Feb 27, 2010, 12.35 PM IST

Budget impact on sectors: Padmakshi Financial

Padmakshi Financial Services has come out with its analysis for Budget 2010. According to the research firm, this budget proposal may impact negative for Aviation, Automobile, Banking & Finance, FMCG & Food Processing while Hotel, Infrastructure / Construction may see positive impact.

Source: Moneycontrol.com

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Budget impact on sectors: Padmakshi Financial

Padmakshi Financial budget analysis 2010:

Reduction in Fiscal Deficit and Interest Rate Stability:

Maintaining high GDP growth in the range of 8‐9% and at the same time narrowing the fiscal deficit was the focus of the budget FM announced to reduce the gap to 5.5% of GDP in the year starting April 1 from 6.9% the previous year. Reduction in fiscal deficit expected to be achieved through: � Divestment in PSUs to the tune of Rs. 40,000 crores � 3G spectrum auction expected to generate Rs. 35,000 crores � Direct/Indirect Tax contribution approx. Rs. 5.8 Lakh crores Government also plans to scale down its borrowing program to 3.4 Lakh crores for 2010‐2011 as against 4.5 Lakh crores for the year 2009‐2010. The reduced government borrowing program is a positive sign for the Bond Market as the Interest Rate environment will remain stable.

Inflation: This budget will sow seeds for higher inflation. The higher tax exemption for individuals is likely to increase the disposable income to the tune of Rs. 26,000 crores. Also, higher fuel prices along with the stimuli‐rollback in the form of excise duty hike by 200 bps will also lead to higher prices.

Sector: Aviation

Budget proposal

Sector Impact

Company Impacted

Air travel on all classes in the domestic sector will become costlier as the government expanded the scope of air transport services to attract service tax.

Negative

Negative for all aviation companies

Sector: Automobile

Specific component of excise duty applicable to large cars/utility vehicles of engine capacity 2000 cc and above to be increased from 20% to 22%.

This will increase the cost and affect the margins and Profitability. The higher excise rate on steel and cess on coal will also result in higher input cost.

Negative for all M&M, Tata Motors

Rate reduction in Central Excise duties to be partially rolled back and the standard rate on all non‐petroleum products enhanced from 8% to 10%

Negative for all auto companies

Increase in the Central Excise duty of Rs. 1 per litre on petrol and diesel other than the current 5% on crude petroleum and 7.5% on diesel

This may have an impact on the customers planning to buy new vehicles

Negative for all auto companies

Sector: FMCG & Food Processing

Slab‐wise increase in excise in various categories of cigarettes leading to overall 15% hike in excise

Negative

Negative for ITC, Godfrey Philips

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