pre budget 2018

In FY19E, the FM will not have the benefit of telecom licenses auction revenues and also will not have the cushion of higher excise revenues on petroleum products. On the other hand, he will have to spend on infrastructure and social causes, to support the economic growth. So don’t expect any relief for corporates on the direct tax front but there could be a some benefits for individuals on the direct tax front.But may change to levy surcharge@15% on tax on Individuals with income above Rs.1 Cr. are subject

Steps to revamp the direct tax system (like reduction in corporate tax rates) AND meaningful cut in the corporate tax rates would benefit the full tax payers, as lower taxes would positively impact their bottomline.

For companies having revenue below Rs.50 Cr. In FY19 budget the government could look to lower taxation for companies with less than Rs.100 Cr revenue. There could be one time amnesty schemes for smaller companies (i.e. no scrutiny of previous years accounts) to enable them to come in the formal economy and comply with the new GST regime. AND MAT rate may be reduced as recently US cut tax rates from 35% to 21%, and  that can put pressure on low cost manufacturing countries like India. 

Global investors would keenly watch the fiscal consolidation path, while addressing politically sensitive rural distress. We believe fiscal deficit target higher than 3.2% in FY19 could raise concerns on possibility of credit rating upgrade from other rating agencies. The FM would have to present achievable budget targets, while stimulating the economic revival and looking after electoral responsibility

The shift is moving towards favoring local manufacturing, strengthening rural economy so focus on Quality small caps and MID CAPS having manufacturing oriented business model AND target "100% appreciation" OR "one year time frame" considering Continued push towards labour reforms (like announcement of a comprehensive National Employment Policy)

BJP's performance in the recently concluded Gujarat state election may have left a lot to be desired by the party's own expected metrics + two structural reforms i.e. demonetization and GST,+ higher crude prices which has taken a toll on the country's economic progress and affected consumer and business sentiment.

Also rumors are there that next loksabha election may be preponed in jun-jul-aug 2018 instead of 2019 so rather than giving subsidies more focus will be to get the infrastructure buildup at earliest.

In view of this slowdown(GVA @1.7% VS 4.1% QOQ and decrease of production of food grains in kharif crop to just 2.8% from 10.7% YOY) in the rural economy, there is an urgent need for government intervention through favourable measures.

Industry is expecting appropriate policies & allocations to ensure good prices for crops & eNAM (electronic National Agriculture Market) over all markets + commodities.

On the rural front, the government already has a stated objective of doubling farmer income by 2022 and almost 50% of the employed workforce in the country belongs to the agriculture sector Thus, greater spend on rural infrastructure, push to irrigation schemes, etc. are expected BY (1)Allocate more funds for conserving water, fertilizer, irrigation, crop schemes, storage, farm education and research and for Disbursing debt/ loans at low interest cost--Increase in budget allocation for Pradhan Mantri Fasal Bima Yojana (PMFBY) + Increase in allocation for investment policy in urea (Positive for Companies like Jain Irrigation, UPL, Kaveri Seeds, Coromandel, GNFC, GSFC, Monsanto, etc)

-Expectation to direct DBT (DIRECT BENEFIT TRANSFER) for fertilizers across India which is ~23000Cr -So +ve for RCF, CHAMBAL, GNFC, COROMANDEL

-For TIMELY SUBSIDY to insurance companies under PMFBY(Pradhan Mantri Fasal Bima Fasal Yogana) so +ve can be ICICI Lombard, New India Insurance and GIC.

-Increase Farm Loan Limit will be +ve for fertilizer ad Agro Chemical companies

-NIP (New Investment Policy for making up domestic UREA CAPACITY). So +ve for RCF, FACT, NFL

-‘Price Deficiency Payment Mechanism’ must be implemented immediately for those crops where procurement cannot be ensured

-‘Agriculture Debt Relief Package’ for the entire country which is used with matching contributions from the State Governments

-Greater focus on warehouses, cold storages at the local level and give boost to agro processing facilities

-To initiate schemes to promote mechanization of farming, Agriculture universities to be made accountable for improving productivity and production in their hinterland and play pivotal in transferring knowledge from research lab to field among other.

-Small and Marginal farmers have come together to form FPOs rather than Cooperatives, should get the same benefits as those of companies

-Need to infuse sufficient funds for incentivizing/subsidizing national resource conservation technologies like micro-irrigation and water recharge etc.

-Also, 'Housing for All' has been a key agenda so More benefits aimed at promoting low-cost housing could also be + more attractive tax treatment.

+ Capital infusion for PSU banks

+ Infrastructure status for the sector & push demand for real estate and housing

+Finance and bringing stamp duty under the ambit of GST

(Positive for Banks & Housing Finance Companies and REAL ESTATE companies investing in affordable housing)

-expects extension of provisions of section 80IBA (income tax exemption) to housing units up to 150 Sqm carpet area from present upto 60 Sqm area.

-Also, in order to ease long term financing for projects, IIFCL should be allowed the status of Development Financial Institution as other alternative instruments such as Bonds, InVITs, REITs and Debt Funds still have not reached levels of full maturity.

For middle-income group, expectations related to greater disposable income so some tinkering of the exemption limits under Sec 80C related to long-term investing in Govt schemes.

Focus on improving farm income

Steps to boost electric vehicles

Incentive to scrap old commercial vehicles

Auto Restore incentives given on R&D(for e-vehicles and less emission) in the form of weighted tax deduction to previous levels & to replace vehicles older than 10-15 years (+ve for ESCORTS, FORCE MOTORS, M&M, Tata Motors, Ashok Leyland, Eicher Motors, AMARA RAJA, EXIDE, MOTHERSUMI, BANCO, CLUTCH AUTO, SMKRG PISTONS, UCAL FUEL)

Increased budget allocations to government initiatives like AMRUT and Smart Cities infrastructure AND push in that for MAKE IN INDIA initiative

12-15% Increase in budgetary allocation Towards Infrastructure spending-roads, railways, defense, oil & Gas, power distribution and smart cities.

-Increase in Custom duty for boilers, generators etc to encourage domestic manufacturing.

-Govt. may provide incentives and compensation for delay in payments (to encourage PPP model)

-Sec 80IA may get amended(related to upgradation of existing infrastructure), Sec10(23G), which provides exemptiom to investors investing in infrastructure might get restored.

-Stamp duty on transfer of assets to REITS might get exempted.

So +ve for VaTech Wabag, EIL, Voltas, Kalpataru Power , KECI, Siemens India (L&T),BEL & BEML, DilipBuildcon, IRB, NCC, Simplex Infra, KNR, PNC Infra, VasconENG , Havells, CG POWER, Eveready, Bajaj Electricals,

Excise duty rationalization and simplification for cement companies and clean energy cess on pet coke

Emphasis on rural development, infrastructure and skill development through a range of measures and higher allocations. So +ve for FMCG companies, especially those expanding their presence in rural India

LOGISTICS

Allocation for transport & Dedicated Freight Corridor. So +ve for GDL, Concor, GATI & Arshiya International

Also infra push can pave way to Removal of import duty on Ferro nickel and stainless steel scrap (+ve for JSW Steel, Tata Steel, Sail,

Increase in custom duty on Aluminum. So +ve for National Aluminum, Vedanta

POWER

Inclusion of Natural Gas within GST -+ve for ONGC, IGL GUJARAT GAS, MGL,     

AND

Implementing GST for power sector + Increase allocation towards power for all schemes like Integrated Power Development Scheme (IPDS), Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) + Focus on Renewables Energy(+ve for NTPC, Power Grid, Adani Power, JSW Energy, Suzlon, Inox Winds, Tata Power)

TEXTILES-

Higher allocation towards Technology Upgrade Fund Scheme (TUFS) subsidy & labour reforms will benefit local textile manufacturer and FINISHED GARMENT EXPORTERS.

DEFENCE

An important weakness with India is the high reliance on imports for meeting our defence needs from self-reliance standpoint + creating jobs for the citizens. expect the government to increase its allocation on capital expenditure on defence sector.

REVENUE

We also believe that, the Government may look at selling some of its non-core assets and privatization of few public sector companies to raise funds for infrastructure.

Expecting 14% increase in capital expenditure. Allocations to important infrastructure sectors, defense AND food subsidies to increase from Rs.1.5trn to Rs.1.6trn. Fertilizer subsidies will likely be projected at Rs.700bn

Gross borrowing of central government is likely to remain [email protected] , as Rs.2.4trn of G-sec is due for redemption in FY19E.