What is there in the 2021-22 budget for us?

In my last article, we had discussed about Digital in retail sector. In this article, we will focus on the Union Budget 2021-22 presented by our Finance Minister on 1st February 2021. We will try to find out what is there in the budget for us at individual/personal level and from the point of view of economy.

We all wait for the budget every year expecting a reduction in our personal taxes. With the pandemic making our lives miserable with massive salary cuts and job losses across the board, it was expected that there will be some relief on this front. But this did not happen and there was no proposal to change the rates of personal taxes. Instead of providing any exemption, interest income on employee contribution to PF beyond 2.50 Lakhs has been made taxable. So a bit of let down from personal point of view but let us see what is there for us in the budget as a professional, investor and follower of our economy.

We will not discuss the detailed provisions over here in this article. That’s anyways available on google. Let us see which sectors will benefit and where is the economy headed over the next 5 years and how we can benefit individually from these proposals.

India to become the fastest growing economy in next 2 years as per IMF and we should not miss this opportunity to mint money for self. Don’t depend on the reduction in tax rates for making money as that is not going to happen. Just focus on areas where govt is focusing and money will be there for you to make.

 We will talk about the major 5 sectors that will benefit from the budget and how can we benefit out of it: -

1.  Automobile Sector

Vehicle Scrappage Policy- The voluntary vehicle scrapping policy aims to remove inefficient vehicles so as to reduce vehicular pollution and oil import bills. Under this policy, if one is owning a vehicle which is more than 20 years old will have to go for a mandatory vehicle test by paying a hefty sum and if the test is against the health of the vehicle, it will be scrapped. For commercial vehicle, the cap is of 15 years. Again, a bit of let down at personal level as one will have to pay the hefty testing fees and also buy a new vehicle if the test fails. Apart from the above, a green tax during renewal of registration of personal vehicle after 15 years is a further dampener.

But if we look it from our economy point of view, it will create a huge demand and bring in huge investment in auto sector and its related ancillaries. With more people now opting for personal transportation, this sector is going to do wonders. One can invest in this sector to generate a handsome return and thereby nullifying the impact of no reduction in personal taxes.

Companies that can be looked into:-

Maruti- Market leader without doubt and their cars available at every price point. With their top-notch service network, nobody can beat them.

Ashok Leyland- Pure commercial vehicle play. With further boost in infrastructure sector, the demand for trucks mfgd by them will increase further.

Tata Motors- Its basically an all-in-one play. Personal vehicles, Commercial vehicles, Electronic Vehicles, JLR, etc…and the brand TATA….what more do you want? Their huge investment in EV and with the number of new launches lined up, it will give other players a run for their money. If everything goes as per plan, it is going to be the next TESLA of India and with cars made available at affordable price point.

Auto ancillaries’ companies- No vehicle is complete without the support of ancillaries like tyres, lamps, engine, wiring, vision system, etc. Focus on companies like Motherson Sumi, Fiem industries , Endurance , MSTC , Shriram transport finance, and Apollo Tyres.

2.  Health Sector

Three major schemes come under this sector-

a.   Pradhan Mantri Atmanirbhar Swastha Bharat Yojana (PMANSWY)- with an outlay of 64,180 crores over the next 6 years, this will help strengthen the healthcare system and help detection and cure of new and emerging diseases.

b.   Jal Jeevan Mission- with an outlay of 287,000 crores over the next 5 years, this will help supply of universal clean water supply, 2.86 crore household tap connection, liquid waste management, etc.

c.   Swachh Bharat Swastha Bharat (SBSB)- with an outlay of 141,678 crores over the next 5 years, this will help in waste water management, reduction in single use plastic, source segregation, etc.

With such a huge outlay on the above sector, our economy is poised to grow and with the right intent- Clean & Healthy India. One can hence invest in this sector to generate a handsome return and reap the benefits of this effort by our government.

Companies that can be looked into:- Sun pharma, Divis labs, DRL, Granules India, Syngene, Aster DM, Ion Exchange, Va Tech Wabag, Thermax, Antony Waste mgnt.

3.  Infrastructure Sector

Let us see the impact on this sector from Road, Rail & other projects point of view.

a.   Road- By March 2022, government would be awarding another 8,500 kms and complete an additional 11,000 kms of national highway corridors. Out of this the major construction will be in the 4 Assembly Election bound states of Tamil Nadu, West Bengal, Assam & Kerala.

b.   Rail- Huge investment will be done to increase the modal share of rail in freight from the current level of 27 per cent to 45 per cent, 100% electrification of Broad Gauge Routes by 2023 and completion of the western and eastern freight corridor by 2022. Total investment proposed- Rs. 110, 055 crores.

c.   National Infra pipeline- have been expanded to 7400 projects now. Total investment proposed- 102 lakh crores in various sectors like transport, logistics, energy, water & sanitation, communication, social infrastructure, commercial infrastructure.

With such a huge capital expenditure outlay on the above sector, huge job opportunities will be created not only in the above sector but the other sectors which provide raw materials and service to this sector like steel, cement, engineering consultancy, pipes, cables & wires, Energy, etc. Hence one can focus on this sector and the companies related to it.

Companies that can be looked into:- L & T, NCC, PNC infra, Tata Steel, Ambuja cement, Heidelberg cement, Astral Poly, Finolex, SAIL , KEC , ABB, Siemens, Rites, Ircon and HFCL.

4.  Energy & Power Sector

Various initiatives for this sector have been taken which will help one at personal level also. Some of these are:-

·     Ujjawala scheme- additional 1 crore household to get the benefit with 100 more districts added for city gas distribution and new gas pipeline project for J & K.

·     Increase in customs duty on solar inverters and lanterns to help domestic companies.

With such a huge social expenditure outlay on the above sector, there will be an upliftment in the lifestyle of households. Hence one can focus on the companies related to it.

Companies that can be looked into:- Hawkins, Stovekraft, Tata Power, Polycab, KEI industries, GAIL, Finolex, Century Ply, Surya Roshni and Crompton.  

5.  Textiles, Pharma Sector & PLI scheme

The govt announced to set up 7 textile parks over the next 3 years. This is in addition to the PLI scheme of Rs. 1.97 lakh crore over the next 5 years for 13 key sectors of which textile is a part of. The govt has already rolled out PLI scheme for mobile & specified electronic components, pharma products and medical equipment totaling to around Rs. 50,000 crores.

This will help nurture global manufacturing champions and increase jobs for the youth. These sectors have huge employment generation capacity and it will lead to huge income generation and growth in demand and consumption.

The world is now looking at India in terms of Pharma and textile hub. This has happened only because of favorable friendly policy by our govt. In Pharma, the journey has not yet begun. Just imagine the value this sector will create over the next few years if we were to serve the entire world with our pharma products. Huge research and investment in medical technology needs to be done so that the opportunity is not missed.

Companies that can be looked into: - Welspun India, KPR Mills, Dixon, Amber Enterprise, Voltas, LMW, V-Guard, Sequent, Laurus Labs, Granules India and Whirlpool.

The above analysis is being shared just for educational and reading purpose.

Though we have just discussed the above 5 sectors but there are many other sectors which will support the above 5 to make it happen like Banking, Iron & Steel, Logistics, IT & Technology, etc.

In my next article, I will try to throw some light on various other sectors apart from the above 5 that can do well going forward to help India grow and become a superpower. Till then have a great week ahead.