Budget 2018: The impact on India Inc

BANKING

Budget proposals

Key schemes announced

• Bank recapitalization program has been launched with bonds of Rs.80,000 crore being issued in the year. This coupled with reforms agenda named Enhanced Access and Service Excellence (EASE) program
   
• Dedicated Affordable Housing Fund (AHF) in NHB to be funded from priority sector lending shortfall and fully serviced bonds authorized by government.
   
• Government and Regulators to take necessary action to permit investment in debt securities with minimum rating of ‘A’ from the current criteria of ‘AA’ rating.
   
• Proposal to onboard public sector banks and corporates on Trade Electronic Receivable Discounting System (TReDS) platform and link this with GSTN.
   
• Allow strong Regional Rural Banks to raise capital from the market to enable them increase their credit to rural economy.
   
• Reserve Bank of India Act to be amended to institutionalize an Uncollateralized Deposit Facility.  

Impact on the Industry

• The recapitalization program shows the backing of the government to the overall banking system and the recapitalization and EASE program look forward to help public sector banks improve their governance standards, efficiency and meet capital requirements as well as provide additional credit estimated at around Rs.5 lakh crore.
   
• The fund will provide NHB with additional resources to refinance housing finance companies to provide credit to affordable housing customers thereby meeting the government’s housing for target by 2022.
   
• These are expected to provide corporates rated lower than ‘AA’ access to capital markets for raising debt capital and help in developing corporate bond market
   
• Enable banks to sanction loan online for MSME sector
   
• Better capitalized Regional Rural Banks will increase credit in unbanked areas there by improving financial inclusion.
   
• Help RBI in managing excess market liquidity.

TYRES

Budget proposals

Key schemes announced

• Custom duty on Import of truck & bus radial tyres increased to 15%

Impact on the Industry

• Government of India has incentivized domestic value addition through ‘Make in India’ by increasing the customs duty on tyres from the existing 10% to 15% will help make the domestic industry more competitive.

AUTOMOBILES

Budget proposals

Key schemes announced

• Increase in customs duty for CKD imports of motor vehicle, motor cars, motor cycles, of key auto ancillary and tyre products
   
• Higher allocation towards infrastructure (From Rs 4.94 lakh crore to Rs 5.97 lakh crore)
   
• Higher allocation towards creation of livelihood and rural infrastructure (Rs 14.34 lakh crores). Employment generation in rural areas, rural roads development, rural houses and rural electrification

Impact on the Industry

• Demand for Commercial vehicles is expected to pick up on account of infra push by the government
   
• Demand for two and three wheelers, small passenger vehicles and commercial vehicles is expected to increase. Also, with agricultural push, demand for tractors is expected to pick up.

FMCG

Budget proposals

Key schemes announced

• Reduction in customs duty on raw cashews (inputs and raw materials)
   
• Increase in customs duty on imports of food products from 10% to 20%.
   
• Import Duty on personal products also raised to 20%

Impact on the Industry

• The measures taken by the government on increasing customs duty on various products is expected to benefit the domestic manufacturers and make them more competitive

OIL AND GAS

Budget proposals

Key schemes announced

• To provide 8 crore rural woman free LPG connections under the Pradhan Mantri Ujjwala Yojana.
   
• The Oil and Gas industry is allocated Rs 24,932.80 crore as subsidies where Rs 20,377.80 crore is earmarked as the LPG subsidy and the remaining Rs 4,555.00 crore is to be given as the kerosene subsidy.  

Impact on the Industry

• Increase in consumption of LPG, to benefit Oil Marketing Companies (OMCs).
   
• The subsidy will provide an increase in the consumption and production of LPG which in turn will is likely to benefit OMCs.   The government has also reduced the allocation towards Kerosene as it is discouraging the use of kerosene.

EDUCATION

Budget proposals

Key schemes announced

• ‘Revitalising Infrastructure and Systems in Education (RISE) by 2022’ initiative announced with a total investment of Rs 1 lakh crore in next four years for funding the research and related infrastructure in premier educational institutions, including health institutions. For this, Higher Education Financing Agency (HEFA) would be suitably structured. Initiative has been taken in this regard by significantly increasing Budgetary allocation from Rs 250 crore in 2017-18 to Rs 2,750 crore in 2018-19 towards HEFA
   
• Promoting digitisation of education by moving from ‘black board’ to ‘digital board’ and usage of technology to upgrade the skills of teachers through recently launched digital portal ‘DIKSHA’
   
• Initiating integrated B.Ed. programmes for teachers in order to improve quality of education

Impact on the Industry

• The same is expected to benefit premier educational institutions offering higher education courses (including Phd courses) that undertake research programs and have been receiving grants from govt. to carry out the same. It will help them fund the research work and related infrastructure appropriately.
   
• The same provides opportunities to entities involved in providing computer hardware, Information Communication and Technology (ICT) and e-learning services to various government/private schools in different parts of the country apart from providing training to school teachers
   
• The same will induce higher educational institutions to commence integrated B.Ed. courses in their institutes thus providing an additional revenue stream

GEMS AND JEWELLERY

Budget proposals

Key schemes announced

• Increase in customs duty on cut and polished colored gemstones from 2.5% to 5%
   
• Increase in customs duty on diamonds including lab grown diamonds-semi processed, half-cut or broken; non-industrial diamonds including lab-grown diamonds (other than rough diamonds)

Impact on the Industry

• The increase in customs duty is expected to promote domestic cutting and processing of rough diamonds gemstones

POWER

Budget proposals

Key schemes announced

• “Saubhagya Scheme” for rural electrification is the thrust area in the power sector as highlighted in the budget. Connecting 8 crore homes with an outlay of Rs 16,000 crore is the main highlight for the sector.
   
• Additionally, lowering of customs duty on solar tempered glass is meant to help lower the cost for domestic manufacturers of solar panels.

Impact on the Industry

• The faster implementation of rural electrification would mean better demand for power produced by utilities.
   
• Major beneficiaries would be Power producers (Thermal), EPC in power segment, Transmission and distribution companies, transformer and electrical equipment manufacturers, irrigation pump-set makers and household appliance companies

HOSPITALITY

Budget proposals

Key schemes announced

• While there are no specific budget announcements pertaining to the Hotels industry, demand for the industry may still pick up due to Tourism related announcements
   
• Propose building tunnel under the Sela Pass
   
• Proposed to develop ten prominent tourist sites into Iconic Tourism destinations
   
• Modernization of railway network

Impact on the Industry

• Is expected to marginally benefit the Hotels industry as the increased movement within the country would augur well for room demand.

CONSTRUCTION

Budget proposals

Key schemes announced

• Sectors under focus during the budget were rural infrastructure, roads and railways and Housing-both rural and urban.
   
• Allocation towards infrastructure saw a hike from Rs 4.94 lakh crore to Rs 5.97 lakh crore which augurs well for the construction sector. Governments plan to modernize 600 railway stations, meeting road project completion targets for the year and construction of houses under affordable housing project in rural and urban areas are going to be major drivers for the construction sector. Smart cities and affordable housing are segment which would further aid the construction sector which have seen higher allocation compared to last year.

Impact on the Industry

• EPC Project Companies, Roads&Toll operators, Capital Goods, Cement are expected to benefit.

TEXTILES

Budget proposals

Key schemes announced

• MSP for kharif crops (cotton) to be 1.5 times from next season
   
• Outlay for Textile sector  - Rs 7,148 crore for 2018-19

Impact on the Industry

• Higher MSPs would mean higher input cost for textile manufacturers
   
• Increase in allocation by 12% from Rs 6,000 crore announced in 2017 is positive for textile sector

EDIBLE OILS

Budget proposals

Key schemes announced

• Upward revision in the custom duty for some varieties of edible oils
   
• Imposition of social welfare surcharge (10%) in place of education cess (3%) on import

Impact on the Industry

• These varieties however account for a very small quantity of the total edible oil imports. Thus, the the impact on the edible oil players shall be neutral. 

FERTILISERS

Budget proposals

Key schemes announced

• The Fertilizer industry has received Rs70,079.85 crore as subsdies where Rs 44,989.50 crore is earmarked as the urea subsidy and the remaining Rs 25,090.35 crore is to be given as the nutrient based subsidy. 
   
• Introduction of Re-structured National Bamboo Mission with an outlay of Rs 1,290 crore to promote bamboo sector in a holistic manner
   
• MSP for all unannounced kharif crops will be 1.5 times of their production cost like majority of rabi crops.
   
• Encouraging the cultivation of horticulture crops by development of infrastructure of horticulture.  

Impact on the Industry

• The allocation towards the nutrient based subsidy has increased by 24% from it being Rs 20,232 in FY 2017-18 to Rs 25,090.35. This is to help augment further production of decontrolled fertilizers . By adding fertilizer to bamboo can promote vigorous growth and more vibrant leaves. Because bamboo is a member of the grass family, it consumes large amounts of Nitrogen. Production of indigenous urea to increase.
   
• This will help in doubling the farmers income which will encourage the farmers to increase the output of food crops in the land holding which will in turn lead to more usage of fertilizers and that will help augment the production of fertilizers.