An essay on budget expectations from the desk of a media exec.
Post the GST regulation, the advertising and media industry is facing some slowdown in terms of spends. New advertisers hesitate to release their purse strings while regular spenders are rationalising how much they need to spend. A relaxation in GST would help boost the trade.
Here's what the M&E sector can expect from the budget:
1. The TV industry witnessed significant change post the TRAI mandate on February 01, 2019. This would lead to the closing down of many small and independent channels and the consolidation of some of the big networks. Healthy competition among channels and wide content opportunity for consumers has to be the prime concern for the industry.
2. The print industry is facing low demand at an overall level. The industry is expecting an abolishment of 5 per cent. The GST norm was introduced in FY 2017 along with 5 per cent GST on the import of newsprint. The trade was expecting an extension of tax reduction on printing machinery as well.
3. The radio industry saw new licenses being issued with a big bang. However, many licenses are yet to become operational. A reduction in license fees, in accordance with the viability of running them in a long-term manner, is important. For some time, radio players have seen a similar GST rate (5 per cent) as print. Another round of radio auctions is on the cards post 5G's rollout in 2020. However, a necessary correction is required before moving ahead.
4. The film industry is seeking uniformity in GST to boost cinema viewership. Under the GST era, movie tickets above Rs 100 attract 18 per cent GST, while those lower than Rs 100 attract only 12 per cent.
5. Growth and higher penetration of the digital medium in metros and tier I and II towns help to drive music streaming along with OTT players to reach out to the masses. The Government is committed to driving digitalisation and the rollout of 5G would boost the digital medium further. Trade is expecting continued support from the Government in the future as well.
The FMCG Sector...
The FMCG sector is largely dependent on agricultural output and the in-hand money of the middle class. The interim budget already presented offered some significant things for both groups.
Agriculture and Farmers:
1. To support farmers, for the first time in Indian history, the Government fixed the minimum support price (MSP) for all 22 crops at a minimum of 50 per cent more than the cost.
2. To provide assured income support to the small and marginal farmers, the Government launched the - Pradhan Mantri Kishan Samman Nidhi (PM-KISAN) - program. Under this program all farmers will be provided with direct income support of up to Rs 6000 per annum.
3. For providing affordable loans to farmers, the crop loan was increased to Rs 11.68 lakh crore in FY 2018-19 and is similar for FY 19-20.
4. India is the second largest fish producing nation in the world, accounting for 6.3 per cent of global production with the average annual growth of 7 per cent(+) in recent years. It provides a livelihood to about 1.45 crore people. For support of the fisheries and the animal husbandry sector, the 'Rashtriya Gokul Mission' assigned INR 750 crore in the current year itself.
The Middle Class...
1. The number of returns filed has also increased from 3.79 crore to 6.85 crore showing an 80 per cent growth in the tax base. With new path-breaking technology to transform the Income-Tax Department into a more assesse-friendly unit; all returns will be processed in 24 hours with refunds issued simultaneously.
2. An estimate of around three crore middle-class taxpayers comprising salary earners, self-employed individuals, small businesses, and pensioners are getting direct tax benefits. Those having a taxable annual income up to Rs 5 lakh will get a full tax rebate, notified saving (80C) - 1.5 lakh, Home Loan - 2 lakh, and NPS - 50,000. Education loan interests, medical insurance, medical expenditure on senior citizens etc. would get an extra rebate. This will infuse more money into the middle-class pocket. Around 18,500 crore of tax benefits will go to three crore taxpayers.
3. Standard Deduction is being raised from the current Rs 40,000 to 50,000. This will provide additional tax benefits of up to Rs 4,700 crore to more than three crore taxpayers.
4. TDS on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000. This will benefit small depositors and non-working spouses.
These initiatives would definitely result in farmers and the middle-class spending more. Lifestyle and FMCG products would be among the first to have more of the pie with this additional income. The Modi 2.0 government, in continuum, seeks more reforms in the agricultural sector and may take more initiatives to fulfil its commitment to double the income of farmers by 2024. This would, by and large, benefit FMCG giants like HUL, ITC, Nestle, Dabur, Patanjali, P&G etc.
(The author is Senior Business Director at Starcom India. Views expressed in this article are personal. The full version of this essay is published on the author's LinkedIn page.)