The Union Budget plays a vital role in allocating funds to sectors, where it is required the most. It is also significant for businesses and enterprises as through the budget, the government can encourage enterprises in revising their policies and contribute to the country’s economic prosperity.
The Union Budget is also important from an Indian stock market investor’s perspective as it can give a vital clue regarding the sectors which one should invest. To give an example, one of the utmost priorities of the current government has been massive infrastructure development. With this objective in mind has allocated significant resources for the same. Companies with the capability to execute large scale infrastructure projects will benefit a lot. This will ultimately reflect in the share prices of those EPC companies listed in the Indian stock market. Click here if you wish to know more about best investment opportunities for next 4-5 years.
Apart from EPC companies, this will also benefit allied industries such as cement and paint which are some of the core raw materials used in construction. So any large scale infrastructure development will also benefit some companies engaged in these businesses.
Let\’s look at the key industry specific announcements made in Budget 2020 and its impact.
|Proposal to set up a National Technical Textiles Mission with a 4-year implementation period from FY21 to FY24, at an outlay of Rs. 1,480cr.
|Will help reduce India’s annual import bill due to technical textiles worth ~$16bn. Local companies will be encouraged to set up technical textile manufacturing capacity in India
|National Logistics Policy to be set up soon to clarify roles of Union Government, State Government and regulators.
|Will create a single window e-logistics market, increasing the pace of movement of goods and setting up of warehousing infrastructure.
Agri sector (Agriculture, Irrigation & Rural Development)
|Total Allocation for Agri Sector is Rs. 2.83 lakh crores. Out of this Rs. 2.83 lakh crores, Rs. 1.60 lakh crores to be allocated towards agriculture, allied activities, irrigation and Rs. 1.23 lakh crores to be allocated towards Rural Development.
|Positive for all companies deriving income from farmers – FMCG, agri inputs, irrigation, fertilizers, two-wheelers, pipes etc.
|Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan (PM KUSUM) to be expanded to provide 20 lakh farmers for setting up standalone solar pumps.
|Positive for solar pump manufacturing companies.
|Scheme to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid would be operationalized.
|Positive for solar equipment companies. Implementation can be an issue unless farmers are given subsidy to install solar plants.
|Focus on balanced use of all kinds of fertilizers including the traditional organic and other innovative fertilizers with a view to change the prevailing incentive regime, which encourages excessive use of chemical fertilisers.
|Negative for select fertilizer manufacturing companies. To build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish, the Indian Railways will set up a “Kisan Rail” – through PPP arrangements. There shall be refrigerated coaches in Express and Freight trains as well.
|Positive for freight and logistics companies.
|Framework for development, management and conservation of marine fishery resources. The fish production to be raised to 200 lakh tonnes by 2022-23.
|Positive for companies engaged in business of fisheries and frozen foods.
|Facilitate doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025.
|Negative for dairy companies as prices will decrease with the increase in supply.
Healthcare sector (includes nutrition related programmes)
|Total allocation towards health sector is about Rs. 69,000 crores that is inclusive of Rs. 6400 crores for Prime Minister Jan Arogya Yojana (PMJAY). Mission Indradhanush has been expanded to cover 12 diseases, including five new vaccines.
|Positive for companies engaged in business of Hospital & Healthcare Services.
|Presently, under PM Jan Arogya Yojana (PMJAY), there are more than 20,000 empanelled hospitals. Proposition of including more empanelled hospitals in Tier-2 and Tier-3 cities for poorer people under this scheme.
|Proposition to set up Viability Gap funding window for setting up hospitals in the PPP mode. In the first phase, Aspirational Districts will be covered, where presently there are no Ayushman empanelled hospitals. This would also provide large scale employment opportunities to youth.
|Strengthening of TB campaign.
|Positive for Pharmaceutical companies.
|Allocation of Rs. 35,600 crores for nutrition related programmes.
|Positive of Pharma, Hospital & Healthcare and Consumption sector.
|Health Cess on import of medical equipment
|Negative for hospitals setting up new facilities or augmenting capacity
|Budgetary allocation of about Rs. 99,300 crores for education sector in 2020-21 and about Rs. 3,000 crores for skill development. An allocation of Rs 8,000 crore for National Mission on Quantum Computing and Technology
|Positive for companies engaged in business of Education, Training and Skill Development.
|The New Education Policy to be announced soon.
|Steps to enable sourcing External Commercial Borrowings and FDI so as to be able to deliver higher quality education.
|About 150 higher educational institutions will start apprenticeship embedded degree/diploma courses by March 2021.
Consumer Staples and Discretionary
|Lowering of income tax rates to increase household savings (subject to riders)
|Positive for staples and discretionary items as consumption would increase due to higher disposable income in hands of individuals
|Basket of announcements to boost rural income. Farmer income is expected to double by 2022
|Excise duty raised on cigarettes and tobacco products (10-11% on blended basis). No change is being made in the duty rates of bidis
|Negative for cigarette manufacturing companies as the end product would become costly.
|Increase in customs duty on imported footwear (5-10%), furniture (5%), wall fans (from 7.5% to 20%), tableware/kitchenware made of porcelain or China ceramic doubled to 20%, food processing products and many other products
|Positive for domestic manufacturers as imported products will become expensive leading to higher demand for domestic products, thereby boosting domestic manufacturing
|Withdrawal of customs duty exemption on raw sugar, agro-animal based products, tuna bait, skimmed milk, certain alcoholic beverages, soya fibre and soya protein
|Custom duty on completely built unit of electric motor vehicle increased from 25% to 40%
|This will provide a partial boost to domestic manufacturing of auto OEM and components
|The customs duty on completely built internal combustion engine vehicle is increased from 30% to 40%.
|Tax on semi-knocked down form of electric PV and 3W has been raised from 15% to 30% and electric buses, trucks and 2W raised from 15% to 30%
|Tax on completely knocked down electric buses, trucks and 2W raised from 10% to 15%
|Rs. 2,500cr allocated for Tourism Industry
|Investments will help in providing better infrastructure, connectivity and improved tourist experience thereby boosting the overall Tourism in India
|More premium trains like Tejas express to be introduced between key tourist stations
|Developing on-site museums at five archaeological sites
|Rs 3,100cr kept aside for Culture Ministry
|100 more airports to be developed by 2025 and doubling of aircraft fleet
|Positive for Aviation sector as well as Tourism
|Depositor Insurance Coverage to increase from Rs. 1 lakh to Rs.5 Lakh per depositor of scheduled commercial banks.
|Negative for scheduled commercial banks.
|Bond Market: Non-Resident Indians will be permitted to invest in certain Government Securities. FPI Investment limit in corporate bonds has been increased to 15% from 9% currently. A new debt ETF proposed consisting mainly of Government Securitie
|Deepen investment in bond market
|Affordable Housing: Allocation for affordable housing under the Pradhan Mantri Awas Yojana (PMAY) was higher by 9% at Rs. 275bn in FY21 vs Rs. 258bn RE in FY20. Govt extends additional Rs.1.5 lakh tax benefit on interest paid on affordable housing loans to March 2021 (from March 2020) Tax holiday is provided on the profits earned by developers of affordable housing project approved by 31st March 2020. This is extended upto March 2021.
|Positive for HFCs focusing on affordable housing
|Debt recovery under SARFAESI: Eligibility limit for NBFCs for debt recovery under SARFAESI Act proposed to be reduced to asset size of Rs.1 bn (from Rs.5bn) or loan size of Rs.5mn (from Rs.10mn).
|Positive for small lenders in terms of recoveries
|Liquidity improvement for NBFCs/HFCs: To address the liquidity constraints of the NBFCs/HFCs, the government formulated a Partial Credit Guarantee scheme for the NBFCs. To further this support of providing liquidity, a mechanism would be devised.
|Positive for NBFCs as and when final measures are taken
|Lending to MSMEs: NBFCs to extend invoice financing to the MSMEs through TReDs Banks to provide subordinate debt for entrepreneurs of MSMEs, which will be counted as quasi-equity and would be fully guaranteed.
|Positive for MSME lenders
|Divestment plans: Government will list LIC and also sell stake in IDBI Bank to private investors to meet FY21 divestment target of Rs.2.1 trillion.
|Negative for insurance companies
|New tax regime: Removal of deductions under new tax regime discourages taxpayers to invest in ELSS and life insurance products.
|Negative for insurance companies and AMCs
Infrastructure- Transport Sector
|Infrastructure allocation and funding Target of Rs 103 trillion investment in infrastructure projects reiterated. Overall 6500 projects identified across – railways, Metrorail, logistics, irrigation, healthcare, education, housing, water, etc. Rs 220bn has already been financed by Infrastructure Finance Companies such as IIFCL and its subsidiary- NIIF. Govt also proposes 100% tax concession to sovereign wealth funds to encourage them to take part in funding these projects.
|Positive for steel & cement companies, equipment suppliers, EPC players engaged in construction of projects in the mentioned sectors.
|Railways Budgetary allocation for Railways is up by 3% at Rs 722bn in FY21 vs Rs 700bn in FY20RE. Indian Railways to set up Kisan Rail for transport of perishable goods. Setting up large solar power capacity alongside rail tracks. To redevelop 4 stations with the help of private sector.
|Positive for Railways construction, Solar EPC players, wagon manufacturers and logistics players.
|Roads Budgetary allocation of Rs 170bn for transport infrastructure that includes accelerated development of highways 12 lots of highway bundle spread over 6,000 kms will be monetized by FY24. Development of 2,500 kms of highways, 2000 kms of coastal roads, 9,000 kms of economic corridors.
|Positive for steel & cement companies Transport infrastructure players engaged in construction of roads, highways, and equipment manufacturers.
|Airports Under UDAAN scheme, 100 more airports to be developed by 2024. It is expected that the air fleet number shall go up from present 600 to 1200.
|Positive for EPC players engaged in construction of airports and airport infrastructure, steel & cement companies, automation players.
|Water treatment and management Budgetary allocation of Rs 115bn in FY21 vs Rs 100bn in FY20 RE for the Jal Jeevan Mission. Comprehensive measures for 100 water-stressed districts.
|Positive for EPC players carrying out projects such as water treatment, irrigation projects, etc.
Infrastructure- Others Sector
|Power Sector Budgetary allocation of Rs 220bn to power and renewable energy sector in FY21. New power generation companies have been extended the benefit of lower rate of 15%.
|Positive for EPC players engaged in the Power generation and T&D sector, cable suppliers, distribution equipment manufacturers.
|Advice to all States and Union territories to replace conventional meters with smart meters in the next 3 years.
|Positive for companies engaged in the manufacture of smart meters.
|Oil & Gas Sector Expand National Gas grid from the present 16,200 km to 27,000 km
|Positive for EPC players engaged in the pipe laying companies, pipeline suppliers.
|Cables Sector Budget allocation of Rs 60bn to Bharatnet programme in FY21 to provide internet connectivity in 1,00,000 gram panchayats.
|Positive for companies engaged in the manufacture of optical fibre cables.
|Allocation of Rs 12,300 Crs towards Swach Bharat
|This mission now focuses towards liquid and grey water management and is committed towards ODF Plus. Focus would also be on solid waste collection, source segregation and processing. This would further benefit sanitary ware companies.
|Aiming to provide piped water supply to all households, allocated Rs 3.60 lakh crores to the Jal Jeevan Mission. This scheme also places emphasis on augmenting local water sources, recharging existing sources and will promote water harvesting and de-salination. Cities with over a million population will be encouraged to meeting this objective during the current year itself. During the year the scheme would be provided with a budget of Rs 11,500 crs.
|Action plan to ease India\’s water problems. Positive for pipe, water treatment pump, valve and cement companies among others.
|Rs 85,000 crs allocated towards Scheduled Castes and Other Backward Classes Rs 53,700 crs allocated towards Scheduled Tribes Rs 53,700 crs allocated towards Senior Citizens and Handicapped.
|Furthering government’s commitment towards the welfare and development of SC, OBC, ST, Senior citizens and Handicapped.
|Allocation of Rs 4,400 Crs for providing clean air in large cities having population of above one million.
|For ensuring cleaner air in cities having population above one million.
|Increase in customs duty (from 10% to 20%) on Water heaters, Table Fans, ceiling fans, pedestal fans and scores of other electrical appliances
|Positive for domestic manufacturers of these goods and the sector as it makes the fringe players exit.
|Tax payment on ESOPs to be deferred by five years from the time of exercise or till employees leave the company or when employee sell their shares, whichever is earlier.
|These measures would provide additional support to start ups in their initial phase, thereby encouraging the start-up eco system.
|Extension of turnover limit from Rs25cr to Rs. 100cr for deduction of 100% of its the profits for three consecutive assessment years out of seven years
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