IMPACT DISCUSSION
FINANCE & INVESTMENT CLUB, IIM R
DEFENCE PROPOSALS Measures to develop two defense industrial production corridors across the country Bring out an industry friendly Defence Production Policy 2018 Provided approval for construction of Sela Pass. First defence corridor will be established in Tamil Nadu, linking Chennai and Bangalore
DEFENCE Allocation Marginal increase of 5.91% over last year (revised estimates) Accounts of INR 2,95,511.41 crore contributes for 12.10% of Central Government expenditure plan for 2018-19 INR 1,95,947.55 crore allocated to revenue (net) expenditure INR 99,563.86 crore for capex Additional allocation of INR 130 crore for developing prototypes for Indian Army projects Budgetary allocation for the NCC increased to INR 22 crore from INR 13 crore earlier. Total Allocation estimated to be 1.58% of GDP Amount for defence pension has increased from 26.60% over the allocation of Rs85,740 crore last year
DEFENCE Analysis Inadequate to modernize India’s armed forces” - Military experts Had huge expectations due to India’s steady growth and FM wearing the cap of Defence Minister twice (2014,2017) NATO countries are expected to spend over 2% of their GDP on defence China & Pak’s defence expenditure >2% consistently By 2025, India will have only 31 squadrons of fighter jets as against the overall requirement of at least 42 Urgent need of future-ready infantry combat vehicles To make “Make in India” initiative successful in defence sector, government will have to spend more India is world’s largest arms importer Only 15% of military equipments is state of the art. 50% is obsolete Procurement procedures are time-consuming and cumbersome
Oil and Gas Proposals Additional five crore free LPG connections will be implemented under Ujjwala scheme for 8 crore poor women Payment of the government’s share of profit in petroleum will be exempted from service tax for contracts signed between 1 April’16 and 30 June’17 Sale of left-over stock of crude oil to be exempted from tax Lowered basic excise duty on both petrol & diesel by Rs. 2 per litre each Abolished Rs.6 per litre additional duty of excise on both the transport fuel. New levy of Rs.8 per litre “Levy of Road and Infrastructure Cess” Changes are proposed in the provisions relating to customs duty on petrol & diesel, which will be considered by OMCs to determine domestic prices Reduction in the basic customs duty on LNG from 5% to 2.5%
Oil and Gas Setting up of two more strategic oil reserves at Chandikhole in Odisha and Bikaner in Rajasthan to enhance country’s energy security taking our strategic reserve capacity to 15.33 MMT.
Analysis Inclusion of petroleum based products and natural gas under GST ambit not addressed Service tax exemption welcomed by upstream sector Little action on addressing energy security need and reduction of import burden Additional subsidy will increase LPG penetration Help sustain LPG volume growth at 8-10% NE refineries adversely affected as Infra cess to hit their GRMs.
Power and Energy Proposals Abolished import duty on solar-tempered glass or solar-tempered (anti-reflective coating) glass. DISCOMs to purchase excess solar power produced by farmers Single point of reference has been proposed to be established for importers, exporters and officers for regulating customs matters. New Customs Advance Ruling Authority with Appellate mechanism has been appointed which will be useful for avoiding unnecessary litigation.
Allocation Allocated INR 2.17 billion to SECI INR 3762 Crore earmarked for green energy Solar: INR 2045 Crore (54%) Wind: INR 750 Crore (20%) INR 600 Crore allocated for green energy corridors
Power and Energy Rs 3,800 crore for Deendayal Upadhayaya Gram Jyoti Yojna (DUGJY) and Rs 4,900 crores for Integrated Power Development Scheme (IPDS) Rs 16,000 crore for the Sahaj Bijli Har Ghar Yojana (Saubhagya) to enable last mile connectivity for rural households
Analysis Government could bring back GBI scheme.
No specific subsidies as well as incentives to compensate increasing cost of project development
Green energy gets boost especially solar (being the darling of the government)
Biofuel blended petrol and diesel are exempted from “Levy of road and Infrastructure Cess�
Infrastructure Proposals Emphasis on rural infrastructure projects and expediting the already announced projects NHAI considering to organize its road assets into special purpose vehicles and use monetizing structures like Toll, Operate, Transfer to raise equity from market for its mature road assets Development of monetizing vehicles like InvIT and ReITs Bharatmala scheme to strengthen roads network by raising Rs.5.35 trillion as equity out of the total investment of Rs.10 trillion
Infrastructure Proposals Increase of budgetary allocations to sector by 25% In 2018-19, total amount spent will be Rs.14.34 cr Largest ever rail and road budget of Rs.1.48 trillion and Rs.1.21 trillion in 2018-19 Budgetary allocation of Rs.73.31 crores for Airports Authority of India The government announced an allocation of Rs 1,014.09 crore for the upcoming financial year towards revival of 50 airports. Amount allocated almost five times as per the revised estimates of 2017-18 The government proposed to set up 5 lakh WiFi hotspots and also allocated Rs 10,000 crore for this under telecom infrastructure
Startups Startup India scheme $43.8 Mn (INR 281 Cr) has been allotted to the scheme of Investment Promotion Startup India. $31 Mn (INR 200 Cr) will be injected to Atal Innovation Mission. The fund targets to set up 600 new Atal Tinkering Labs (ATLs) in 1,500 schools, which were selected in 2017-18 on the basis of compliance as per ATL guidelines
$112.25 Mn (INR 720 Cr) has been kept for innovation, technology development and deployment, which will be used to feed 70 technology business incubators (TBIs) and other startup related activities
$13.7 Mn (INR 87.86 Cr) has been kept for the development of an entrepreneurship scheme to enhance the entrepreneurial ability of the youth in the country
Source: https://techmoran.com/startup-grind-lagos-host-oluyomi-ojo-of-printivo-at-her-june-meetup/start-up-concept/
Technology $40.5 Mn (INR 260 Cr) has been allotted to support market development of hybrid and electric vehicles (EVs)
$66.3 Mn (INR 425 Cr) will be spent on e-governance related projects such as 70K CSCs, MeghRaj Cloud, issuing 20 Mn e-signatures and continued financial support to NeGP projects like SWAN, SDC, e-Districts, SSDG and capacity building
Over $39 Mn (INR 250 Cr) has been allocated for setting up of Integrated Land Information Management Systems in 100 districts To boost the semiconductor industry, an amount of over $134.7 Mn (INR 864.22 Cr) has been allotted for the promotion of electronics and IT hardware manufacturing Over $27.8 Mn (INR 178 Cr) has been allotted to Microprocessor Development Programme, Indian Nanoelectronics User Programme at IIT Mumbai and IISc Bangalore, National Mission Programme on Power Electronics Technology, Centre for Excellence for developing theranostic devices at IIT Guwahati and converged cloud communication network 5G research project for next-generation communication.
Railways Northern Railway has been allocated Rs 9,000 crore in the railway budget 2018-2019 to modernise its entire signalling system by embracing the world's most advanced technology( European Train Control System II)
Highest ever capital expenditure of Rs 1.48 lakh crores
Almost all the Railway budget is CAPEX for capacity creation, including track doubling, gauge conversion of 5k km, and third and fourth line works of 18k km and redevelopment of 600 railway stations
Rs.2,028 crores is to reimburse operating losses on strategic lines and reimburse IRCTC for the operational cost of eticketing
No new trains were announced, focus was more on modernisation and passenger safety
Railways Railways is expected to end this fiscal year with an operating ratio of 95 percent Projected operating ratio for 2018-19 is 93 percent Operating ratio is the measure of money spent to earn every Rs 100 Railway stations with more than 25k footfall would have escalators and CCTVS and Wi-Fi facilities A specialised Railway University will come up at Vadodara Mumbai’s suburban railway system is being expanded at cost of Rs 10k crores 160 km of suburban rail network worth Rs 17k crores has been planned for Bengaluru
Railways Railways will step up the use of technologies like fog safe and train protection and warning system, and eliminate 4300 unmanned level crossings in next 2 years
Railways Gross Budgetary support (GBS) which was around Rs 55k crores last year has been revised to Rs 42k crores
GBS for 2018-19 is 55k crores
Pension bill for Railways increased from 35k crores in 2016-17 to 47k crores in 2018-19
Healthcare
Healthcare •Increase of 11.8% over last year’s allocation but only a 2.7% increase over the revised estimate Target estimation to spend 2.5% of GDP by 2022 Rs 28252 crore is used in funding rural healthcare under National Rural Health mission Rs 1458 crore for funding higher education in medicine No substantial provision for online based medical treatment. Plans to set up 24 new government medical colleges and hospitals and upgrade existing district hospitals in the country
Healthcare National Health Protection scheme Under the scheme, 10 crore families will be provided Rs 5 lakh cover per family annually for secondary and tertiary medical treatment Estimated Rs 11,000 crore in federal and state funding is required each year Currently, â‚š3,000 crore under the Rashtriya Swasthya Bima Yojana (RSBY), which provides a family cover of â‚š 30,000 to a population of over 33 crore
Healthcare As per NITI Aayog, premium would work out to ₹1,200 per family, or a sum of ₹12,000 crore New 4 per cent health and education cess (as against the 3 per cent education cess) is expected to raise an additional ₹11,000 crore Allocating Rs 1,200 crore for 1.5 lakh health and wellness centers which would provide essential drugs and diagnostic services free of cost
Rural economy Sector Agriculture Rural development Social welfare Health
2016-17 50,814 1,13,877
2017-18 56,589 1,35,604
% change 12.76% 19.08%
2018-19 63,836 1,38,097
% change 12.81 1.84
31,812
38,624
21.41
44,220
14.49
39,005
53,198
36.39
54,667
2.76
Allocation for agriculture, has been raised by 12.8% like previous year Allocation for the rural sector has been increased by 1.8%, much less than the 19% hike in the previous Budget Increase in the allocation for social sector schemes in this Budget is 14.5% as compared to 21.4% in 2016-’17
Rural economy Pradhan Mantri Saubhagya Yojana For enhancing power supply, the government had already approved Rs 16,320 crore as the total spend for two years from 2017 to 2019. In financial year, 2017-’18, the scheme was to get Rs 3,600 crore from the Centre but received only Rs 2,000 crore
For 2018-’19, it was supposed to get Rs 8,720 crore but the Budget has allocated only Rs 3,500 crore
Operation Greens Government launched a programme, ‘‘Operation Greens’’ (Corpus: Rs 500 crore), to promote Farmer Producers Organizations (FPOs), agri-logistics, processing facilities and professional management.
Rural economy Subsidy Fertilizer subsidy Food subsidy Petroleum subsidy
2016-17 66,313
2017-18 64,974
% change -2.02%
2018-19 70,080
% change 7.86
1,10,173 27,539
1,40,282 24,460
27.33% -11.18
1,69,323 24,933
20.7 1.93
No increase in budget for the MGNREGA Scheme from the current Rs 55,000 crore Fisheries and Aquaculture Infrastructure Development Fund and an Animal Husbandry Infrastructure Development Fund allotted Rs 10,000 crore, but actual allocation was Rs 47 crore Minimum support price to be set at atleast 1.5 times the cost of production of the kharif (summer) crops
Rural economy Agri Market Infrastructure Fund Developing nearly 22,000 rural Haats into Grameen Agricultural Markets.
No allocation for upgrading the Haats
National Rural Livelihood Mission Government also announced an increase in funds allocated for the National Rural Livelihood Mission under the rural development ministry to Rs5,750 crore in 2018-19, from Rs 4,500 crore in 2017-18
Irrigation Allocation of Rs2,600 crore to ensure Irrigation facilities in 96 irrigation deprived districts
Rural economy Corpus of funds available to women in self-help groups to be increased to Rs75,000 crore by March 2019 from Rs42,000 crore in 2016-17
Restructured National Bamboo Mission Total outlay of Rs 1,290 crore over 3 years Allocation for the coming financial year is just Rs 300 crore
Prime Minister Awas Scheme Construction of 51 lakhs houses in rural India under the Prime Minister Awas Scheme this year and as many the next year. Allocation for the scheme has been cut 5% from last year as compared to Rs 27,505
Indirect tax
*Please find explanation in the notes
Indirect tax Encouraged – “Make In India” Focus to ensure – “Ease of Doing Business” Expansion in scope of customs law Replacement of EC and SHEC with SWS Corporate Tax :Rate reduced to 25% for turnover not exceeding INR 2.5bn in the FY 2016-17
*Please find explanation in the notes
Markets Proposals Introduction of a separate policy for investment in hybrid instruments for start-up or VC firms. Announced that additional measures to strengthen the growth of alternative investment funds in India will be undertaken during the year. Reforms in Stamp Duty on financial securities transactions.
Establishment of a unified authority to regulate all financial services in IFSCs. Equity of the National Housing Bank should be transferred from the RBI to the Government.
Initiatives Regulators have been directed to permit investments in bonds with an ‘A’ rating. LTCG Tax at the rate of 10% (without indexation) is to be introduced on transfer of listed equity shares, units of equity oriented funds and business trusts. Transfer of certain securities by a non-resident on IFSC stock exchanges has been exempted from taxation
Proposal by SEBI to mandate large corporates to meet one-fourth of their funding needs through the bond market.
Dividend Distribution Tax
• Corporate tax rate has been reduced from 30% (plus surcharge) to 25% (plus surcharge) for Indian companies whose total turnover during FY 201617 did not exceed approximately US$40 million. This makes the corporate structure somewhat more attractive than LLPs.
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FINANCE & INVESTMENT CLUB, IIM R