Highlights to the Union Budget 2017-18,Sensex salute by 500 points

Here are the key highlights:

  • Tax proposals
  • Inspiring Physical Assets: The holding period of long-term capital gains tax on immovable properties has been brought down from 3 years to 2 years. And the government of India proposes to revise the base year for the calculation of long-term capital gains tax from 1981-2001.
  • Tax slab for individuals: The government has offered to reduce the income tax rate on individuals which fall under the slab of Rs 2.50 to Rs 5 lakhs from 10% to 5%. Moreover the government has also reduced the tax rebate which is provided to the individuals who are earning up to Rs 5 lakhs from 4000 to Rs 2500 for the individuals who are earning up to Rs 3.50 lakhs. This means that the person having annual income up to Rs 3 lakhs has zero tax liability. Also when the person has annual income of Rs 4.5 lakhs and invests Rs 1.5 lakhs, then also they will have zero tax liability. Mentioned in section 80C.
  • All other categories to get uniform benefit of Rs12,500 per person; to levy surcharge on income bracket Rs50 lakh-Rs1 crore

Union Budget 2017

  •  Non-tax proposals
  • Additional debt product for senior citizen: government has introduced a new scheme for the senior citizen that gives the assurance of 8% return.
  • Fiscal deficit: Aspiring target to get a fiscal deficit of 3.2% in the recent financial year and would be 3% in the financial year 2017-18.
  • Cashless/digital society: The government of India is going to promote its payment banking app which would be named as “Bhim” through freebies like referral benefits, bonuses and cash back on downloads. Also it is mandate to do transactions less than Rs 3 lakhs.
  • Suppressing Cyber crime: The government is all set to make a team called computer emergency reform to determine cybercrime prevalent in the financial services industry.
  • More CPSE ETFs in the line-up: After getting immense response from the latest FFO of CPSE ETF, the government is likely to come out with more of the same in the financial year 2017-18.
  • Integration of cash and derivative market: The government is all ready to form an expert committee to integrate equity and derivative markets.
  • Preference of financial sector: it has been told by the FM that the government is committed to grow financial sector through stronger institutions.

Other interesting facts of FY 2016-17

  • Out of 4 crore salaried individuals, only 1.74 crore of them filed the filed the tax returns. Also, out of 5. Crore business professionals, only 1.81 crore of them had filed the tax return which feels really sad to know.
  • Total of 13.94 lakhs companies are there out of which only 5.97 lakhs company have filed their tax returns. Out of these 5.97 lakhs only 28000 of them declared profits between Rs 1 crore and Rs 10 crore.
  • Out of total 3.97 crore individuals, 99 lakhs of then earn less than Rs 2.5 lakhs annually, 1.95 crore earn between Rs 2.5 lakhs to Rs 5 lakhs and 56 lakhs take home between Rs5 lakhs and 10 lakhs. In a year, only 24 lakhs people earn more than 10 lakhs.
  • Only 1.72 lakhs people are showing their income more than Rs 50 lakhs per year.
  • 2 crore Indian people went to abroad last fiscal. India is largely a tax non-complaint society.

Affect of Demonetization

After demonetization, 1.09 crore accounts received deposits between Rs 2 lakhs – Rs 80 lakhs and 1.48 lakhs account received more than Rs 80 lakhs. The finance minister said that these accounts would be specially surveyed and transactions would be studied.

Tax administration

  • GST: preparedness of IT system on schedule
  • Exempt FPI category 1 and 2 investors from indirect provisions
  • Time period of revising tax return reduced to 12 months
  • Real estate: to make changes in capital gains tax
  • Start-ups: Relaxing holding rules
  • Corporate tax rate: MSMEs’ rate (annual turnover less than Rs50crore) reduced to 25%
  • LNG: Reduce customs duty to 2.5%
  • Limit of cash donation for charitable trusts cut to Rs2,000

Fiscal Management

  • Revenue deficit for FY18 at 1.9%

Digital Economy

  • AADHAAR Pay to be launched for people who don’t have mobile phones

Financial sector

  • FDI policy: FIPB to be abolished
  • Commodities market: panel to study legal framework for spot and derivative market
  • Pradhan Mantri Mudra Yojana: Lending target at Rs2.44 trillion

Impact of Demonetization on Real Estate & its effective resolution plan

The real estate suffers a lot these days. 2016 ends up bad for them. But hope doesn’t have any end. Many expectation are there in the year 2017 for the real estate industry.

Real estate saw an immense change this year, especially on the policy front. Few of the massive game changing policies such as GST and RERA have cleared the obstacles on their way and and moved towards the execution in full speed.

The demonetization has created a substantial confusion among all. But by implementing Benami Transactions Act, it assures to bring clarity in the real estate sector.

Real estate investment trust (REIT) has assured to open up the real estate market to smaller investor in the upcoming years and now there will be much focus on the affordability in housing sector. India’s Tier-I cities moved up to the 36th rank in JLL’s biannual Global Real Estate Transparency Index in 2016 due to improvements in structural reforms and liberalization of the foreign direct investment (FDI) policy.

Policy Chassis

  • Demonetization

After the announcement of demonetization on 9th November, the old currency notes of 500 and 1000 were withdrawn from the banks as a legal tender. After this act, the real estate transaction has been slow down, especially in the land and capital raising business.

  • Real Estate (Regulation & Development) Bill

The parliament passed Real Estate Regulatory Agency (RERA) in the month of March, 2016. All the states of India including union territories had a last date for the implementation of the act i.e. 1 year from the date the bill passed. This will bring clarity to the real estate sector than never before.

  • REITs

Real estate investment trusts (REITs) will help small investors to invest in Grade-A commercial real estate across India. In budget 2016-17 dividend distribution tax (DDT) has been excluded on special purpose vehicles (SPVs). Rules for REITs were relaxed, and the investment cap in under-construction projects was raised from 10% to 20%.

  • Benami Transactions Act

This new law is applicable to curb black money. It has a provision that persons indulging in benami transactions may face upto 7 years of imprisonment and fine but, the amended has only 3 years of imprisonment or fine or both. Also the law states that, providing the false information is punishable by imprisonment upto 5 years and fine.

The amendment gives the right to the government to usurp the properties or assets held in the name of another person to avoid the tax responsibility and conceal the unaccounted wealth. The act covers the properties such as tangible, intangible, movable or immovable and also comprehend any right or interest in those properties.

  • Goods and Services Tax

The GST is the single-largest taxation reform in modern India, and assures to blot out geographical barriers for businesses by lighten the differences in indirect taxes relevant within the various states in India. The deadline for the implementation of the act is 1st April, 2017.

Commercial Real Estate

As per the demand made by the public, the space requirements for office in sectors such as FMCG, manufacturing, logistics, etc.. had improved a lot in 2016 and it should be same as in next coming years. Commercial real estate sector is heading their business towards the highest level o growth these days and doing a great job.  Depreciation of the INR versus the USD and Euro is likely to play a major role in this.

The office space needs of technology and outsourcing firms (especially in software development) slowed down in 2016. The step taken for the growth of top technology firms was in single digits due to global uncertainty and technological interruption.

A WAY OF SUCCESS FULL FINANCIAL PLANNING

The coming year 2017 is will continue to increase the acceptance of new technologies across the business. Hence, the ratio between growth of a business and its real estate requirements are going to be changed, as technology is becoming a disturbing element across the sectors. The technology is becoming more process-driven rather than people-driven.

As India is improving on the ‘ease of doing business’ rankings and policies are made more investor-friendly, so higher FDI is suppose to rule into India very soon. The Modi government’s focus on wooing foreign investment is helping. Demand has been steady so far – and if GDP growth is maintained as it is, then demand will definitely rise up.

Residential Real Estate

A pan-India trend that came out in the year 2016 was that a higher number of units were sold every quarter (1Q16-3Q16) than new project launches in the same period. A very few of the new launches helped to reduce the inventory project. The result of demonetization changes in the fourth quarter readings being intensely different from the first three quarters once they get in.

Since, the old currency notes of 500 and 1000 are not in use now, that is why, home buyers or investors using unaccounted wealth to carry out transactions in cash would be in difficult situation, and developers accepting cash components are facing a higher liquidity crunch than those accepting all payments through cheque or bank transfer.

In cities, especially in Hyderabad, Pune and Bengaluru, Capital Values (CVs) saw an affable appreciation in 2016 and this will definitely be continued in the coming years as the residential markets are being mature and become more end-user-driven than ever before. Sales are going to remain constant throughout the year. It is suppose to rise up from 2H2017 after the settlement of demonetization, which has made many buyers hold on to their purchase decisions as they are waiting for the slowdown of the capital values in residential sector.

Impact of Demonetization on Real Estate

Retail Real Estate

Supply was approximately 2 times less than the absorption in the year 2016. 14 poor malls closed down in the past few quarters or getting spruce up into office buildings and shopping centers in the cities like Delhi and Mumbai, the retail space across key Indian cities stood at 75.8 million sft as of 3Q16.

2017 is likely to see the highest mall space becoming operational, second to 2011. High levels of activity are expected 2017 onwards, after a prolonged slowdown from 2014 that lasted through 2016. This slowdown was the result of very few malls getting completed in these three years, and also due to poorly-performing malls shutting down. All three segments of retail – apparel, F&B (food and beverage) and entertainment & cinema perform well in 2016. High streets and malls saw more and more people eating out, which helped the F&B category. Delhi and Mumbai led this growth. Entertainment and cinema also saw a good performance this year.

Various brands like LeEco have filed applications with the Foreign Investment Promotion Board to set up their company-owned stores across India. Brands are also looking at expanding their production activity in the country. This is one of the various requirements of the government, as per our prime ministers ‘Make in India’ prospect.

KARVY Private Wealth Report 2016

Key Points

  • In contrast to the previous year when wealth in physical assets had declined and those in financial assets had grown by 19% i.e. total wealth held by individuals in India has grown by 8.5% to Rs 304.2 lakh crore and individuals wealth in financial assets grew by 10.32%.
  • Due to ‘Jan Dhan Yojna’ which was initiated by the government of India, have seen a huge growth on account of the government by small savings and savings bank deposits.
  • Due to demonetization it is expected to slow down the GDP growth rate for a short time being in the coming year 2017 but it may regain its speed from the financial year 2018.
  • The Real Estate sector is expected to see a price correction in the urban markets, leading to an increase in demand within the people.

India: A vivid place among emerging markets

India’s GDP growth rate is 7.6% in 2015-16 which was 7.2% in the previous year 2014-15 and will go in increasing faster and due to this; India comes under one of the fastest growing economies in the world.The recent demonitisation exercise is expected to impact GDP growth in the short term,with the number averaging at 6-6.5%.

Foreign exchange reserves stood at around $360 billion.

Individual Wealth in Financial Assets

Bank Fixed Deposits

The total individual wealth in bank fixed deposits has grown almost 10.58% to whopping Rs 35.12 lakh crore as of financial year 2016.

Corporate Fixed Deposits

Individual wealth in corporate FDs fell further by almost 49% y-o-y to Rs 15,356.47 crore in financial year 2016.

NBFC Deposits

Total individual wealth in Non-banking financial company’s deposits grew at a reasonable 21.26% y-o-y in financial year 2016.

Equity

Total individual wealth in direct equities declined 13.84% to Rs 29.6 lakh crore.

How a 172 lakh crore cookie is spilt up

Insurance

Total individual wealth in the asset class grew 7.6% to reach Rs 25.48 lakh crore in financial year 2016.

Provident Funds

Total individual wealth in provident funds grew by a whopping 24.57% y-o-y, to Rs 11.51 lakh crore in financial year 2016.

EMI VS SIP ( Be controlled or take control )

Public Provident Funds

The total individual wealth in PPFs with banks grew almost 19% y-o-y to Rs 3, 07,495 crore.

NRI Deposits

As at the end of financial year 2016, the total individual wealth in NRI deposits grew by almost 15% to Rs 8.26 lakh crore.

Small savings

Overall individual wealth parked in small savings schemes surged almost 14% in financial year 2016 to Rs 6.58 lakh crore.

Mutual funds

The wealth held by individual investors in mutual funds grew by almost 13% to Rs 6.23 lakh crore.

Pension Funds

Wealth in pension schemes grew by 24% to Rs 3.92 lakh crore in the financial year 2016.

  • National Pension Scheme – Individual wealth in the NPS grew almost 47% y-o-y to Rs 1.18 lakh crore in financial year 2016.

A WAY OF SUCCESS FULL FINANCIAL PLANNING

 Alternative Assets

Total investments in alternate assets rose by 84.70% to Rs 77,503 Crore in financial year 2016.

High-yield Debt

Individual wealth in this asset class has risen by 43.52% y-o-y in financial year 2016 to Rs 20,425 crore.

Infrastructure Funds

Total individual wealth is estimated to be approximately Rs 457.71 Crore at the end of financial year 2016 nearly up 113% y-o-y.

Gold

Total individual wealth in gold is estimated to be Rs 65.9 lakh crore ,up 15% from financial year 2015.

Diamond

Individual wealth held in diamonds grew by just 0.5% to Rs 8.02 lakh crore.

Download the complete report

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Different concept of Wholesale Price Index (WPI) & Consumer Price Index (CPI)

Wholesale price index and consumer price index are the primary measures of calculating inflation rate. WPI and CPI are known as their official barometer to weigh their inflation. These two measures maintain the track of change in price.

Inflation Rate

Inflation is the increase in the price of goods and services. And the rate at which the price of goods and services increase at a particular time interval is called as ‘inflation rate’.

INDIA INFLATION RATE

Wholesale Price Index (WPI)

Wholesale Price Index is the indicator of change in price in wholesale market i.e. WPI shows the change in price of goods and services that are bought or sold in the wholesale market.

WPI make change in price of the goods and services at selected levels before going to the retail market. They change the price charged by the manufacturer. This is because, as the distribution channel goes on price of the products goes up.

WPI

The above data shows the WPI change in the year 2016 from January to October.

WPI is prepared on weekly basis. The WPI is based on 435 commodities in India, which show those prices in all trade and transactions.

Consumer Price Index (CPI)

CPI measures changes in the prices paid by the consumers for a basket of goods and services such as housing and medical care, foods and beverages, transportation, education, communication, apparel and recreation.

CPI

It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. It is also known as Standard Retail Price (SRP).

It is calculated on monthly basis.

 WPI versus CPI

·       Wholesale price index is the mid-point of the sum of all goods and services bought by the traders.

·       There are very few countries that use WPI for the calculation of inflation rates.

·       WPI results an inaccurate measure.

·       WPI measures inflation rate at every stage.

·       WPI is compiled and published by Office of Economic Advisor on a weekly basis.

·       A lot of insignificant goods are considered under WPI.

·       WPI is the basis for the economic deflation rate.

·       WPI is based on the price on which bulk transactions are made.

·       Consumer price index is the mid-point of the sum of all goods and services bought by the consumers.

·       Maximum countries use CPI for the calculation of inflation rates.

·       CPI results more accurate inflation rates.

·       CPI measures inflation rate at final stage only.

·       CPI is compiled and published by Labour Bureau on monthly basis in India.

·       Well selected variables are considered under CPI.

·       CPI is the basis for the inflation rate.

·        CPI is based on the final prices of goods at the retail level.

  • The Central Bank of India used to measure inflation based on WPI but under the Governorship of Dr Raghuram Rajan they switched to CPI.

RBI Statement: Incremental CRR goes up to Rs. 11.5 trillion in India

As per the data received from the RBI (Reserve Bank of India) on 7th December, 2016. Rs 11.5 trillion of total deposits had come across the system. Rs 8.4 trillion of gross deposits were received by the bank in between the time period of 8th November to 27th November in which 330 billion was of exchange of notes and the rest of Rs 8.1 trillion was the deposits. Banks also received transactions of cash withdrawals of Rs 2.1 trillion. Total deposits receive in the system from last 10 years till now goes up to Rs 3.1 trillion.

Commercial banks have paid Rs 1.5 trillion in reverse repos (i.e. RBI borrows money from commercial banks) and have bought Rs 2.4 billion of Cash Management Bills (which are meant to meet temporary cash flow mismatch of the central government).

Cash Reserve Ratio in banks has increased up to Rs 4 trillion because of heavy deposits and incremental CRR.

To pay the salaries in the starting week of December around Rs 3 to 3.5 trillion cash withdrawals were made. And the rest is the cash held by the bank.

Total Rs 14.5 trillion of Rs 500 and Rs 1000 notes were in circulation in which till now only 11.5 trillion has been deposited in the account and the rest could come in within the remaining 25 days.

RBI

RBI has announced that the incremental CRR is removed from 10th December 2016. Well, in this case CRR positions of banks would come down and liquidity would be increased around Rs 3.5 trillion. The excess of liquidity would be managed by RBI through the issue of MSS (Market Stabilization Scheme) bonds and reserve repos.

To slow down the liquidity, the RBI will start allowing higher withdrawals.

Why Rupee hits all time low as against US dollar

More about MSS bonds.

The government has made the new ceiling for the issue of MSS bonds at Rs 6 trillion from Rs 300 billion. As higher ceiling will help RBI in the management of deposits coming into bank. To manage the liquidity, the RBI will use these MSS bonds. The bonds are most likely to be the form of 28 to 91 days cash management bills or treasury bills.

As of 2nd December, banks have an outstanding amount of Rs 2.36 trillion in Reverse repo and Rs 1.3 trillion in Repo. And incremental CRR has been maintained by banks of Rs 3.5 trillion, which would be there only till 9th December, as RBI has planned to remove it from 10th December. Also, RBI has announced the auction of 28 days Government of India cash management bills for a specified amount of Rs 200 billion.

More about Incremental CRR.

Incremental CRR were started from 26th November and immediately crossed about Rs 3.5 trillion of liquidity. For immediate credit of CRR, banks exchanged old notes.

Money market rates and bond yields will rise in the starting on the back of RBI, but as this move by RBI is temporary. So, it will fall again and will be reviewed within the upcoming 14 days.

Bond market is expecting rate cut of 50 bps which would result in fall in GDP growth and inflation.

It has been decided by the RBI that on the increase in NDTL (Net Demand and Time Liabilities) between the time period of 16th December 2016 to 11th November 2016, banks need to maintain the incremental CRR of 100%, starting the fortnight (within 14 days) 26th November 2016 or even before. This would help to drain excess of liquidity in the system. 

Black Money Opened Up!!

On 28th November Government of India, the surplus Cash balance increased sharply by Rs 1.4 trillion to Rs 1.415 trillion. And this rise in cash balance made a question in everybody’s mind that how government did received such a high cash balance? This was due to third quarter advance tax payment is due only on the December 15 and government didn’t have any stake sales during this period. This made the sharp increment in inflows.

The government has disclosed that the black money is used to raise the government surplus rather to waste it.

The deposits made in the bank disclose the steady flow of black money.

 

Why Rupee hits all time low as against US dollar

The Rupee on Thursday breached the 68.86 mark as upbeat economic data strengthened the prospect for higher US interest rates, while the dollar’s bull run continued as US bond yields hovered near multi-year highs.

We look at five factors why rupee hits all time low.

FII outflows: The government’s demonetisation drive and Trump’s election win has prompted FIIs to withdraw money from Indian stocks and invest overseas. A day after Trump won, FIIs pulled out Rs 1,440 crore from the Indian market. The demonetisation drive of the government has also led to investors pulling out money from demand-led and consumption stocks. The movement of rupee and FIIs flow has been directly proportional to each other.

So far in November, FIIs have sold a combined $3.18 billion in local equity and debt, the steepest selling seen in three years.

Overseas holding of Indian stocks and Bonds have dropped this month

US Federal Reserve Rate Hike: Federal Reserve chair Janet Yellen has announced that trump’s election has done nothing to change the federal reserve’s plans for a rate increase “relatively soon.”  A rate hike in US will lead to flow of money from emerging markets leaving their currencies and assets vulnerable to the negative risks.

Why DII are Buying when FII are selling ?

Donald Trump win: The rupee has fallen against the dollar since Donald Trump won the presidential election in the US on November 9, 2016. from the 66.43 level then, it reached 68.86 mark today.

Weak domestic market: The Sensex is down more than 4 per cent since demonetisation drive was announced. the negative market sentiment has affected the currency since november 8.

rupee-vs-dollar

Dollar rise: The US dollar has been rising steadily on expectations that president-elect Donald Trump’s policies will boost the US economy. It recently sprinted to a more than 13-1/2 year high against a basket of major currencies.

India’s benchmark 10-year sovereign bond yield has tumbled 51 basis points this month, on course for the biggest drop since May 2010, as Prime Minister Narendra Modi’s move to withdraw 86 percent of currency in circulation has the public rushing to banks to exchange bills. Lenders will use that money to buy bonds.

IT Dept To Block PAN, LPG Subsidy Of Tax Defaulters

In order to cripple and check the activities of wilful tax defaulters, the Income Tax department has decided to “block” Permanent Account Number (PAN) of such entities, get their LPG subsidy cancelled and take measures to ensure that they are not sanctioned loans.

A number of such measures have been mooted by the tax department, to be undertaken this financial year, in order to curb the menace of large-scale tax avoidance and evasion.

As per a strategy paper prepared by the department, also accessed by PTI, the taxman will block PAN in such a way “that these defaulters are not sanctioned any loans or overdraft facility by public sector banks, as the same is bound to become non-performing assets”.

Further, it said, “Ministry of Finance can be suggested to withdrawn facility like LPG subsidy which is directly credited in to the bank accounts of the said defaulters.” This step, the strategy paper said, will act to “disincentive” the defaulters.

income tax
The taxman also proposes that the identities of such blocked PANs be circulated to the Registrar of Properties “with a request for not allowing any registration of immovable properties where such PANs are involved.” Such defaulters’ information has also been recommended to be circulated across tax offices so that their activities loans or government subsidy can be plugged country-wide.

Mahanagar Gas IPO review

The department has also decided to subscribe to the Credit Information Bureau Limited (CIBIL) data, on a possible payment basis, to check out the financial activities of defaulters and undertake action against them for recovery and freezing of assets.

CIBIL is an agency to collect and maintain records of an entities’ payments pertaining to loans and credit cards.

The department, beginning last year, has also started to ‘name and shame’ large tax defaulters (over Rs 20 crore default) by publishing their names and other credentials in leading national dailies and on its official web portal.

The IT department, beginning this financial year, has also decided to publicly name all category of taxpayers who have a default of Rs one crore and above.

“Tax default is a major menace that the department is grappling with.These new measures are aimed to curb these instances in the right earnest,” a senior IT official said.

PPF Rate Cut – Positive for equity and bonds

As the Indian economy is upwardly growing at 7.3% levels, the country is bringing efficient changes like Repo Rate Cuts, Interest Rate Cuts on Small saving schemes, introducing schemes and campaigns like JanDhanYojana, Pension schemes etc with a sole vision to build a high functioning economy focused on industry, innovation and entrepreneurship.

Union Budget 2016 announced PPF Rate cut of 60 bps i.e., from 8.7% to 8.1%, the highest reduction after 2004.The short tenure investments of 1yr,2yr & 3yr term deposits have reduced their interest rates as they have only 25 basis spread over comparable government securities rates.

How are the interest rates determined for such small saving government schemes?

The market determines the interest rate and government gives subsidy on its securities, including saving schemes.

So for example, the Sukanya Samriddhi Yojana and the Senior Citizens Savings scheme offer 9.2% and 9.3% rates respectively; the highest among the Small Savings schemes. They enjoy a spread of 75 bps and 100 bps over the rate of G-securities of comparable maturities.

As per information from the RBI, at the end of May 2015 deposits under all the savings schemes put together, totaled Rs. 6.28 lakh cr. This included funds & rates allocated towards Deposits, Certificates and the Public Provident Fund (PPF) schemes are as below:

Total Govt. Deposits

Rate cut updates

Source : Rbi.org

Since January 2015, RBI has cut the repo rate by 125 basis points but the banks have reduced the lending rates by maximum 70 basis points. In the previous rate cut of 50bps by RBI in September 2015, it had asked government to review the small savings rate on Post Office Schemes, National Saving Schemes, Public Provident Fund etc to encourage banking investments which will bring financial inclusion in the country and hence lead to more lending.

More Deposits = More Loans = More Credit Growth = Leads to Capital Formation

The current government initiatives like Make in India, Start up Stand up India, Digital India, Smart Cities Project etc where lending rates are required to remain low, rising deposit rates will make the economy sluggish rather than efficient. Therefore both are interlinked.

To attract long term investments, Tax free bonds are going to be the best thing going forward for long term savers and pensioners assuming the liquidity needs are not immediate.

What are the implications of a downward trend in the rates?

– Savers have to save more and spend less. Real interest rates are yet positive, a Fixed Deposit giving 7.5% interest per annum and inflation of 6% will compensate the individual with 1.5-2% gain but post tax gain can turn negative. Therefore, putting your money in tax free bonds, SIP’s etc will be a smart decision for an investor to attract real gains.

Lower Rates is a need for investment boom in the Indian economy to accelerate the Government initiatives like Make in India, Start up Stand up India, Digital India etc this will lead to higher GDP and more employment in the country.

Debt funds will gain as higher coupon bonds will not see negative price fluctuations.

Banks suffering from the NPA effect will be the biggest beneficiary as they can offer lower deposit rates thus improving their margins.

RBI can have further reduce repo rates provided the inflation meets the target as it was to maintain at 5.6% in December,2015

Therefore, the overall effect of this rate cut will lead to annual savings of approximately Rs.1250 cr to the government which will help in reducing the fiscal deficit and create investments in the field of innovation and entrepreneurship, promotion of investor confidence, job creation, development of infrastructure & achieving total digital connectivity.

Budget 2016 : Sector Impact

Positive for Insurance

Foreign investment in insurance, pension sectors up to 49% via automatic route ( IIFL Hold )

Proposes Rs 5,500 cr for crop insurance scheme for FY17 ( Bajaj Fins,L and T Fin )

NBFC shall be eligible for deduction to extent of 5% of its income in respect of provision for bad debts ( SKS Micro, IIFL,NETWORK 18 )

Propose to launch new health care scheme with Rs 1 lakh as cover per family

Positive for general Insurance companies ( Reliance capital, Kotak )

Target of amount sanctioned under Pradhan Mantri Mudra Yojana (SKS Microfinance, Satin Creditcare )

Amendments in SARFAESI Act 2002 to enable sponsor of an ARC to hold up to 100% stake in ARC

Positive for fertiliser companies

Unified agri market scheme to enhance farmer access to markets (Coromandel Fertiliser,Chambal,GSFC )

Have to give farmers income security, aim to double farmer income

Negative for Auto

To levy 1-4% infra cess on cars, SUVs, higher engine capacity vehicles and 2.5% tax on diesel vehicle

Tax to be deducted at source at rate of 1% on purchase of luxury cars exceeding value of Rs 10 lakh ( Tata motor,Maruti,M&M )

Negative for PSU Bank

FM says Rs 25,000 cr for bank recapitalisation (less than expected, so negative for PSU banks) ( SBI,BOB,PNB)

Positive for PSU Bank

Goverment has option to reduce stake in IDBI below 50% ( IDBI )

Positive for Engineering

Will commission 9 km/day of broad gauge lines in FY18 and 13km/Day by FY19 ( Kalindee rail )

Positive for IT companies

Digital depository for school leaving certificates, college degrees ( TCS,Infosys,Wipro )

Positive for Software and training

set up high education financing agency with Rs 1,000 cr capital ( APTECH , NIIT, zee learn )

Regulatory architecture to be provided to ten public and ten private cos.

BUDGET

Positive for food processing cos

100% FDI to be allowed through FIPB route in marketing of food ( Nestle , Britannia,)

4 new schemes to enhance dairy farming in India at Rs 850 cr ( prabhat dairy )

Positive for Hospitals & Medical Services

Allocation of Rs 1.5 lakh cr for social sector including education, healthcare ( Aptech,Apollo hospital,Fortis,Narayan hrud )

Positive for Ceramics & Granite

FM allocates Rs 9,000 cr towards Swachh Bharat Mission (Nitco Tiles, Kajaria Ceramic, HSIL, Cera Sanitary )

Positive for Chemicals

e-Platform to connect wholesale agri markets ( pdiilite,Tata chem )

Negative for Cigarettes

To raise excise duty on most tobacco products by 10-15%. (ITC, VST Industries, Godfrey )

Positive for Construction & Contracting – Housing

Propose 100% deduction to undertakings for construction of affordable housing (DB Realty, NBCC ,Ashiana Housing , Peninsula Land, Nila Infra )

Raise personal I-T house rent exemption to Rs 60,000 from Rs 24,000/year. ( DLF,Oberoi Reality)

Positive for electricals

All major stations to have CCTVs in phased manner, 311 railway stations currently under CCTV surveillance (Zicom , Bharat electronics, Genus Power, Centum Electron )

Positive for Infrastructure

Investment in road sector, including PMGSY allocation, would be Rs 97000 cr in FY17.

( IRB, ITNL, HCC, Sadbha, L&T, NCC, Ashoka Buildcon )

To issue guidelines for renegotiation of PPP contracts ( L& T,Bhel,Adani ports,Siemens )

Allocate Rs 55,000 cr for roads & highways excluding Rs 15,000 cr NHAI bonds (MEP Infra, MBL Infra IRB Infra, J Kumra )

Improvement of suburban transport systems ( BEML )

Will set up 2 Locomotive Factories at the cost of Rs 40,000Cr (BHEL, BEML)

Positive and Negative for Mining & Minerals

Propose to scrap export duty on low grade iron ore. ( NMDC )

Clean energy cess for coal Rs 400/tonne (- ve for JSW, Coal India)

Plan to establish wi-fi services in 100 more stations in 2016 and 400 stations in 2017, ( D link )

Positive for Oil Drilling And Exploration

Cess on crude reduced from Rs 4500/MT to 20% ad valorem. ( ONGC, CAIRN INDIA)

Positive for pharma

FM propose to exempt parts of dialysis equipment from basic customs duty ( opto circuit )

Positive for Plastics

Propose to spend Rs 86,500 cr on irrigation projects in 5 years,28.5 lakh hectares will be brought under irrigation, Allocation for Accelerated Irrigation Benefits

Programme at Rs 17,000 cr for FY17, Allocation to farming sector at Rs 35,984 cr (Jain Irrigation, EPC)

Positive for Power – Generation & Distribution

Propose Rs 8,500 cr for rural electrification (Power Grid, NTPC, PFC, REC)

Target is to commission 1000 MW of Solar Capacity in next 5 years (Indowind Energy)

Positive for Power – Transmission & Equipment

Government committed to achieve 100% village electrification by May 1, 2018 (KEC international, L&T, Kalpataru Power

FM allocates Rs 9,000 cr towards Swachh Bharat Mission (A2Z Infra)

To up FY17 allocation for electrification by 50% (Kalpataru Power, KEC Intl, Siemens)

Electrification of 2000 Km (KEC international )

No reimposition of custom duty on crude

Negative for Textile

Higher excise on readymade garments priced at Rs 1,000 or more (Arvind)

Positive for Transport & Logistics

Basic custom and excise duty on refrigerated containers reduced to 5% ( snowmen )

Negative on Aviation

Excise duty on aviation fuel increased to 14% from 8% (SpiceJet, Jet, InterGlobe)

Positive for Transport & Logistics

Mission to provide LPG gas connection to women household members (Aegis Logistics)

Positive for Transport & Logistics

Propose to set up 3 Freight Corridors (Gateway Distriparks)