The Budget 2013-14 has had marginal to profound impact on a variety of sectors & industries. SMEOneStop provides a sector & industry specific analysis of the budget & its impact on the individual constituents of the economy.

 

Micro SME’s:

Budget Announcement:

  • Finance Minister proposed to continue with non-tax benefits for entities in this sector for a 3 year period even if the said enterprise rises to a higher category.
  • Allocation of re-financing facility for Small Industries Development Bank of India (SIDBI) to be doubled to Rs. 10,000 crore from previous year’s outlay of Rs. 5,000 crore.

The Impact:  The extension of benefits for 3 years is an encouraging step for MSME’s and incentivizes startups and SMEs.

 

 Semiconductor Manufacturing Industry

Budget Announcement:

  • The budget has exempted the semiconductor industries from paying custom duty for their plants & machineries.
  • A 15 % deduction announced on investment allowance for companies investing above Rs. 100 crore in machineries & plants in the sector from April ‘13 to March ‘15.

The Impact: With 65% of demand being met through imports currently; the swelling middle class & growing demand for electronic gadgets would promote domestic manufacturing. Manufacturing even 50% of the current demand will make way more employment opportunities.

 

 Tobacco Industry

Budget Announcement:

  • The budget announced an increase in taxes on cigarettes & cigars by 18%.

 

Impact: With the current hike, it has been calculated that a customer has to pay as much as Rs 14 more on a pack of 20 cigarettes varying from brand to brand.

 

Textile Industry

Budget Announcement:

  • With target investment of Rs. 1.51 lakh crore, the Technology Upgradation Fund Scheme for the textile segment has been extended to the 12thplan.
    • Rs. 2,400 crore allocated solely to modernize & improve the power loom sector.
    • Besides setting up Apparel Parks under the Scheme for Integrated Textile Parks, the Ministry allocated Rs. 50 crore along with Rs. 10 crore as an additional grant for each Park.
    • Handloom weavers to avail of working capital or term loans at 6 % concessional interest thus benefitting a minimum of 1,800 primary cooperative societies & 150,000 individual handloom weavers.
    • Import duty for raw silk increased to 15% from 5 % in view of protecting domestic sericulture.
    • Accepting the demand of readymade garment producers, the ministry is to adopt “zero excise duty route” for manmade (spun yarn) & cotton garments.
    • Textile floor coverings made up of jute or coir & handmade carpets to enjoy total exemption from excise duty.

 

Impact: The textile sector attempts to revive in the form of an Integrated Processing Development Scheme to address environmental concerns & benefit manufacturers.

 

Automobile Industry

Budget Announcement:

  • Proposal to increase the customs & excise duty for sports utility vehicles (SUV) & imported luxury automobiles; to affect the sector.
  • Excise duty on all kinds of SUVs to rise to 30% from the earlier 27% and from 75% to 100% for luxury vehicles.
  • Motorcycle engines with a capacity of more than 800cc also to experience a hike in custom duty from 60% to 75%.

Impact: The new hike in custom duty, can lead to a rise in prices of SUVs & luxury vehicles up to a minimum of Rs. 15 lakh.

 

Jewellery Industry

Budget Announcement:

  • The Finance Minister proposed certain schemes to make financial instruments more profitable & attractive than buying gold.
  • The proposal of inflation-indexed bonds along with modified Rajiv Gandhi Equity Saving Schemes expected to attract investors and cut down the ample investment in gold.

Impact: A move to reduce the appetite for gold by incentivizing other investments.

Real Estate Industry

Budget Announcement:

  • An additional deduction up to Rs.1 lakh on EMI’s for loans up to Rs.25 lakh for the first time homebuyer from April 2013 – March 2014.
  • The budget proposes to apply TDS at the rate of 1 % on the value of the transfer of immovable property (except for agricultural land) where consideration exceeds Rs. 50 lakh.
  • Reduction in service tax abatement from 75 per cent to 70 per cent for luxury units (size of 2,000 sq ft or more and cost of Rs. 1 crore and above).

Impact: The new reforms will control speculation & bring accountability to the industry.

 

Forging Industry

Budget Announcement:  

  • The budget overlooks the slowdown of the manufacturing industry, especially in the auto sector on which the forging industry is dependent.
  • An investment allowance of 15% announced but that will only help the larger industries with outlays of more than Rs. 100 crore.
  • Increased funds available to SIDBI from Rs. 5,000 crore to Rs. 10,000 crore will benefit the SME sector.

Impact: The Rs. 500 crore credit guarantee scheme for loans up to Rs. 25 lakh to boost the sector. The move to shift oil exploration projects to revenue sharing from the existing profit sharing has been a positive one.

 

Pharmaceuticals

Budget Announcement:  

  • No major changes for the sector. The step to permit investment allowance of 15 per cent on new plant & machinery is positive.

Impact:  May result in increase in investment in new projects & tax benefits. Increase in surcharge rates on both, income tax and dividend distribution will increase the tax outgo for the sector. Guidance on GST and DTC is welcome.

 

Food Processing

Budget Announcement:

  • Food grain production during 2013-14 estimated at 250 million tons and Rs. 500 crore allocated for promoting crop diversification.
  • Rs. 220 crore was allocated for promotion of nutrient-rich crops.
  • Rs. 50 crore to be allocated for farmer-producer organizations & National Livestock Mission to be launched with an allocation of Rs. 307 crore.

Impact:  An increased move to make food security a possibility for the undernourished & weaker sections of the society with priority given to Quality food.

 

Metals

Budget Announcement:

  • The Budget 2013-14 was neutral.
  • A levy of 4 per cent excise duty on silver extracted from smelting of zinc, lead & copper announced.
  • Public-Private-Partnership with Coal India to raise production announced.
  • Fast track approvals announced for the sector through Cabinet Committee of Investments.
  • Increase in customs duty from 0 per cent to 2 per cent and CVD from 1 per cent to 2 per cent on thermal coal was declared.

Impact:

It is likely that there will be expediency in projects related to the sector due to the budget. Demand for precious metals may be tamed due to policy decisions taken in the budget.

 

Impact of Budget 2013-14
Micro SMEs Positive ↑
Semi conductor and manufacturing sector Positive ↑
Tobacco Negative ↓
Textiles Positive ↑
Automobiles Negative ↓
Jewellery Negative ↓
Real estate Positive ↑
Forging Neutral ↔
Pharma Neutral ↔
Food processing Positive ↑
Metals Neutral ↔