From the Editor
http://www.businesstoday.in
The Budget and More
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mmediately after the Budget, many friends and acquaintances ask me if I
consider it to be good or bad. My answer generally is: it largely depends on
who you are. For example, if you were a farmer or rural worker suffering
acute distress because of two years of bad rains and a huge debt, some parts of
the current Budget would definitely delight you. If you were a small taxpayer
looking to build your first small house, you would also find some cheer in the
Budget. Ditto if you were a cement or steel manufacturer. Cement and steel
companies would also have things to cheer about, given the focus on infrastructure development. Construction firms specialising in roads would also see good
business prospects.
On the other hand, if you are part of the auto industry, and especially a
maker of diesel vehicles, the surcharges and cess introduced by the finance
minister would be unlikely to make you happy. For the average middle-class
consumer too, most prices will go up quite a bit because of various cesses
introduced, while there has been no relief in terms of income tax slabs and
other savings. In fact, the new tax proposed on withdrawal of PF would make
you very upset.
If you are an economist worried about the government’s profligacy, the
commitment to stick to the fiscal deficit target would cheer you up – until you
realised that next year, the finance minister wants a range to play around with,
not a single fiscal number as the target.
So much depends on what you were looking for or hoping for in the Budget.
While Budgets can be really bad, no Budget in the past
two decades has succeeded in being so good that it lifts
the spirit of everyone uniformly. In the Budget package
of BT, and its companion, Money Today, you will see how
the proposals affect different segments of the populace
and different sectors of the economy.
Meanwhile, the big corporate news in the past
month was the resignation of Vijay Mallya as chairman
of United Spirits Ltd. The flamboyant businessman had
lost management control of the company he built into
India’s biggest liquor empire to Diageo sometime ago.
But he had tenaciously held on to the chairman’s position despite the board’s
efforts to dislodge him. Now Diageo has paid him a pretty penny – $75 million
– to finally leave the company. With this, Diageo hopes to get complete control
of United Spirits and shed the tag of having a chairman who was considered a
defaulter by multiple banks.
However, all the troubles for both may not be over. For one, Diageo finally
ended up paying two times or more than what it had originally agreed upon to
get final control of the company. And it still needs to answer questions about
the payout it has promised Mallya. More importantly, it has lost market share
in the past three years, and now needs to fight rivals who have snared these.
Mallya himself can’t claim all his troubles are over – State Bank of India
wants its hands on the $75 million Diageo is paying him, because of the loans
it had given to Mallya’s defunct airline Kingfisher.
In our cover story, Deputy Editor Venkatesha Babu explores the real cost of
USL to Diageo and the task it has in hand now in restoring its reputation and
market share. And also chronicles the rise and fall of Vijay Mallya, who inherited
a clutch of liquor and FMCG companies at the age of 28, started many new businesses, and was once riding high as a billionaire with a flashy lifestyle until he
decided to set up an airline on his son’s 18th birthday.
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