Only pickup in economy can help CG firms

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The six-month extension in excise duty concession came as a small relief for the capital goods and consumer durables industries, which felt it would be a drop in the ocean without a rebound in the economy.

“We have not really seen any benefit after the excise reduction in February, as it was followed by the general election and there was no policy stability,” said MV Kotwal, director for heavy industries at L&T, India’s infrastructure bellwether.

The extension of two per cent reduction in excise duty up to December 31 will not provide any serious benefit to the capital goods sector, as the industry’s fortunes depend more on the overall economic growth, inflation and what measures are taken to remove the roadblocks in the infrastructure sector and expedite stalled projects, he said.

Kotwal said the duty cut could have an impact if the government came out with some measures in the budget to drive the sector.

Finance minister Arun Jaitley on Wednesday extended by six months the excise duty cuts that were to expire on June 30 to revive sagging demand in the economy.

His predecessor P Chidambaram had cut excise duty to 8 per cent from 12 per cent in his interim budget to kickstart the slowing economy and had left it to the new government to take a call on its extension.

Consumer durables firms, which too have been reeling under prolonged demand slump, welcomed the decision, saying it would boost demand.

Deloitte senior director Kumar Kandaswami said a reversal of the excise duty concessions at this time would have influenced the demand environment negatively, particularly ahead of the festival season.

“That said, one must add that this would probably protect the current demand scenario rather than add to it. Any significant growth in sales will occur only if disposable incomes in the hands of customers grow faster than that of inflation. The return of sales growth in a decisive manner is some time away.”

Sunil K Sinha, MD and CEO, Sharp Business Systems India, said the duty concession announced in the interim budget had been there only for a short period and hence it was not be possible to identify whether the sales growth had been due to the stimulus or due to the usual seasonal uptick. “The extension of the excise duty cut has boosted sentiments among the trading community,” he said.

White goods manufacturers have increased stocks and pushed sales at the store level following the government move to support the electronic industry. “As an industry we are not asking for duty concessions or any other stimuli. Proper implementation of the GST will be a major step towards ensuring growth. Efficiency and transparency will improve with uniform taxation across the country,” Sinha said.

LG India, Godrej Appliances and Whirpool, felt the government’s move gave the much-needed stimulus to the industry leading up to the festival season.

But Krishan Sachdev, MD, Carrier Midea India, said the extension of excise duty concession will help the industry. “The AC industry has seen robust growth this season and this measure will further strengthen this sentiment.”


(With inputs from Vikas Shrivastav in Mumbai and Shyamala Seetharaman

in Chennai)


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