Telecom sector Reaction to the Indian Union Budget, 2012

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When Mr. Pranab Mukherjee quoted from Shakespeare’s ‘Hamlet’ to joke about the tough job FM has towards ensuring the interest of a range of stakeholders – one couldn’t help but think of the “har friend zaroori hai, yaar” reference and empathize with the challenge involved in leading this mammoth task. Given slowing growth of the economy and rising inflation, the Finance Minister has had a difficult job of devising the country’s economic plans for FY2012-13. Despite challenges, the Government has been able to deliver a practical and inclusive budget for the next fiscal – one that reinforces the treatment of the Union Budget as a process and not an event.

The FM’s strategy towards fiscal consolidation will play an eminent role in containing challenges faced by the economy and contribute towards 7.6% GDP growth projection for 2012-13. With ongoing long term focus on planned fiscal deficit reduction, the budget proposes noteworthy reforms across manufacturing and infrastructure which should boost employment. Reforms announced are expected to add thrust to agriculture and power sector growth and should contribute towards revival of the aviation industry. Enhanced focus on Governance as evident in measures like UID funding will surely enhance the disposable income in the rural areas and prevent leakages within the system. Reduction in subsidy is a welcome move, but the process of implementation needs to be detailed out further. Other laudable effort lies in definite move towards, Direct Tax Code, GST regime, FDI in multi-brand retail – but it will be meaningful to set a deadline for the same.

The telecom sector is already burdened with multiple and high tax levies which account for 30% of the telecom services revenue. The rise in Service Tax from 10% to 12% will increase cost of services to customers and impact the P&L of telecom companies. As a highly taxed industry, this will certainly have a further impact on the consumer. We see proposals on mobile based fertilizer subsidy tracking and heightened IT enablement as factors that will as opportunities to drive the growth of ICT. Additionally, FM’s recommendation for gap funding of telecom towers, cables and optic fibres should lead to reduction in cost of capital for telecom infrastructure. Reduction on duties on mobile parts should enhance affordability and stimulate demand for mobile services across the country.”

However we must keep in mind that the life of the telecom sector does not wholly depend on the budget pronouncement only the sentiment needs to be positive. We hope this budget will be a harbinger of a healthy telecom policy, which would be inclusive and enable viability of the industry at large.

Below you can Read Finance Minister Pranab Mukherjee’s full speech regarding Union Budget 2012:
Budget 2012 Pranab Mukherjee Speech

Highlights of the Union Budget 2012-13 :

  • Up-to Rs.2 Lakh: No Tax (Income tax exemption limit raised from Rs 1,80,000 to Rs 2,00,000)
  • Rs.2 Lakh to Rs.5 Lakh: 10% Tax
  • Rs.5 Lakh to Rs.10 Lakh: 20% Tax
  • Above Rs.10 Lakh: 30% Tax
  • Savings bank account interest up to Rs 10,000 exempted from tax.
  • No change in corporate tax rate
  • Service tax rate raised from 10 per cent to 12 percent
  • Large cars, imported bicycles, cigarettes, bidis and some imported jewellery to cost more
  • Branded silver jewellery may get cheaper.
  • Securities Transaction Tax on cash delivery reduced by 25 per cent to 0.1 percent
  • A new Rajiv Gandhi Equity Saving Scheme to allow income tax deduction to retail investors in stocks.
  • Import duty on equipment for iron ore mining reduced from 7.5 to 2.5 per cent.
  • Allocation of Rs.200 crore for research on climate change.
  • Irrigation and water resource company to be operationalised.
  • National mission on food processing to be started in cooperation with state governments.

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  1. I was expecting quite alot from this year’s budget, listen to complete budget but I was very disappointed a the end of the day.

    I was having Net Profit of 1.5 lakh in my equity investments till today but today I suffered a Intra-Day Loss of 25000 due unexpected market crash. I was not excepting much for salary class but was hopeful for corporate sector. I confident about recovering this loss next week.

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