Overall this year’s budget 2017 also remained balanced like the last year.

Finance minister expectation of global environment:

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  • World economy faces uncertainty after major economic and political developments in last year.
  • US Federal Reserve’s intent to increase rates in 2017, may lead to lower capital inflows and higher outflows from the emerging economies.
  • Uncertainty around commodity prices (crude) has implications for the fiscal situation of emerging economies.
  • Signs of retreat from globalisation of goods, services & people, as pressures for protectionism are building up.

Expectations for 2018:

  • Fiscal deficit projected at 3.2% and govt. expect to hit 3% in 2019 – Good for markets
  • Net market borrowing to Rs 3.48 Lacs Cr 2018 – 20% Lower
  • Capital spending raised by 25.4% and total expense to be ~Rs. 21.5 T for 2018 – Good for Infra
  • CPI to remain 2-6% as per RBI range
  • Agri credit target at Rs. 10 T for 2018
  • Disinvestment target of Rs. 72,500 Cr 2018
  • 100% electrification by May-18
  • Lending target under Mudra Yojana is Rs. 2.44 Lac Cr
  • NHB to provide Rs 20,000 Cr for home loans – Good for HFCs

Welcome measures:

For Individuals:

  • Income tax on income bracket of Rs 2.5 – 5 lakh to be 5% from 10% – Benefit of Rs. 12,500
  • 10% surcharge on individuals with taxable income between 50 Lacs to 1 Cr – Higher tax for wealthy
  • Long-term capital gains tax on immovable property to be levied after 2 years instead of 3 years – Better for real estate
  • Transaction above Rs. 3 Lac can’t be done in cash and max donation of Rs. 2,000 in cash for political funding

For Companies:

  • Corporate Tax for MSME with turnover < Rs. 50 Cr reduced to 25% from 30% – Better MSME
  • FIPB abolished – Faster Foreign Investment
  • Allowable provision for bad loans in banks to 8.5% from 7.5% – Better for banking
  • Affordable housing to be given infrastructure status – Better for affordable housing companies and HFC
  • Halves import tax on LNG to 2.5 percent

Allocations:

  • Defence: Rs. 2.74 Lac Cr Expenditure and Capital of Rs. 86,488 Cr
  • Infra: Rs. ~4 Lac Cr – Good for Infra
  • Transport: Rs. 2.4 Lac Cr – Good for Auto
  • Rural, Agriculture and allied areas: Rs. 1.87 Lac Cr – Good for FMCG
  • National and State Roads: Rs. 64,000 Cr – Good for Construction
  • Railways: Rs. 55,000 Cr and 1 Lac Cr railway safety fund in next 5 years – Good for Rail companies
  • Rural Jobs: Rs. 48,000 Cr
  • Irrigation fund:  Rs. 40,000 Cr – Good for Construction
  • Rural Roads: Rs. 19,000 Cr
  • PSU Banks: Rs. 10,000 Cr equity infusion
  • Milk processing: Rs. 8,000 Cr over 3 years
  • Rural Electrification: Rs. 4,800 Cr
  • Youth training: Rs. 4,000 Cr

 

Impact of Investment:

Broadly, it looks that budget 2017 is going to benefit three types of companies:

  1. Infra and Construction related companies: You can think of buying an infra mutual fund like Kotak Infrastructure & Economic Reform Fund
  2. Consumption relation companies: You can think of buying consumption oriented mutual fund like Birla Sun Life India GenNext Fund
  3. Medium and Small companies: You can think of buying a small cap mutual fund like DSP BR Micro Cap Fund

 

Happy Investing!

Ishan