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Pranab Mukherjee: Don't hike excise duty, pleads consumer durables industry
March, 06th 2012

The biggest plea from the consumer durables industry is to keep excise duty at current levels. After experiencing the worst year in terms of growth in over a decade, the industry is looking for some relief from Union Budget 2012, and almost all of them say a hike in excise duty will only worsen consumer spending.

Chairman of the Future Group, Kishore Biyani also agrees. According to him, the consumer durables industry is a hallmark of growth for an economy, so everything should be done to support this industry.

He further adds that the Goods and Services Tax (GST) will change the way consumers' go about their spending. "GST creates a level playing field, so consumers will get the best of goods at the best of prices," he said.

Below is an edited transcript of Biyani's interview with Anuradha Sen Gupta. Also watch the accompanying video.
Q: We do see these 'buy before the Budget' offers. Do consumers really bite that offer or is it just some effort to create excitement?

A: February-March are traditionally weaker months, so the idea is to pick up and generate some sales. Around the Budget there always has been some talk of prices going up, irrespective of the hike in excise duty, because a lot of input prices have gone up, the dollar has gone up, so the prices are bound to go up for this reason. So there are schemes which we and others are promoting.

Q: Are there takers for that scheme? Do consumers advance their purchases because of this?
A: They do. In fact lot of people buy lot of consumer durables during the month of March because of tax benefits which they can get as per the financial year ending.

Q: Consumer durables is supposed to have seen its worst year in the past decade. Do you see budget excise hikes making it more difficult going forward or will it be what we saw last year?

A: There are many factors which have affected the consumer durables industry. One has been the rise in commodity prices, the dollar exchange rate and local cost inputs which has gone up. I think one of the categories didn't do well at all, which was air conditioners, because weather pattern played there a lot, we didn't have a very strong summer last year.
This is a very important industry for India because it makes your life a little better, you live little better with your refrigerator, with your washing machine, with your air-conditioners and this is one category which has to grow double digits or 20%-25% plus. I think that's a hallmark of a growing economy - consumer durables industry. I somehow believe that everything should be done to support this industry, to make people buy and live better.

Q: In the last budget we know that there was a 10% excise duty levied on branded apparels and I remember you talking to us at that point saying that it's almost like being penalized for the industry growing robustly and for managing to create brands in which there is so much value. What was the past year like in regards to branded apparels?

A: Like consumer durables industry, the fashion industry also saw a steep decline; virtually no volume growth or decline of growth. Even prices went up because of multiple factors like an increase in cotton prices, input costs became higher and excise duty came about. Also, consumers were not willing to pay that extra price because they knew the sales were going to come about. So they would buy only during sales and the industry suffered a lot.

Another iseue is that the entire value chain is not taxed. This tax should be coming in when GST comes in so as to create a level playing field for everyone. Everybody moved out of branding garments and the whole industry changed, so again the level playing field got disturbed.

Q: GST is something which is not a budget declaration. It is something that has to be implemented but is stuck for several years because the states and their role in the whole matter. The question is, is that really going to be something that helps consumers?

A: Absolutely, because GST creates a level playing field. You will get the best of goods at the best of prices. Also, you get an output credit on all your input tax which you have paid. I think that will be the biggest beneficiary for free movement of goods and for consumers getting the choice and much better prices.

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