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Jan 13, 2018 02:01 PM IST | Source: Moneycontrol.com

Budget 2018: Here's what these 12 sectors are expecting from FM Arun Jaitley

The focus on infrastructure spending to revive the capex cycle should see higher allocations for Roads, Railways, and Power programmes.

Moneycontrol News @moneycontrolcom

Gautam Duggad

Motilal Oswal Institutional Equities

We expect the government to provide a boost to consumption via higher allocation for rural oriented schemes. Some relief for middle-class via a cut in tax rates/higher exemptions for tax savings can’t be ruled out either given this is the last budget before the general elections 2019.

The focus on infrastructure spending to revive the capex cycle should see higher allocations for Roads, Railways, and Power programmes.

We also anticipate some relaxation of fiscal deficit targets as this is the first year of transformational and disruptive reform like GST. However, overall the glide path for fiscal consolidation should continue in the medium term.

Here is a list of expectations from 12 sectors:

Banks:

Increased incentives and budgetary allocation to encourage the flow of credit to MSMEs. The inclusion of a wider income range under affordable housing schemes and further incentives to developers for the same.

Incentives for long-term project financing by banks with a focus on roads and railways. More clarity over recapitalisation bonds for state-owned banks’. Reduction in the tenure for interest tax-free deposits from 5 years to 3 years.

Digitization initiatives including a special focus on promoting UPI based payments across a broader platform.

NBFCs:

In order to give a boost to affordable housing, the government might announce steps to make land acquisition easier for affordable housing developers.

PMAY allocation was raised from INR150b in FY17 to INR230b in FY18. We expect increased allocation for the same.

If there is any announcement of higher import duty on gold, it could impact gold prices and in turn gold financing companies.

Exemption limit for interest deductible for housing loans u/s 24 for tax calculation purpose may increase from the current level of INR0.2m.

Infrastructure bonds may be reintroduced for increasing the allocation towards infra spending.

FMCG:

Increase in total budgetary allocation towards rural and MNREGA will also be an interesting factor to note. We expect a significant increase in allocation.

Two years ago the government had announced a plan to double rural income in the next 5 years. Clarity on how they propose to do that with the revised time frame, if changed, would be appreciated.

Change in personal income tax slabs or income tax rates would be watching out for as it has the potential to boost consumption.

Any timeline on the proposed reduction in Corporate Income tax rate to 25% will be keenly watched out for as many consumer companies are in the peak tax bracket.

After a steep increase in cigarettes GST from earlier proposed levels it would be interesting if the budget continues stringent policy towards cigarette consumption or takes a breather.

Oil and Gas:

Subsidy on LPG/kero amounts to INR90b for H1FY18. Higher crude oil prices are expected to result in INR470b under-recoveries in FY19. Govt is expected to give clarity on what proportion of these are they expected to provide for.

India wants to increase penetration of gas. Last year, customs on LNG was cut to 2.5%. Expect this to be further cut in order to boost consumption.

Upstream companies have been asking for lowering cess. Low probability of this one happening though.

Govt had increased excise on auto fuels when oil prices crashed. But excise duty hikes have not been rolled back. Expect some relief on that front.

Capital good and infrastructure sector:

Increased allocation for infrastructure sectors like Roads, Railways, Housing and Urban Development. Rail capex saw at INR1.46trn in FY19 vs. INR1.31trn in FY18 while the road ministry is looking for a 10-12% higher budgetary allocation from the finance

minister.

Increased allocation to major programmes of the Union Government such as a. Pradhan Mantri Awas Yojna for urban and rural housing, b. Electrification schemes of IPDS and DDUGJY, c. AMRUT and Smart Cities, d. Namami Gange, Metro, and MRTS

projects.

Telecom:

Withdrawal of customs duty exemption on final telecom products.

The Government in order to encourage indigenous manufacturing may extend concessional rate/exemptions to inputs required for manufacturing of telecom and IT equipment and may withdraw exemption/ concessional rate on import of final goods.

Provide essential infrastructure status to the industry.

Non-applicability of service tax on payment for spectrum: Telecom operators are required to pay service tax on spectrum allotment. The ability of service tax on payments for spectrum allocation leads to payment of tax on a statutory levy.

May increase allocation towards BharatNet project to accelerate broadband fibre optic connectivity in rural areas.

Real Estate:

Single Window clearances for all approvals. Additional tax incentives for first time home buyers.

Reduction in GST rate while increasing the ambit of GST.

Metal Sector:

Push for use of indigenous products, encouraging Make-in-India.

Increase spending on infra project including housing for all and roads.

Power Sector:

Increase allocation towards 'Power for All' and scheme like IPDS, DDUGJY.

Policies to encourage e-vehicles.

Pharma:

Status to change from priority sector to infrastructure sector, including Hospitals and Diagnostic centers, which will reduce their cost of funds and enhance profitability.

To extend Tax benefit for 10 years on capex for hospital projects.

Streamline the duty structure by reducing the duty structure on API so as to have better utilization of credit.

Airways:

ATF is expected to be brought under the purview of GST during this budget.

Action plan for the privatization of Air India.

Fund allocation to improve aerospace manufacturing and MRO sector in India.

Update on up-gradation of existing airports infrastructure.

Technology:

Incentivize infrastructure towards churning high-quality technology talent in the Digital era.

Any timeline on the proposed reduction in Corporate Income tax rate to 25% will be keenly watched out for as many Technology companies are in lower tax brackets, which will effectively go up.

Foster an ecosystem for start-ups to help them access capital and make investments in the segment lucrative.

Any announcements on timelines around Smart Cities will be a welcome opportunity for some companies focused on the same.

Exchanges:

Announcement around launch new products, participants in commodity exchanges and regulations to accelerate the growth of newer segments such as bond markets and currency – will be key for BSE, CDSL, and MCX.

Relaxation of STT / CTT for an impetus to trading volumes.

Disclaimer: The author is Head of Research, Motilal Oswal Institutional Equities. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for top and latest Budget 2018 news, views and analyses.
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