on a negative list) and hike the service tax as well as excise duty from 10% to 12%, will wreak on prices of consumer goods.
Sharma reckons the 2% increase in excise duty will push up prices by 3-4% across categories of consumer durables and home appliances like air-conditioners, refrigerators, washing machines and microwaves. Accordingly, a 1.5-tonne, 3-star split AC will cost Rs 1,000 more, while a 240-litre, 5-star frost-free refrigerator will be dearer by Rs 800. And a 6-kg, fully-automatic front-loading washing machine will be more expensive by Rs 1,200.
Smaller ticket items of daily consumption will be dearer, too. Prices of chocolates, ice-cream and flavoured milk will go up by 3% to 4% this summer. Says RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation: "A combination of freight, service tax, packaging material cost and excise - all of which have gone up - will lead to higher prices."
Head honchos at consumer companies are understandably nervous. Says Milind Sarwate, group CFO at Marico: "The indirect tax increase will hurt consumer sentiments, especially because income-tax slabs for individuals have been only tinkered with, much below expectations. The re-emergence of inflation could have a serious impact on disposable incomes of consumers."
http://economictimes.indiatimes.com/personal-finance/tax-savers/tax-news/budget-2012-you-get-to-save-rs-22000-in-income-tax-but-be-ready-to-spend-more-on-everything-else/articleshow/12299144.cms
He's attempted to put more money in your pockets by nudging tax exemption limits upwards. But that will still prove to be loose change when you consider that the finance minister hopes to shore up revenues by making almost everything you set out to spend on more expensive. In already inflationary climes, that's not going to help bump up consumption.
"The signals are not good considering consumer demand is anyway low due to recurrent price hikes on account of commodity inflation and other macroeconomic conditions," says Manish Sharma, managing director, Panasonic India. "Demand will get dampened and we expect the (consumer durables) industry growth to be hit by 10-15% this year, after last year's dismal singledigit growth rate," he adds.
Here's why Sharma is so downbeat. The FM's income-tax proposals will save a maximum of Rs 22,660 for individuals. Now counter that with the relative havoc his move to tax all services (except those on a negative list) and hike the service tax as well as excise duty from 10% to 12%, will wreak on prices of consumer goods.
Smaller ticket items of daily consumption will be dearer, too. Prices of chocolates, ice-cream and flavoured milk will go up by 3% to 4% this summer. Says RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation: "A combination of freight, service tax, packaging material cost and excise - all of which have gone up - will lead to higher prices."
Head honchos at consumer companies are understandably nervous. Says Milind Sarwate, group CFO at Marico: "The indirect tax increase will hurt consumer sentiments, especially because income-tax slabs for individuals have been only tinkered with, much below expectations. The re-emergence of inflation could have a serious impact on disposable incomes of consumers."
http://economictimes.indiatimes.com/personal-finance/tax-savers/tax-news/budget-2012-you-get-to-save-rs-22000-in-income-tax-but-be-ready-to-spend-more-on-everything-else/articleshow/12299144.cms
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