sectoral expectations from union budget 2013

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Sectoral expectations from Union Budget 2013

Written by: Aditya Prasad Updated: Thursday, February 21, 2013, 12:00

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This year's Budget is critical for the Indian markets and the economy as a

whole as the Finance Minister is likely to chalk out steps towards fiscal

consolidation and policy measures to kick start activities in the infra space.

Also, road map for several economic reforms which are touted as game

changers for India like GST, DTC, land acquisition bill, FDI in insurance

and pension is expected. Following are the list of expectations sector wise.

Autos

There have been talks about additional excise duties on diesel cars whichwere mainly aimed to bring down the under-recoveries of the oil PSUs.

However, considering that the auto space, is already struggling with its

sales numbers with every passing month, an additional burden on diesel

cars will prove to be a negative for several auto companies. The next

hopeful move from this space is in the form of special schemes under

Jawaharlal Nehru National Urban Renewal Mission for the commercial

vehicle segment which has witnessed steep de-growth.

Aviation

This is one space which has been languishing for quite a few years now.

The key Budget expectation for the aviation industry is to include ATF

under declared goods and reduction in airport related charges.

Banks & NBFCs

PSU banks have been in news off late for their increasing NPAs thanks to

their exposure in stressed pockets like infrastructure, aviation, agricultureetc. Hence it is only logical for them to wish for capital infusion or

recapitalization as it will prove to be helpful in providing support to lending

activities. The other major expectation is relaxation in lock in period for

savings in order to qualify for tax benefits under Section 80C. This is to

help make term deposits more attractive and at par with other instruments

which are of tax saving nature. Related to the above point is the increase in

TDS limit on interest on bank deposits. Currently any gains of above Rs.

10,000 attract TDS. This level is anticipated to be revised higher to Rs.50,

000. Another move in the banking space is the increase in agri lending


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targets. The Government is likely to go through this announcement as this

increase will be pushed under financial inclusion. However, it will be a drag

on the PSU banks as this segment has been steadily turning into NPAs.

Increase in FDI limit for insurance companies from 26% to 49% is another

key announcement which is expected as this move will provide capital tocash strapped insurance companies.

Capital Goods

Capital Goods have been under tremendous pressures due to sluggish

capex cycle, delay in project off take due to clearances required from

various departments etc. The key expectations are as follows: In order to

provide a thrust to the fiscal consolidation stand adopted by the

Government, reduction in Government spending Budget and service tax onpower projects is likely. For the power space, fund allocation for T&D

activities are expected to continue as it provides continues business

opportunity. Also, there are hopes for some budgetary provision for

restructuring of state owned power distribution companies.

Cement

There are no major changes expected in the cement sector as the current

scheme of excise duty is expected to remain the same. Any other plus forthis space will come in the form of announcements of infra projects like

highways, freight corridors etc which will boost cement demand.

Construction

This is another space which has been in the negative over the past 12

months as spiraling commodity prices, high interest rates and inflationary

pressures have been proving a major challenge for those engaged in

construction business. This year's Budget is expected to provide some

relief in the form of dedicated infra debt bonds and tax benefits made in

infra bonds which will help provide long term funding which will give a major

impetus to the sector. Revamping the National Investment Board to ease

bottlenecks in implementing large scale projects is vital. Though a bit

stretched to wish for, MAT being abolished for the tax holiday period under

Session 80 IA to improve the viability of projects.

FMCG


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Continued focus and increase in focus of allocation of resources towards

projects like NREGA and the likes will lead to increase in disposable

income which will be a positive for this space. Implementation of GST

would be a huge help for FMCG space as this will cut out multiple taxes like

Value added Tax (VAT) and excise duties. Cigarette companies will behoping for no hike or marginal hike in excise duties on cigarettes after the

huge jump witnessed in the last Budget.

IT

Industry body, NASSCOM expects MAT on SEZ units to be removed as

this will be a huge advantage to all the companies operating in various SEZ

units.

METALS

There are not many changes expected in this pocket. The only ones being

increase in import duty on manganese ore and decrease in export duty on

low grade fines.

Oil & Gas

Oil Marketing Companies are expecting pricing of Diesel and Petrol on the

basis of trade parity rather than export parity. Also, tax holidays set duringthe 12th five year plan is another demand. Another change than can come

in this sector is the introduction of 5% customs duty on crude oil.

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