Top sector expectations from the budget
Auto, banking, FMCG, infrastructure and power sectors are expecting a push from the government. Government plans on demonetization and GST implementation are top concerns for India-Inc. Raising Income Tax slabs and reducing corporate-tax rates are also anticipated from Budget 2017-18. In addition, the government will place greater stress on 'Make in India' plans. In this timeline, we explore the sector-wise expectations from the Budget.
What is Budget 2017-18?
The Budget, to be presented by Finance Minister Arun Jaitley on February 1, is a statement of the estimated receipts and expenditure of the government for a particular year. The Budget for 2017-18 subsumes the Railway Budget for the first time.
Budget presentation advanced
The budget presentation has been advanced by nearly a month to allow the government to withdraw from the Consolidated Fund of India for routine expenses till the Union Budget is approved by the houses.
Key Expectations - Auto industry
To adjust with the proposed GST rates, auto industry needs changes on the excise duty rates. For example, excise rate on SUV/MUV is 30%, even though the highest proposed GST rate is 28%. In the pre-budget consultation, automobile industry requested clarification on tax structure for luxury cars to enable smooth transition to GST. The budget is expected to encourage replacement of old vehicles.
Key Expectations - Banking
Bankers hope that the government will boost incentives for digital transactions. Public Sector Undertaking (PSU) banks hope for greater capital infusion as there is a shortfall of over 1 lakh crore in government's Indradhanush plan. The Budget 2017-18 is expected to provide greater tax relief on bad loans. The current rebate stands at 7.5%. PSU banks also wait for an effective divestment plan.
Indradhanush plan
In 2015, the government launched the Indradhanush plan to overhaul the state-run banks over a period of seven years. It is likely that the government will pump more money into the Rs. 70,000 crore plan in 2017.
Key expectations - FMCG
The FMCG industry hopes for a pro-consumption budget along with incentives on digital transactions. The consumer goods industry also hopes for more rural infrastructure to develop better markets in rural India. In budget 2017-18, the industry hopes for more benefits for the salaried class so that disposable income increases and boosts demand. Junk food restaurants and cigarettes may cost more in 2017.
Key expectations - Housing and Infrastructure
Infrastructure, especially in rural areas, is expected to be the key focus of Budget 2017-18. Roads and highway ministry may get a 30% increase in funds. Real estate housing loans for the poor and middle class households are likely to get subsidized. Government is expected to ensure success of its "housing for all" initiative. First-time home buyers expect better financing options and tax incentives.
Key expectations - Power
The government may announce a slew of measures to encourage renewable energy generation. Renewable energy sector expects to enjoy tax incentive and supportive regulatory environment. The industry hopes for SEZ-like treatment for solar parks and related entities. Renewable energy companies want to issue green bonds when they achieve Commercial Operation Date (COD) The capital-intensive power sector also hopes for low-cost borrowings in the Budget.
What are Green Bonds?
Green Bonds are fixed income instruments that are used for raising funds only for clean energy projects. Last year, India's biggest independent clean energy producer, raised as much as USD 500 million through sale of green bonds to overseas investors.
