Budget announcements have ceased to offer major benefits to independent industries. Today, it has bigger implication on the overall economic growth and development.

The most important issue facing our industry is the recent pre-budget notification that calculates customs duties for IT peripheral products based on MRP (Max Retail Price). In the notification issued on January 24, 2008 (made applicable with immediate effect), the abatement allowed has been kept merely 25 percent. In other words, duties will be levied on 75 percent of MRP instead of the procurement price. This has resulted in increase of customs duties by an additional 10.25 percent. Previously, duties on IT digital imaging peripherals (such as printers, scanners, laser-MFDs, digital copier MFDs and so on) were 21.14 percent. Now, the same has increased to 31.39 percent. This 50 percent increase in duties announcement has been an unpleasant shock.

We would expect this correction by making the abatement 49 percent at least. This is because there are four components of costs – Companies gross margins (which is usually 15 percent of MRP), Distributor margins (usually 5 percent), Retailer margins (usually 15 percent – customers take 5 percent discount from this) and Value Added Tax (usually 4 percent, but can also be 12.5 percent in some cases and 2 percent Central Sales Tax in some cases.

All in all, this totals to 49 percent. Anything less will only increase duties, resulting in higher MRPs to customers, which is a big minus for an economy building a strong IT infrastructure.

More importantly, Budget 08 should create or sustain high economic growth, which in turn will help higher consumption.