Sector-wise key expectations from Budget 2017

1. Sector-wise key expectations from Budget 2017 With over a week left for Finance Minister Arun Jaitley to unveil the Budget 2017 on January 01, industry experts are being vocal about the expectations that they seek from the NDA-led government’s fourth Budget under the current term. “We believe that the government is likely to take corrective measures which would offer remedy to the demonetisation wounds. In our opinion, increase in individual income tax slab limits and reduction in corporate tax rate is expected to be the highlight of the budget in order to revive the consumption cycle,” said brokerage Angel Broking in a pre-Budget research note. Below are sector-wise expectations from Angel Broking: Auto Auto sector was expected to report strong growth numbers in fiscal year 2017, however, the sudden cash crunch following demonetisation impacted the industry severely with November 2016 and December 2016 sales showing weakness across the segments. The industry expects the government to slash personal income tax rates so that consumers may have more disposable income to boost auto demand. It also expects the government to reduce excise duty on SUVs. Banking sector

2. The Banking sector has been undergoing a painful stage in India. While large scale defaults have weakened the balance sheet of banks on one hand, lower credit growth is exerting cost pressure on the other. The brokerage expects the Budget to allocate more funds to infrastructure and focus on capex revival. “Higher allocation to infrastructure, housing and urban development will ease the stress level of corporate India’s balance sheet,” it said. The brokerage also wants government to hike capital infusion in public sector banks to improve their capital adequacy position. FMCG FMCG sector has not witnessed any significant revenue growth for the last two years owing to slowdown in rural demand. Demonetisation has only aggravated the pain. The brokerage expects more funds into marquee programs such as the Pradhan Mantri Krishi Sinchai Yojana, Rashtriya Krishi Vikas Yojana, Pradhan Mantri Gram Sadak Yojana etc. It also wants the government to increase the income tax slabs to leave more money in the hands of consumers. Infrastructure Infrastructure is expected to be the key focus of Budget 2017. The brokerage is expecting a 30% increase in budgetary allocation to the Roads and Highways Ministry. It may also increase 10% allocation to Ministry of Rural Development (schemes focused on rural housing, roads and bridges), and Ministry of Housing and Poverty Alleviation. 20% surge in allocation towards Urban Development Ministry (covers Smart City & AMRUT scheme) is also expected. Information Technology IT Industry is not looking forward to any major incentives, barring few, like tax benefits, deductions on R&D expenditure and accelerated depreciation on IT andbtelecom hardware products. Angel Broking expects the Budget to be broadly neutral for the sector. Metals and Mining The steel industry has been reeling under immense stress from import glut and predatory pricing for last couple of years. The brokerage doesn’t expect the government to make any major announcements for the metals sector as it has recently taken a few measures like imposing Minimum Import Price (MIP), extending safeguard duty on steel and making BIS (Bureau of Indian Standards) mandatory on steel products. It has also imposed anti-dumping duty on certain varieties of steel from China and European Union.

3. Oil & Gas Lately, with OPEC agreeing to cut production, prices have stabilised with a positive bias. The brokerage expects government to provide exemption on transportation of LNG from a foreign country as well as its re-gasification from levy of GST and service tax in order to promote gas based industry in India. The government would also consider changing the various income tax norms pertaining to tax holiday for companies and provide incentives for the shift towards cleaner fuel for downstream companies. Pharmaceutical Pharma sector is mostly unlikely to benefit from events like Budget, unless the finance minister announces tax benefits either on R&D or corporate front, said Angel Broking. Other benefits, in the form of indirect sops such as increased budgetary allocation for healthcare will provide some boost to the sector, the brokerage added. Power The brokerage expects the government to take measures to promote the renewable energy sector by extending various tax incentives. The industry is also demanding for measures such as treatment of solar parks at par with SEZs with MAT exemption provided to projects within these solar parks. Solar sector should also be allowed to issues green bonds once projects achieve CoD, which will reduce their borrowing costs to 7%-7.5%. Real Estate Realty industry wants government to increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. It seeks 10% increase in allocation to the implementation of ‘Housing for All’, 2022 scheme and other housing schemes, and some clarity on capital gain tax in the hands of Real Estate Investment Trust (REIT). Article Source – Business Standard