Union Budget FY15 - Highlights - Msearch

- Excise duty hike on cigarettes increased from 11% to 22%. Negative for ITC

- Reduced in Excise duty for footwear for retail from 12% to 6%. Positive for Bata, Liberty & Relaxo

- Export duty on bauxite increased from 10% to 20%

- Imported flat rolled steel products from 5% to 7.5% custom duty

- Simplification of coal duty structure is proposed.

- Custom duty on below 19 inch LCD & LED panel reduced.

- Non- plan expenditure proposed is 12.2L cr and apparently no liberalization proposed in subsidy front.

- Total expenditure budgeted is 17.95L cr.. 13% higher than the previous year.

- Increase rate of tax on long term capital gains on sale of mutual fund units to 20% from 10%

- Budget assumes tax revenue growth of 19.7% which is too aggressive in our view, but lower than the interim estimate.

- Proposing to extend 10 year tax holiday to power sector.

- Exemption for interest in housing loan increased 1.5lk to 2lk. This will give boost demand in the real estate sector which is suffering from low demand for the last 4-5 months

- No change in tax rate ,education cess will also continue

- Fiscal deficit to be at 4.5% in FY15

- Non Plan Expenditure to be at 12.2 Lk cr for FY15

- In order to increase savings, investment limit under section 80 c has been increased from 1lk to 1.5lk .

- Personal exemption on income tax exemption limit increased to 2.5 lK from 2 lk.

- Additional 1000 cr proposed for rail connectivity to North East. beneficial for tapping the natural resources that lie in that area.

- Government is giving the required focus to the North East region both in terms of Infrastructure development & Human resource development as promised in the manifesto

- Defence expenditure allocation increased by 15%

- Allocating 2.29 Lk cr for defence, higher than the amt provided in interim budget.

- To enhance PPF contribution, tax exemption will be increased to 1.5Lk cr from 1 Lk cr

- New accounting standards proposed for Indian companies from FY17. Increasing the disclosure of Indian companies taking Indian standards closer to to Global Standards

- Long term Infra funds that will not be subject to regulatory needs of SLR & CRR. Positive for IDFC

- Long term Infra funds that will not be subject to regulatory needs of SLR & CRR. Positive for IDFC

- INR 37850 cr for road sector Positive for Sadbhav, ITNL, KNR

- 16 new port project to be awarded in FY 15 positive for adani port

- NHAI to target 8000km of roads in FY15. We believe most of this will come through the EPC model.

- FM focusing on improving liquidity in the corporate bond markets & currency markets.

- FM focusing on improving liquidity in the corporate bond markets & currency markets

- Adequate coals to be guaranteed to existing power plants which will help stalled projects to restart.

- In order to complete gas grid of 15000 km of pipelines PPP mode is recommended

- 37800 cr allocated for road development. Also focusing on single window clearances. Decent amount has been allocated with an intention to speed up the process. Positive for road development companies.

- Scheme for development of new airports in tier I& tier II cities through PPPs

- Restructuring food corporation of India to be a priority. Continuous focus on supply side constraints. If implemented properly, will bring run away food inflation in check

- To sell shares in PSU banks to retail investors for recap of PSU Banks is Negative for PSU Banks

- 5000 cr allocation to increase warehouse capacity & also better connectivity is proposed. This will help check food prices & prevent wastage of food items

- To reduce supply pressure on food grains, open market sales of the produce is recommended when required.

- 3% additional interest subsidy for farmers has been proposed

- Inflation is a focus to target all inclusive growth targeting sustainable growth of 7-8% in the next 2-3 years

- Government recognizes the challenge of higher growth in presence of tough financial conditions

- Government hitting the right button by targeting tax to GDP ratio as India has one of the lowest level of Tax/GDP ratio & only 3-4% of population pays tax

- FY16 fiscal deficit target of 3.6% & FY17 target of 3% is postive for the economy no retrospective tax amendment is recommended, which will be positive & investor friendly

- New urea policy to be introduced, positive for Chambal & FACT

- government understands unfavourable tax environment created by the tax authorities and focuses on changing it

- FDI in defence manufacturing increased to 49% from 26%

- FDI in insurance increased to 49% from 26%

- Favourable regulation for low cost housing, positive for Repco, Can Fin homes & Gruh

- Infuse 240000 cr equity in banks by 2018. Greater autonomy to banks is to be given.

- 7060 Cr provided for 100 new smart cities as promised in the manifesto

- 7060 cr may not be sufficient for overall development but can be taken as a good start

- PPP recommended for for funding infrastructure projects. Tax pass through status for REITS

- Initiating Scheme for irrigation and setting aside 1000cr. Positive for Finolex Industries

- for uninterrupted power supply to all, feeder separation will be done to augment power supply to rural areas. 500 cr will be set aside for this. Positive for Power distribution companies

- IS this government focusing on populism by contributing large amounts of money to popular projects rather than infrastructure spending. Spending of 1000 cr on irrigation seems too low.

- Incentive to REITs through tax pass through. Positive for oberoi, prestige estate, brigade.

- FDI increase in Defence positive for l&T and Astra

- FM is focusing on rural development through initiatives for rural housing, roads, education & self employment for youth

- Maintained allocation for NREGA & committed to better allocation of the funds for asset creation. This is in the right direction to remove inefficiencies from the system. This can also address the labour shortage & spiralling inflation that has been created by the scheme

- Allocation to PMGSY 14300 cr. Positive for NBCC as it is govt's implementation agency.

- Unclaimed PPF funds to be reorganized to senior citizens.

- Budget is focusing on health & education. Focusing on Plan expenditure, but what about the source

- Infra investment trust to be set up to securitize infra projects. PPP is the recommended route to mobilize funds.

- 2 million + cities should start metro rail planning. positive for L&T

- 4000cr for NHB for reasonable housing to rural & Urban India and FDI is proposed.

- subsidy rationalization of food & fuel is mentioned but no clear road map given so far

- GST solution by the end of this year is recommended but implementation within such a short period could be a challenge.

- Targeting a 4.1% deficit may seem to be an encouraging step but might not provide the quality of fiscal consolidation that is the need of the hour.

- 500cr for price stabilization fund for agriculture produce. This is in line with thrust of the government to reduce hoarding & provide stable food prices

- 8lk cr set aside for agricultural credit. See FY15 agriculture growth at 4%

Source : Equity Bulls

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