Monday, July 6, 2009

Union Budget 2009- a review in my style

I am no Tax expert, neither do I know the difference between MAT and DDT. But the Budget 09 is certainly something which needs to be followed by everyone like me, owing to the fact that this budget led to a fall in the 'Sensex' while trying to please the 'common man'. But what does it bring for the people who are stuck in the middle of these entities- the common man trying to become uncommon by becoming a common part of the business world. The word 'common' is too commonly used, hence it needs a caroused explanation (sorry for the bad joke :), I just wanted to build the mood by establishing that everything this budget does is for the word 'Common').

So, as mentioned in my earlier posts, the driver of the Indian market in this period of economy is going to be SMEs and to some extent, startups. The market is seeing a surge and every new and small innovation is going to benefit. What does this driver stand to achieve from this market, how will things change for someone who is about a launch a new product, how is the Union Budget 2009 going to affect small businesses.

Lets first have a look at the interesting features of this budget- Fringe Benefit Tax abolished, sharp hike in Defence Budget, Branded Jewelleries get cheaper (non branded ones... take a plunge), IT Exemption limits increased, lots of money for higher education through IITs, IIMs etc. This is clearly budget which, in its first sight, seems short sighted and aimed only at popular developmental issues.

But SMEs will definitely benefit immensely from the FBT abolition. FBT is the tax which was put on all amenities and perks provided to the employees apart from the regular salary. This had led to a lot extra expenditure for employers, specially in marketing firms (marketing firms because their a large amount of traveling and business trip perks associated with such businesses). Now that FBT is abolished, SMEs will have their way again by luring new employees not through their basic salary, but through the option of earning through perks which the company provides. When SMEs are benefited, entrepreneurs and new ideas are benefited too. FBT abolition can be used as a unique weapon by these smaller firms, as these firms always need some unique weapons for winning over prospective employees (since they lack normal weapons like high pay package or big brand name). Now, they have a chance which every calculating mind will utilize to the best of its advantage.

Is there anything apart from the FBT news, which is going to bring a drastic change? Yes, there is. At least on paper, there is. Special funds for easy lending to smaller and micro enterprises has also been formed. Though the focus currently is rural market, it won't be long before these micro and small enterprises will benefit much more. The FM, while deciding the budget, must have kept this into mind that the base need be strengthened to allow a towering structure to be made. Thats why he focused on the right segment of market at least in this part of the budget.

But didn't the market expect much more from this budget; there is no doubt that small enterprises can thrive only when the market receives more from the FM. But lets look at the best part, the budget clearly seems to have inclined itself more towards the bigger benefits of MSEs (Micro and Small Enterprises) rather than bigger corporate houses, a clear sign that the road is going to be easier for every person who has the plans to startup. Easing the taxation system in the few months, will make this road even easier. Soon, India will also be the country with lots of hassles while having a startup removed, thus leading to greater investment in startups from established firms and VCs.

Things are looking good :) ........

3 comments:

arbitreader said...

good going ahwin ..... cover more aspects of budget in the next post - Paras

Goddy_Blogs said...

wowww.... wat a view.... needs complete coverage.... gr8 1 !!!!

Jitendra said...

u write well as well.... i liked ur post on enterprenuership... the fact that they are doers.... keep writing ....