Budget Musings Part - 1
This Budget could have been a historic and landmark budget for India but sadly it has become just another event. Although, I knew that the budget will be a non event but somewhere in my heart I was hoping that FM will do something magical and India will make a Big Leap forward. Anyways, whatever fall you are seeing in our stock markets is due to Global Factors and FM should not be held responsible for it.
It seems that in order to bring inflation under control FM has become over conscious and took some anti inflationary measures which may boomerang causing further rise in inflation. He knows it better that every hike in excise duty is passed on to the costumer/consumer by the industry and the same has happened with cement. FM hiked the excise duty on cement sold at the rate of Rs. 190.00 per 50 Kg. and above by 50%, as a result cement manufacturers hiked the prices. Now, cost of every builder increases and they pass it to customers therefore “Home” which is already dearer due to higher interest rates becomes more costly. It is like Chaos Theory – “the flapping of a butterfly's wings in one area of the world can cause a tornado in another”
Well, FM says that he wants to punish those who sell costly cement by hiking price every now and then. Question : Why do cement producers hike price? Because there is demand greater than they can fulfill. Cement manufacturers are businessmen and they have also seen lean seasons. What did FMs do to help them during the period of recession? India lacks in infrastructure in the form of ports and roads and public transportation and airports and what not? So, a lot of cement and steel are required to develop world class infrastructure. And, if there is demand for cement and manufacturers are happy, why punish them. Instead, help them to increase their capacity and if you can’t do that, incorporate a Cement PSU mammoth and give subsidies through it and let it bleed to death sparing private sector manufacturers.
I am still wondering whether hiking the excise duty is an anti inflationary measure or reducing it. If you hike it on cement, why reduce it on Petrol & diesel.
It seems that in order to bring inflation under control FM has become over conscious and took some anti inflationary measures which may boomerang causing further rise in inflation. He knows it better that every hike in excise duty is passed on to the costumer/consumer by the industry and the same has happened with cement. FM hiked the excise duty on cement sold at the rate of Rs. 190.00 per 50 Kg. and above by 50%, as a result cement manufacturers hiked the prices. Now, cost of every builder increases and they pass it to customers therefore “Home” which is already dearer due to higher interest rates becomes more costly. It is like Chaos Theory – “the flapping of a butterfly's wings in one area of the world can cause a tornado in another”
Well, FM says that he wants to punish those who sell costly cement by hiking price every now and then. Question : Why do cement producers hike price? Because there is demand greater than they can fulfill. Cement manufacturers are businessmen and they have also seen lean seasons. What did FMs do to help them during the period of recession? India lacks in infrastructure in the form of ports and roads and public transportation and airports and what not? So, a lot of cement and steel are required to develop world class infrastructure. And, if there is demand for cement and manufacturers are happy, why punish them. Instead, help them to increase their capacity and if you can’t do that, incorporate a Cement PSU mammoth and give subsidies through it and let it bleed to death sparing private sector manufacturers.
I am still wondering whether hiking the excise duty is an anti inflationary measure or reducing it. If you hike it on cement, why reduce it on Petrol & diesel.
.......to be continued
Labels: Thoughts
posted by Raj @ 6:31 PM
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