BUDGET BLUES

February is budget time.  In the pink hey days of socialism (not quite red in India) both the businessman and Laxman’s common man cringed in fear.  Paanwallas started hoarding up cigarettes in anticipation of a price rise.  A drop in prices or taxes was unimaginable. Even Direct taxes – income tax, wealth tax, estate duty, etc. always went up.  The salaried class, the honest taxpayer, and industry in general, dreaded this.  Indirect taxes like Excise and Customs Duty also went up and up.  Manufacturers naturally passed the burden on to the consumer.  It was a vicious spiral, literally spiralling out of control.

     The first major reforms in taxation and the budget began with V.P. Singh as Finance Minister in Rajiv Gandhi’s cabinet in the late 1980’s.  He had reduced direct taxes and abolished Estate Duty.  Then came a succession of economic reformists, led by Dr. Manmohan Singh in 1991, followed by P. Chindambram and Yashwant Sinha.   Direct taxes were reduced to rational levels, and indirect taxes also had to respond to the forces of globalisation and liberalisation.

     Most of us are not professional economists or macro-level planners.  But we do value our hard earned money.  We do believe in legitimate means of tax planning (not evasion), and in balancing our domestic budget.  What is a national budget, if not the sum total of our domestic affairs.  Macro-level planning ultimately must be reflected in the results at the micro-level. Since I am also a businessman by profession (I have to earn my daily bread) I wish to make available to my readers the data I have through my business, Noronha Super Bazar Pvt. Ltd.  Since we have been dealing with about 7000 different products, we have a large database.  I had undertaken a similar exercise before the 1997 budget and sent my findings to the then Finance Minister Sri P. Chidambram, and the Planning Commission.  Prof. Madhu Dandavate, then Deputy Chairperson of the Planning Commission, had duly acknowledged the study.  It was also published in various journals, including the highest circulated Hindi daily – Dainik Jagran.  This time round it is being published exclusively in VJ, with all copyrights reserved.  It will of course be sent to the Finance Minister and the Planning Commission.

     I must repeat that I am not an economist, but a businessman who is concerned about consumer interests.  I give below two tables.  Table A concerns the price-rise over the last eight years.  In order to be as reliable as possible, I have given the price comparison of exactly the same products; to the extent that they are still available.  There is no change in the product, brand, packaging, classification or season.  Let me explain.

     By product I mean a generic item like ghee, tea or toothpaste.  By brand is meant the product manufactured by a particular company with a specific name.  Packaging costs vary.  Hence similarity of packaging is used for comparative study.  Something packed in a tin is not compared with a like product in a polypack or tetrapack.  Prices also vary according to size.  Hence, as far as possible, like comparisons are made – e.g. 500 gm packs.  Where there is a marginal difference in weights (475/500 gms) appropriate adjustments have been made in the tables.  By classification is meant parity of the product.  Notable examples are soap and tea.  Soap is classified according to its Total Fatty Matter (TFM). Tea is classified by its process – Curled, Toasted and Cured (CTC).  Finally there is the season.  Prices vary according to the time of year and festive occasions. Hence the comparison made is for the same time of year – December in this study.  It is the end of the calendar year, and the latest data available before the February Budget. Readers will therefore agree that every possible attempt at honesty and transparency has been adopted in this exercise.

    Let us now turn to Table A.  Over a random product range of 60 items we have the comparative prices for December 1993, 1996 and 2001.  The overall annual price rise (simple, not compounded) from 1993 to 2001 has been 8.5 %.  However, the interesting point is that whereas from 1993 to 1996 it was a high 12.4%; from 1996 to 2001 it has been one third, at 4.3%.  Government statistics apart (who believes them anyway?), one may safely conclude that inflation has been arrested.  What are the major factors for this, and who should get the credit?  I leave that to better-qualified persons to answer.  A careful appraisal of the table shows that there is no appreciable increase over 5 years, in several items of daily consumption like rice, lentils, salt, vanaspati, etc; with some of them actually showing a decline in prices.  The sole exception is clove (lavang), which has jumped by 5 times in as many years.  This is because in the 1990’s these prices had slumped, due to a crash of the Indonesian economy and currency, and a glut in production.  This does not reflect on the Indian economy.  Nor is clove an item of major consumption.  Hence, though it has been retained in the Table for the sake of transparency, it has been excluded from the averages arrived at.

     In contrast, manufactured goods, be they processed foods, toiletries or cosmetics; have showed a continuing increase in prices.  Incidentally, the market for Fast Moving Consumer Goods (FMCG) is being dominated more and more by the Trans-national Companies (TNCs).  Does this mean that the Indian farmer or agricultural producer is earning less for more work?  On the other hand TNC behemoths, led by Hindustan Lever Ltd (HLL), have continued to gobble up and buy out Indian companies; and rake in large profits; fuelled by their media blitz and ad-spend.  Oh the gullible Indian consumer, and our penchant for phoren goods and gora mems!

     This takes me to Table B.  In the last issue of VJ I had covered a talk by noted economist Sri Jairam Ramesh.  He had advocated economic pragmatism as against the dogmatism of economic liberalisation vis-à-vis swadeshi.  Let the data speak for itself.  Following the same method of comparison as for Table A, we have a list of 15 products randomly selected, but commonly used.  On an average TNC products are 21 % more expensive than their Indian counterparts.  Inspite of this, the share of sales of TNC products in the FMCG sector is probably in the range of 70% to 80%.  This is only a guesstimate, as I have not studied this angle sufficiently.  The biggest TNC players are HLL, followed by Nestle, Colgate Palmolive and Proctor & Gamble.  The Indian giants are led by the consumer co-operative of Amul/Dhara followed by Tatas and Nirma.  I do have strong nationalistic feelings.  Hence I prefer to use a swadeshi product whenever available.  My preferential option therefore is, “Be Indian – Buy Indian.”  What about you?  Can we not blow away the budget blues, by making intelligent choices?  Remember you are not just a buyer.  You are a consumer, a part of the economic engine that goes towards nation building.  If you have hardearned money, spend it judiciously.

TABLE ‘A’

COMMODITY PRICECHANGE

S. No.	ITEM	PACKING	DEC.93	DEC.96	DEC.01	Annual %	Change
						1993-96	1993-2001	1996-2001
1	Tata Salt	Kg	3.50	6.00	6.00	24+	9+	Nil
2	Wheat Flour	Kg	5.27	8.85	12.08	23+	16+	7+
3	Sugar	Kg	13.00	13.75	16.80	2+	4+	4+
4	Maida	Kg	5.60	10.50	9.80	29+	9+	1-
5	Rice Bilaspuri	Kg	9.60	13.80	13.75	15+	5+	Nil
6	Rice Rambhog	Kg	13.60	20.80	23.80	18+	19+	3+
7	Rice Basmati	Kg	20.00	32.50	31.00	21+	7+	1-
8	Dal Malka Masoor	Kg	11.90	25.40	24.20	38+	13+	1-
9	Dal Arhar Phool	Kg	20.20	28.20	25.30	13+	3+	2-
10	Dal Moong Dhuli	Kg	18.70	25.50	33.00	12+	10+	6+
11	Rajma Red	Kg	24.60	23.00	21.20	2-	2-	2-
12	Dalda Vanaspati	Litre	39.50	38.75	38.25	1-	1-	Nil
13	Ghee Amul	500 ml	38.60	59.00	NA	18+	NA	NA
14	Groundnut Oil (Postman)	2 Lt	117.00	136.00	NA	5+	3+	NA
15	Refined Oil (Dhara)	Litre	37.50	43.50	47.75	5+	3+	2+
16	Kardi Oil (Saffola)	5 litres	259.00	319.00	399.00	8+	4+	1+
17	Pepper	kg	54.00	110.00	115.00	35+	14+	1+
18	Jeera	Kg	88.00	92.00	149.00	2+	9+	12+
19	Cloves	Kg	155.00	130.00	740.00	5-	47+	94+
20	Turmeric Powder (Ashok)	100 gms	5.65	7.00	7.50	8+	4+	1+
21	Coriander Powder (Ashok)	100 gms	4.70	10.50	10.25	41+	15+	1-
22	Chilli Powder (Ashok)	100 gms	5.80	10.50	12.00	27+	13+	3+
23	Tea Red Label	500 gms	41.25	51.75	83.50	8+	13+	12+
24	Tea Taaza	500 gms	42.80	53.50	81.00	8+	11+	10+
25	Coffee – Nescafe Select	50 gms	23.75	48.75	48.25	35+	13+	Nil
26	Biscuits Parle G	100 gms	3.25	4.00	4.00	8+	3+	Nil
27	Biscuits Brit. Marie	200 gms	8.00	11.00	12.75	13+	7+	3+
28	Pepsi	500 ml	8.00	12.00	15.00	17+	11+	5+
29	Milkmaid	1 pc	26.00	35.75	37.00	13+	5+	1+
30	Lactogen Tin	500 gms	62.75	94.50	124.00	17+	12+	6+
31	Maggi Noodles	100 gms	6.90	5.50	10.00	7-	6+	16+
32	Mohuns Cornflakes	500 gms	26.50	31.75	44.75	7+	9+	8+
33	Amulya Refill	500 gms	42.00	62.00	68.50	16+	8+	2+
34	Kissan Jam	500 gms	26.25	35.00	53.00	11+	13+	10+
35	Bournvita Refill	500 gms	51.00	66.00	95.00	10+	11+	9+
36	Mineral Water (Yes)	1Lt	8.00	8.00	7.50	NIL	1-	1-
37	Butter Amul	500 gms	37.00	52.00	62.50	14+	9+	4+
38	Mutton	Kg	41.00	72.00	95.00	25+	16+	6+
39	Pork	Kg	29.50	38.00	49.00	10+	8+	6+
40	Eggs	Dozen	16.80	21.00	19.80	8+	2+	1-
41	Bread	800 gms	8.00	13.00	15.00	21+	11+	3+
42	Paneer	Kg	39.00	50.00	55.00	9+	5+	2+
43	Charmis Cream	50 gms	24.80	25.75	NA	1+	NA	NA
44	Lakme Lipstick	Pc	32.00	52.00	83.00	20+	20+	12+
45	Keokarpin Oil	200 ml	17.00	19.00	44.00	4+	20+	26+
46	Dabur Amla Oil	200 ml	27.00	32.00	42.25	6+	7+	6+
47	Parachute Oil Bottle	200 ml	19.80	24.00	22.75	7+	2+	1-
48	Toothpaste Promise	200 gms	23.80	28.00	45.50	6+	11+	13+
49	Toothpaste Babool	250 gms	23.80	27.50	40.25	5+	9+	9+
50	Toothpaste Colgate Shakti	200 gms	26.25	31.00	52.50	6+	13+	14+
51	Goodnights Mats 30	Pc	34.00	38.75	44.75	5+	4+	3+
52	Bandaid	5 Pc	3.00	5.00	NA	22+	NA	NA
53	Rin Supreme	250 gms	9.30	13.25	15.65	14+	9+	4+
54	Lux	100 gms	5.75	8.50	10.75	16+	11+	5+
55	Surf	500gms	23.50	33.50	41.75	14+	10+	5+
56	Whisper Regular	10 s	31.50	35.25	58.50	4+	11+	13+
57	Kiwi Polish	40 gms	10.50	15.75	24.50	1+	17+	11+
58	Robin Blue Powder	100 gms	12.25	14.25	16.75	5+	5+	4+
59	Nirma Powder	Kg	13.40	16.20	16.50	7+	3+	Nil
60	Eveready Cell 1015 HD	Pc	5.70	6.25	6.25	3+	1+	Nil

AVERAGE ANNUAL PRICE INCREASE

From 1993 to 1996 —12.4%

From 1993 to 2001  — 8.5%

From1996 to 2001   — 4.3%

TABLE ‘B’

Price comparison for Consumer Goods manufactured by Indian and Transnational Companies (TNCs) in December 2001

S.No	PRODUCT	INDIAN Name, Manufacturer and Price	TNC Name, Manufacturer and Price	PRICE DIFFERENCE
1.	Toothpaste (200gm)	Promise (Balsara)  45.50	Colgate Shakti (ColgatePalmolive)  52.20	+15%
2.	Soap Moisturising 75 gm (73-76% TFM)	Borosoft (Nirma) 10.00	Lux (Hindustan Lever) 14.75	+48%
3	Shampoo (200 ml)	Vatika (Dabur) 87.00	Sunsilk (Hindustan Lever) 105.00	+21%
4.	Detergent Powder (Kg)	Nirma (Nirma) 16.50	Wheel Green (Hindustan Lever)                      17.25	+5%
5	Talcum Powder	Premium (J.K. Helene Curtis) 69.75	Dreamflower (Hindustan Lever)                      72.00	+3%
6	Shaving Cream (70 gms)	Park Avenue (J,K, Helene Curtis) 31.50	Palmolive (Colgate Palmolive) 34.00	+8%
7	Tea (CTC)	Tata Green (Tata Tea) 80.75	Red Label (Hindustan Lever)                      38.25	+3%
8	Vanaspati (1 Litre)	Rath (Suraj Solvents) 36.25	Dalda (Hindustan Lever) 38.25	+6%
9	Milk Powder (500gms)	Amulya (Amul) 68.50	Everyday (Nestle) 78.75	+15%
10	Cornflakes (500gms)	Mohans (Mohan Meakins) 44.75	Kellogs (475gms) (Kellogs)                100.00	+135%
11	Noodles (400 gms)	Licia (Licia) 33.50	Maggi (Nestle) 36.00	+7%
12	Jam (500 gms)	Morton (Birlas) 40.00	Kissan (Hindustan Lever) 53.00	+16%
13	Ghee (1 Litre)	Amul (Amul) 132.00	Anik (Hindustan Lever) 138.25	+5%
14	Sunflower Oil (1 Litre)	Dhara Health (Dhara)              60.00	Sundrop (ITC)         69.50	+16%
15	Pickle (400 gms)	Nilons (Nilons)                         38.50	Maggi (Nestle)         42.00	+9%

     Average price difference between Indian and TNC products of comparable weight, packaging, quality, and specification is +21%.