Detailed Highlights
of Union Budget for 2018-19 -
Chart How Stock Markets Performed On Past Budget Days -
Read some commentary at the end -
THE BEHAVIOUR OF MARKET ON BUDGET DAY AND SOME OBSERVATIONS -
The biggest feature of this budget for the markets was the introduction of LTCG which caused the biggest single day market sell off in more than one year. We believe the provision that no LTCG will be levied till shares sold upto march 2018 prompted the investors to rush and sell their holdings and rebuy them lateron. The government should have, in our opinion, made the law effective from 1 february itself, which could have removed the fundamental reason for investors to sell their holding to save on capital gains taxes accumulated by them. We are talking about almost half of market capitalization here. even if 20% market capitalization is churned the market invariably will see 5% and more decline.
Trying to decipher how markets moved from budget to budget and from budget day to end of year is not a lot or at all a meaningful exercise. In our opinion, budgets per se are never are driving force for the market in terms of its core momentum strength nor weakness. It never gets that from the budget. Our observations are either the market has already decided how to move according to the expectations from coming budget or it gives strong reactionary show on the day of budget or during few days ahead. The reactionary behaviour is more seen when some unexpected bad news is put upon the market such as the levy of LTCG in the present 2018-19 budget. The blows like LTCG are not very common announcements for markets out of budget days, so on most other budgets, when the markets are already in strong and clear up or down trend momentum' remain kind of 70% of times a non event type. During the other 30% of times, the market are not in clear directional trend themselves, save taking any clue from markets.
Also, as per some thumb rule behaviour of market, when market is in strong uptrend and there is lack of any bad news, then market will tend to rise, as no bad news is also a good news in market parlance during certain circumstances. On occasions, when the market is in downtrend and gets no bad news then it may just stay where it is or give a small reactionary up move or showcase of strength of a day or two and then resume downtrend. Of many important conclusions we can derive, one is, the markets is that unless there is some dramatic bad news causing compulsory huge sell of, the markets usually do not take budget as much seriously, and resume its usual trend or sideways moves of hitherto.
Also as per the 'theory of discounting' if market has already discounted the good news, it may fall, and if market has already discounted the bad news, it's possible that it may rise. Again these maxim should be observed in the light of the prevailing trend whether up or down.
Another observation, our research team has bound down as conclusion is that budgets are never decisive of market move and mostly supportive of prevailing trend, reactionary for few days or non event on other occasions. Having said that, budgetary provisions may bring dramatic change in stocks of particular sector, for e.g an import duty decrease or export duty rise on say tyres may change the movement of tyre stocks for the next 12 months as the whole EPS and PE facts will alter which are main cause of stock rises most of the times (barring crazy bull run which is only 20% of the entire rally of any bull market, in terms of time frame). Similarly when there is any perks to the middle classs which might possibly increase their disposable income, such as tax breaks in IT returns or increase in tax slab limits etc.; these gives fillip to consumer durable goods firms stocks as more disposable income in hands of middle class income group means more sales for these firms. So, sector specific importance of any budget will continue to remain. Otherwise as stated on 90% of occassions the budget is not a make or break even or even paradigm shifting or trend deciding turn for markets. This is because the markets are very smart these days. They have already analysed the present and pas economic, business and commerce situation in the country and know the possible political upheavals and figure out 90% of the time how 90% of budget would be and discounted 90% of the medium to long term move of the same.
BELOW ARE IMPORTANT HIGHLIGHTS NOT OF JUST BUDGETARY ANNOUNCEMENTS BUT ALSO THE ESTIMATES AND REVISIONS.
**FY19
ESTIMATES**
* Fiscal
deficit target pegged at 3.3% of GDP
* Fiscal deficit seen at 6.24 trln rupees
* Net market borrowing pegged at 4.62 trln rupees
* Net short-term borrowing 170 bln rupees
* Gross market borrowing pegged at 6.06 trln rupees
* Provide 646 bln rupeeS for switch/buyback FY19 gilts by Mar
* Gilts repayments 1.43 trln rupees
* Nominal GDP growth seen 11.5%
* Revenue deficit pegged at 2.2% of GDP
* Revenue deficit seen at 4.16 trln rupees
* Total expenditure seen at 24.42 trln rupees
* Disinvestment target at 800 bln rupees
* Gross tax revenue 22.7 trln rupees
* GST collections seen 7.44 trln rupees
* CGST collections seen 6.04 trln rupees
* Transfer to states seen at 1.43 trln rupees
* Excise mop-up pegged at 2.60 trln rupees
* RBI surplus, PSU bank dividend seen 548 bln rupees
* Total infra spend at 5.97 trln rupees
* Communication receipts seen 486.6 bln rupees
* Fertiliser subsidy 700 bln rupees
* Defence outgo 2.82 trln rupees
* Pension outgo 1.68 trln rupees
* Dividend from PSUs seen at 525 bln rupees
* Food subsidy 1.69 trln rupees
* Agri credit target at 11 trln rupees
* Transport outgo seen at 1.35 trln rupees
* Small savings receipts seen 750 bln rupees
* Rural development outgo seen 1.38 trln rupees
* Customs mop-up pegged at 1.13 trln rupees
* Interest outgo seen 5.76 trln rupees
* Income tax pegged at 5.29 trln rupees
* Farm, allied activities outgo 638.36 bln rupees
* Gilts buyback pegged at 719 bln rupees
* Fertiliser subsidy seen 701 bln rupees
* Corporation tax pegged at 6.21 trln rupees
* Petroleum subsidy seen 249.3 bln rupees
* To conduct 280.6 bln rupees of gilt switches FY19
* To issue 650 bln rupees of bonds to PSU banks FY19
* Fiscal deficit seen at 6.24 trln rupees
* Net market borrowing pegged at 4.62 trln rupees
* Net short-term borrowing 170 bln rupees
* Gross market borrowing pegged at 6.06 trln rupees
* Provide 646 bln rupeeS for switch/buyback FY19 gilts by Mar
* Gilts repayments 1.43 trln rupees
* Nominal GDP growth seen 11.5%
* Revenue deficit pegged at 2.2% of GDP
* Revenue deficit seen at 4.16 trln rupees
* Total expenditure seen at 24.42 trln rupees
* Disinvestment target at 800 bln rupees
* Gross tax revenue 22.7 trln rupees
* GST collections seen 7.44 trln rupees
* CGST collections seen 6.04 trln rupees
* Transfer to states seen at 1.43 trln rupees
* Excise mop-up pegged at 2.60 trln rupees
* RBI surplus, PSU bank dividend seen 548 bln rupees
* Total infra spend at 5.97 trln rupees
* Communication receipts seen 486.6 bln rupees
* Fertiliser subsidy 700 bln rupees
* Defence outgo 2.82 trln rupees
* Pension outgo 1.68 trln rupees
* Dividend from PSUs seen at 525 bln rupees
* Food subsidy 1.69 trln rupees
* Agri credit target at 11 trln rupees
* Transport outgo seen at 1.35 trln rupees
* Small savings receipts seen 750 bln rupees
* Rural development outgo seen 1.38 trln rupees
* Customs mop-up pegged at 1.13 trln rupees
* Interest outgo seen 5.76 trln rupees
* Income tax pegged at 5.29 trln rupees
* Farm, allied activities outgo 638.36 bln rupees
* Gilts buyback pegged at 719 bln rupees
* Fertiliser subsidy seen 701 bln rupees
* Corporation tax pegged at 6.21 trln rupees
* Petroleum subsidy seen 249.3 bln rupees
* To conduct 280.6 bln rupees of gilt switches FY19
* To issue 650 bln rupees of bonds to PSU banks FY19
**FY18 REVISED**
* Direct tax revenue up 12.6%
* Fiscal deficit 3.5% of GDP
* Gilts buyback at 570 bln rupees
* Gilts switches 430 bln rupees
* Dividend from PSUs revised to 548 bln rupees
* RBI surplus, PSU bank dividend revised to 516 bln rupees
* Small savings receipts 1.03 trln rupees
* Non-tax revenue to see shortfall
* GST revenue for only 11 months
* Divestment target revised to 1 trln rupees
* Hope to grow 7.2-7.5% in H2 FY18
* Exports expected to grow 15% in FY18
* Direct tax revenue up 12.6%
* Fiscal deficit 3.5% of GDP
* Gilts buyback at 570 bln rupees
* Gilts switches 430 bln rupees
* Dividend from PSUs revised to 548 bln rupees
* RBI surplus, PSU bank dividend revised to 516 bln rupees
* Small savings receipts 1.03 trln rupees
* Non-tax revenue to see shortfall
* GST revenue for only 11 months
* Divestment target revised to 1 trln rupees
* Hope to grow 7.2-7.5% in H2 FY18
* Exports expected to grow 15% in FY18
**DIRECT
TAXES**
* Propose only modest change in long-term capital gains tax
* To tax long-term capital gains on shrs over 100,000 rupees at 10%
* Strong case for long term capital gains tax on shares
* Tax on short-term capital gains from shares unchanged at 15%
* 200 bln rupee more revenue on long-term capital gains tax
* To tax dividend given by equity schemes of MFs at 10%
* No long-term capital gain tax on shares till Jan 31, 2018
* Eases rules on long-term capital gains tax on realty
* Anti tax evasion steps led to extra 900-bln-rupee revenue
* Seeing buoyancy in personal income tax collection
* 80-bln-rupee revenue loss on income tax standard deduction
* To allow 40,000 rupees standard deduction in income tax
* Personal income tax rates unchanged
* Senior citizen exemption on interest income up at 50,000 rupee
* 25% corporate tax for cos with up to 2.5 bln rupee turnover
* Corp tax to remain 30% for cos above 2.5-bln-rupee turnover
* To forego 70-bln-rupee revenue on corp tax benefit for MSME
* Lower corporate tax rate to aid 99% MSMEs
* Announces tax sops for farm producer cos
* Propose post-harvest tax incentives
* Health, education cess increased to 4%
* To get 110 bln rupees more revenue from health, edu cess
* Tax sops for transactions at international fincl centres
* To amend IT Act to roll out e-assessment
* Propose only modest change in long-term capital gains tax
* To tax long-term capital gains on shrs over 100,000 rupees at 10%
* Strong case for long term capital gains tax on shares
* Tax on short-term capital gains from shares unchanged at 15%
* 200 bln rupee more revenue on long-term capital gains tax
* To tax dividend given by equity schemes of MFs at 10%
* No long-term capital gain tax on shares till Jan 31, 2018
* Eases rules on long-term capital gains tax on realty
* Anti tax evasion steps led to extra 900-bln-rupee revenue
* Seeing buoyancy in personal income tax collection
* 80-bln-rupee revenue loss on income tax standard deduction
* To allow 40,000 rupees standard deduction in income tax
* Personal income tax rates unchanged
* Senior citizen exemption on interest income up at 50,000 rupee
* 25% corporate tax for cos with up to 2.5 bln rupee turnover
* Corp tax to remain 30% for cos above 2.5-bln-rupee turnover
* To forego 70-bln-rupee revenue on corp tax benefit for MSME
* Lower corporate tax rate to aid 99% MSMEs
* Announces tax sops for farm producer cos
* Propose post-harvest tax incentives
* Health, education cess increased to 4%
* To get 110 bln rupees more revenue from health, edu cess
* Tax sops for transactions at international fincl centres
* To amend IT Act to roll out e-assessment
**INDIRECT TAXES**
* CBEC to be renamed Central Board of Direct Tax and Customs
* Excise on unbranded diesel cut by 2 rupee to 6.33 rupee/ltr
* Excise on unbranded petrol cut by 2 rupee to 4.48 rupee/ltr
* Plan changes in customs duty act for ease of doing business
* Social welfare surcharge of 3% on import of some goods
* To raise customs duty on certain items
* To raise customs duty on mobiles to 20% from 15%
* Custom duty on certain TV parts raised to 15%
* Customs duty on mobile phones raised to 20% from 15% * Custom duty on raw cashew cut to 2.5%
* Import duty on diamond up at 5% vs 2.5% earlier
* Crude palm kernel oil, corn oil customs duty up at 30%
* Crude safflower oil, coconut oil customs duty up at 30%
* Crude groundnut oil, cottonseed oil customs duty up at 30%
* Social welfare surcharge on import of gold, silver at 3%
* Social welfare surcharge on import of petrol, diesel at 3%
* Import duty on cut, polished coloured gemstone 5% vs 2.5%
**FY20 & FY21 ESTIMATES** * FY20 revenue deficit pegged at 1.8% of GDP
* FY20 fiscal deficit target pegged at 3.1% of GDP * FY21 revenue deficit pegged at 1.6% of GDP
* FY21 fiscal deficit target pegged at 3.0% of GDP
**MACROECONOMY MATTERS**
* Firmly on course to achieve 8% plus growth
* Achieved average 7.5% growth in first 3 years of govt * This Budget to consolidate gains of last 4 years' budgets
* India stands out as the fastest growing economy in world
* India a $2.5-trln economy now
* India to become fifth largest economy very soon
* Govt has implemented fundamental structural reforms
* Promised to reduce poverty, build strong India
* Direct transfer mechanism is a global success story
* Will focus on health, infrastructure, senior citizens
* Focus on 'ease of living' for common man
* To move ahead on ease-of-doing business
* Demonetisation has reduced cash in circulation
* Recapitalised banks have better capacity to support growth
* Indirect tax system made simpler with GST
* FDI increased due to govt actions
* Manufacturing sector back on growth path
* There's a premium on honesty because of govt's reforms
**AGRICULTURE**
* FY19 Budget aims to strengthen agri, rural economy * Seek paradigm shift to double farmers' income by 2022
* Govt committed to welfare of farmers
* Govt to create mechanism for post harvest facilities
* MSP hikes not enough, farmers must be able to get benefits
* NITI Aayog to make robust system for fair price to farmers
* Next kharif crop MSP to be at least 1.5 times of cost
* Emphasis on generating gainful farm, non-farm jobs
* Focus on low-cost farming, higher selling price
* Institutional system for farm goods price, demand forecast
* Export of farm commodities to be liberalised
* Agri export potential $100 bln
* To launch Operation Green in line with Operation Flood
* Allocate 5 bln rupees for Operation Green
* Allocate 2 bln rupees for medicinal, aromatic crops
* To encourage women self-help groups for organic farming
* Cluster-based models to be developed for horticulture crops
* e-NAM to be exempt from APMC regulations
* 470 APMCs connected to e-NAM, rest to be connected by Mar
* To develop, upgrade 22,000 rural haats to agricultural mkts
* To allocate 20 bln rupees for farm development fund
* Favourable tax treatment for farm mfg organisations
* Kisan credit card benefit also to animal husbandry, fishing
* To launch bamboo mission for 12.9 bln rupees
* To set up 42 mega food parks for farm exports
* FY19 Budget aims to strengthen agri, rural economy * Seek paradigm shift to double farmers' income by 2022
* Govt committed to welfare of farmers
* Govt to create mechanism for post harvest facilities
* MSP hikes not enough, farmers must be able to get benefits
* NITI Aayog to make robust system for fair price to farmers
* Next kharif crop MSP to be at least 1.5 times of cost
* Emphasis on generating gainful farm, non-farm jobs
* Focus on low-cost farming, higher selling price
* Institutional system for farm goods price, demand forecast
* Export of farm commodities to be liberalised
* Agri export potential $100 bln
* To launch Operation Green in line with Operation Flood
* Allocate 5 bln rupees for Operation Green
* Allocate 2 bln rupees for medicinal, aromatic crops
* To encourage women self-help groups for organic farming
* Cluster-based models to be developed for horticulture crops
* e-NAM to be exempt from APMC regulations
* 470 APMCs connected to e-NAM, rest to be connected by Mar
* To develop, upgrade 22,000 rural haats to agricultural mkts
* To allocate 20 bln rupees for farm development fund
* Favourable tax treatment for farm mfg organisations
* Kisan credit card benefit also to animal husbandry, fishing
* To launch bamboo mission for 12.9 bln rupees
* To set up 42 mega food parks for farm exports
**POLICY STEPS**
* Aim to lower central govt debt-to-GDP ratio to 40%
* To take all steps to eliminate use of crypto-currencies * To encourage blockchain technology in payment system (still confusion will prevail over this whole crypto currencies conundrum)
* To provide 30.73 bln rupees for Digital India plan
* To take more steps to curb black money
* Govt committed to revised fiscal glide path
* Prepared to accept key recommendations of FRBM committee
* NITI Aayog to set up plan for artificial intelligence R&D
* 100 bln rupees for animal husbandry, fisheries develop fund
* To set up 2 new funds of total 100 bln rupees for fishery
* To set up 500,000 WiFi hotspots for rural connectivity * To review refinancing policies under MUDRA plan
* Online loan facility for MSMEs to be revamped
* To address bad loan problems of MSMEs
* 37.94 bln rupees for MSME credit support
* Job creation core of policy planning
* To take steps for improving start-up funding environment
* PSUs to be part of e-trade receivables platform
* To link e-trade receivables platform with GSTN
* 3 trln rupees lending target for MUDRA plan FY19 * Smart City scheme outlay 2.04 trln rupees
* Reforms in stamp duty regime in consultation with states
* To set up unified fincl mkt regulator for GIFT city
* To introduce pay-as-you-use toll system
* Identified 372 reform actions for ease-of-doing business * To infuse more equity in FCI
* Plan to assign every enterprise in India a unique ID
* To bring out domestic defence production policy
**INDUSTRY, INFRASTRUCTURE**
* To allocate 71.5 bln rupees to textiles sector FY19
* Allocation for food processing sector 14 bln rupees FY19
* To expand airports' capacity to handle 1 bln trips a year
* To construct tunnel under Sela Pass
* To award water supply contracts worth 194.28 bln rupees
**RAILWAY PLANS**
* Rail track renewal target at 3,600 km
* Special attention being given to rail track maintenance
* Capex for Railways pegged at 1.48 trln rupees FY19 * 170 bln rupees for suburban rail infra in Bengaluru
* FY19 allocation at 110 bln rupee for Mumbai Rail Transport
* To eliminate 4,267 unmanned railway crossings in 2 years
* All trains to soon have WiFi system, CCTVs
**FINANCIAL SECTOR & MARKETS**
* RBI norms to nudge cos to access bond mkts for fund raising
* To monetise PSUs using via invest trusts from next year
* SEBI to mull asking large cos to meet 25% of debt from mkt
* Regional rural banks to be allowed to raise money from mkts
* To merge 3 public sector insurance cos into 1
* To list entity post merger of 3 public sector insurance cos * To explore more ETFs, including debt-based ETFs
* Govt to have separate policy for hybrid fincl instruments
* To frame policy to develop gold as asset class
* RBI to transfer NHB shareholding to govt
* Gold monetisation policy to be revamped
* RBI Act being tweaked to allow standing deposit facility
**SOCIAL SECTOR**
* To set up dedicated affordable housing fund under NHB
* Aim 5.1 mln rural houses under affordable housing plan * Aim to give houses to all poor by 2022
* Aim to build 20 mln more toilets under Swachh Bharat
* More than 60 mln toilets built under Swachh Bharat plan
* To give 80 mln LPG connections under Ujjwala scheme * To spend 1 trln rupees on education infra over 4 years
* To subsidise removal of crop residue to tackle pollution
* To set up Ekalavya schools for scheduled tribes
* To treat education holistically pre-nursery to class 12
* To give 40 mln power connections under Saubhagya Yojana
* To move from blackboard to digital board
* Allocate 99.75 bln rupees for social security plan FY19
* Allocation to National Livelihood Mission 57.50 bln rupees
* Allocate 14.3 trln rupees for rural infra FY19 * Allocate 26 bln rupees under ground water irrigation plan
* Health protection scheme to cover 100 mln poor families
* Allocate 12 bln rupees for health wellness centres
* To launch PM research fellow plan for 1,000 BTech students
* To set up 2 new schools of planning & architecture
* 600 mln Jan Dhan accts to get micro insurance benefit
* 24 new medical colleges to be set up via hospital upgrade
* Aim 1 medical college for every 3 Parliament constituency
* 6-bln-rupee nutritional support for Tuberculosis patients
* Govt progressing towards universal health coverage
* Health scheme to have 500,000 rupee/family/yr benefit
* Allocate 566.2 bln rupees for Scheduled Castes welfare
* Cover all poor family in PM insurance plan in mission mode
* 187 projects sanctioned under Ganga cleaning programme
* Allocate 391.35 bln rupees for welfare of Scheduled Tribes
* Govt women employees to contribute 8% to EPF in first 3 yrs
* To contribute 12% of new employees' wages in EPF for 3 yrs
* To supply water to all homes in 500 cities under Amrut plan
* LIC 8% assured income plans for sr citizen extended to 2020
**MISCELLANEOUS**
* Special scheme to fight pollution in Delhi-NCR
* To develop 10 places as iconic tourism destinations
* Salary hike for President, Vice-President, governors
* New law to govern salaries of lawmakers
* Lawmakers' salary to be revised every 5 yrs
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