Budget Expectations 2017-18
After demonetization move by the government markets now can expects some positive surprises from the upcoming budget dated 1st February 2017.
One of the major question these days is the GST application,this is billed as India’s most pushy reforms, will link together a common national market, dismantle fiscal barriers among states and consolidate a patchwork of local and central duties such as excise into a single levy.
The original deadline of April 2017to roll out GST looking missed for now, Finance Minister Arun Jaitley is likely expected to announce GST’s implementation schedule in the upcoming budget 2017-18.Under law, India will have to implement GST on or before September 15, 2017.
Considering the economical conditions the Modi government tried it’s hard to change the view of Indian economy in the eye of global leaders.As per our expectations, government meet its target for fiscal deficit at 3.5%-3.6% of GDP in FY17. And for Fiscal year 2018, the government is likely to relax the target of 3.0% (of GDP) to 3.3% (of GDP).
Major sectors we can expect to get benefit from the budget 2017-18areInfrastructure space, as government’s focus will be more in to the infrastructure spending which we expects more than the earlier budget 2016-17, therefore mainly the sectors coming in to this theme such as companies in the EPC road construction, capital goods and cement companies would be benefited from this. Also government’s push for rural as well as urban housing would benefit various industries like consumer staples, two wheeler and housing finance companies.
In to the tax reformation, after GST, the major attention in the budget 2017-18 will be on direct tax. We expect big reforms in the income tax slabs and rates. Like,possibly the government will raise the income tax exemption limit substantially from Rs 2.5 lakh per annum currently.Income tax on individuals is expected to raise based on lower tax evasion, income disclosure schemes and a wider tax base.
Considering the corporate taxation, as the government is mainly a corporate friendly, we expect the corporate taxes likely to get reduced from current rates of 28-29% to 25%. That will be added as a positive margin mover to the corporate.
In budget dated 1st February 2017India’s finance minister Arun Jaitley likely propose to create a favorable atmosphere for foreign direct investors (FDI), private equity (PE) firms, angel investors and venture capitalists (VCs) as part the broad strategy to ease fund flow to start-ups and small businesses.
Major Sector in Highlights:
Automobile: Finance Minister Arun Jaitley likely to announce some bold measures in the Union Budget for 2017-18 (Apr-Mar) for auto industry. The automotive industry anticipates the government would set a reasonable rate of goods and services tax for two-wheeler, three-wheeler, commercial vehicles, small cars, utility vehicles, and auto components. Also expects the goods and services tax rate for electric vehicles and hybrid cars to be significantly lower than the general rate.
BFSI-Banking: Currently the industry is in pain after demonetization due to asset quality, in the budget the FM Arun Jaitley likely to get some sweet spot for the BFSI industry. Majorly the PSU banks are under pressure on the worsening of NPA levels. Government may consider some fund inputs in to the PSU bank system to make it a positive deal like earlier it had done.
Infrastructure and Theme:Considering the current levels of rural developments by the government, we expect the budget likely increased thrust on schemes promoting rural growth. We also expect the government will increase the infrastructure spending, the introduction of metro rail, mono rail in metro cities, road development are the key factors to watch from the budget.
We also expect more clarity and higher level of investments in housing for all initiative (which was announced earlier) and funds for Smart Cities to be increased post relaxation in built up area and FDI requirements.
Oil & Gas Sector: A reduction in the Oil Industry Development Cess again finds itself at the top of the wish-list of oil and gas companies from of the Union Budget for 2017-18.Upstream oil majors such as Oil and Natural Gas Corp Ltd, Cairn India Ltd and Oil India Ltd want the rate of the levy to be cut to 8-10% from 20% at present.In the previous Budget, upstream companies received some respite on this front as the government changed the structure of this cess and made it ad-valorem chargeable at the rate of 20% from a hefty fixed levy of 4,500 rupees per tn. However, with the recent rise in oil prices, the relief to producers has been completely erased as at a rate of 20%, they are now paying more than the earlier fixed cess of 4,500 rupees per tn. The petroleum ministry is also supporting the industry’s view on the matter. Companies are also pitching for a friendlier and rationalized tax regime and want the Finance Minister Arun Jaitley, who will present the Budget on Feb 1, to give tax exemptions on capital investment in creation of oil and gas infrastructure like pipelines.
Steel & Metal Sectors:In the current fiscal, the government has rolled out protectionist measures such as minimum import prices and anti-dumping duty on several steel products.But, with volatility in the commodity markets continuing, the industry wants the government to continue to be pro-active in safeguarding its interests. The steel industry is hoping for a waiver on import duty on raw materials such as coking coal and iron ore. The industry is also looking for a thrust on various infrastructural segments, which in turn will widen the scope for steel consumption in the country.
Disclosure in pursuance of Section 19 of SEBI (RA) Regulation 2014
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