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DIRECTORS' REPORT
GODFREY PHILLIPS
INDIA LIMITED-
DIRECTORS' REPORT & MANAGEMENT DISCUSSION AND ANALYSIS
Your Directors deem it a privilege to present the Annual Report and Accounts for the year ending
March 31, 2010.
GENERAL ECONOMIC ENVIRONMENT
For the Country, the year 2009-10, was indeed a challenging one in the backdrop of continued slowdown
n the developed world following the impact of global financial crisis. Yet the Indian economy posted a
remarkable recovery not only in terms of overall growth rate but more importantly in terms of its
fundamentals which justify belief in india's promising future. The Indian economy's escape from the global
financial contagion was mainly due to its robust foundations, and its banking sector remaining largely
unexposed to risky assets, as had been financed in advanced economies. The indian system has
focused on deposit-based banking as opposed to being based on banks' short-term borrowings from
capital markets.
The economy is expected to grow by 8.7% in 2010-11, with a return to a growth rate of 9% in 2011-12. This
outlook would be based on an escalation in investment demand, signs of recovery in the global economy
and the positive effects of carrying out critical fiscal reforms such as the transition to Goods and Service
Tax (GST) and broader direct tax reforms by 2010-1 1 to fuel growth. In fact the optimists predict that the
economy will soon breach the double digit growth mark to become one of the fastest growing economies
of the world.
TOBACCO INDUSTRY
The Economic Survey 2009-10 indicated that with growth in private expenditure on food, beverages and
tobacco falling behind the overall growth in private consumption expenditure, the share of expenditure on
food items has gradually been declining over the years. As per the CSO (Central Statistical Organisation)
data, the share of private expenditure on food, beverages and tobacco was 35.3% (2008-09) of the total
private consumption. This is a decline from 39.6% in 2004-06
After registering a growth of around 14% annually in the eight year period ending 2008-09, the category of
beverages and tobacco products experienced a decline of 2.2% in 2009-10 (Apr-Nov). Cigarette
production has not shown any significant growth since 2007-08. The cigarette industry continues to reel
under burdensome taxation and an increasingly restrictive regulatory environment.
Impact of Taxation
Union Budget 2010-11 increased excise duties on cigarettes by about 18%, further pressurizing volume
growth, affecting product pricing and impacting consumer behaviour, particularly since cigarette
consumption, unlike other tobacco consumption, is price elastic. The continuously rising taxes are
resulting in a shift in cigarette consumption to cheaper alternatives that have higher tar/nicotine levels
Coupled with the existing rise in VAT on cigarettes from 12.5% to 20% in state budgets, this was another
discriminatory blow for the cigarette segment.
Due to various issues remaining unresolved amongst various stakeholders, the earlier deadline of
April 01, 2010 for GST implementation stands postponed till next year. The Empowered Committee of
State Finance Ministers continues consultations on compensation to states, subsumation of state taxes.
Constitutional amendments and model legislation for GST, amongst other issues.
Source: https://www.industrydocuments.ucsf.edu/docs/jybx0223

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