Only one day left to go before Finance Minister Arun Jaitley announces Union Budget 2017. India Inc has readied its wishlist and is eagerly waiting to find out how things unfold on February 1, 2017. Through the budget, the government is expected to address the problems created by demonetisation. For the first time, we will witness the merger of the Railway budget with the Union budget, and the change of date of the budget announcement from end February to February 1.
IT Industry is not looking forward to any significant incentives, barring few, like tax benefits, deductions on R&D expenditure and accelerated depreciation on IT and telecom hardware products. Angel Broking expects the Budget to be broadly neutral for the sector.
Infrastructure is expected to be the key focus of Budget 2017. The brokerage is expecting a 30% increase in budgetary allocation to the Roads and Highways Ministry. It may also increase 10% allocation to Ministry of Rural Development (schemes focused on rural housing, roads and bridges), and Ministry of Housing and Poverty Alleviation. 20% surge in allocation towards Urban Development Ministry (covers Smart City & AMRUT scheme) is also expected.
FMCG has not seen any stellar growth over the last two years. They attribute it to the slowdown in the rural market. Therefore the sector is expecting the government to invest more money into marquee programs such as the Pradhan Mantri Krishi Sinchai Yojana, Rashtriya Krishi Vikas Yojana, Pradhan Mantri Gram Sadak Yojana, etc. It also wants the government to lower income tax rates to boost the purchasing power of consumers.
Realty sector is yet to recover from the effects of market slowdown which occurred a few years ago. The government has taken several measures to promote its growth, but any significant impact is yet to be seen. From upcoming Union Budget, the industry wants the government to increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. Last year, the government increased the tax deduction for home loan takers under section 24, but It is also expecting 10% increase in allocation to the implementation of ‘Housing for All’, 2022 scheme and other housing schemes, and some clarity on capital gain tax in the hands of Real Estate Investment Trust.
The steel industry has been reeling under immense stress from import glut and predatory pricing for the last couple of years. The brokerage doesn’t expect the government to make any major announcements for the metals sector as it has recently taken a few measures like imposing Minimum Import Price (MIP), extending safeguard duty on steel and making BIS (Bureau of Indian Standards) mandatory on steel products. It has also imposed anti-dumping duty on certain varieties of steel from China and the European Union.
Lately, with OPEC agreeing to cut production, prices have stabilised with a positive bias. The government should consider changing the various income tax norms about the tax holiday for companies and provide incentives for the shift towards cleaner fuel for downstream companies. The oil and gas industry desires more pricing freedom for domestic gas production to link oil prices to the market. The sector also wants exploration activities to be exempted from service tax and reduction in cess rate.
At the beginning of previous Financial Year, it was forecasted that automobile sector will witness a robust growth. However, soon after demonetisation came into effect, the industry saw a decline in sales across several segments. So, the auto sector is expecting some measures from the government to boost growth. Excise duty on SUVs and sedans is quite high, which can be lowered by the government. The sector also expects the government to lower personal income tax rates to give more buying power to the consumers.
The increase in number of NPAs and low credit growth has put a lot of pressure on the banking sector in India. The banking sector is hoping that our Finance Minister focusses on CAPEX revival and focus more funds towards infrastructure development. The government can ease the pressure on banking industry by allocating more funds for infrastructure, housing and urban development. The government should also increase capital infusion in public sector banks to improve their capital adequacy position.
Healthcare industry is mostly unlikely to benefit from events like budget unless the finance minister announces tax benefits either on R&D or corporate front. Other benefits, in the form of indirect sops such as increased budgetary allocation for healthcare, will provide some boost to the sector. However, the sector has several expectations from the government. India has one of the lowest healthcare expenditure ratios in the world. So, the industry wants the government to boost investment in the healthcare sector to upgrade community healthcare centres, increase the number of government-funded healthcare institutions and improve quality and reach of medical education.
The power sector has seen robust growth in the past few years. The government has taken several measures like the implementation of UDAY, amendments in National Electricity Act, new solar RPO targets for states. Despite all these measures by the government, there are several issues which need to be addressed. The sector expects the government to take steps to promote the renewable energy sector by extending various tax incentives. The government should create stressed asset revival fund to help out stressed power plants. There is need to bring some interventional policies to further boost the growth rate.
Government’s steps towards digitisation and innovation is taking education to remote locations of rural India. However, the education industry still feels the need of financial and statutory incentives. The government also needs to allocate more funds towards the development of technology towards education to enhance the quality of education. Standardisation of curriculum across states and boards is also necessary.
So, here is how various sections of the economy have set their expectations from Union Budget 2017. It will be interesting to see which hope becomes a reality. Stay tuned with us and get all important updates when the budget is revealed tomorrow.