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Union Budget 2014-15: Impact on Sectors

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The Union Budget, presented by finance minister Arun Jaitley on 10th July 2014, had much to offer to various sectors. View our presentation to know the impact on different industries.

The Union Budget, presented by finance minister Arun Jaitley on 10th July 2014, had much to offer to various sectors. View our presentation to know the impact on different industries.

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  • 1. Union Budget 2014-15: Impact on Sectors
  • 2. Introduction • The Union Budget, presented by finance minister Arun Jaitley on 10th July 2014, had much to offer to sectors across board. • Here’s a look at the impact on different industries:
  • 3. Real Estate
  • 4. What has changed? • The housing and real estate sector is the biggest beneficiary of the budget. • The budget announced multiple measures like development of 100 smart cities, foreign direct investment in realty – especially in low-cost housing, tax concessions for Real Estate Investment Trusts (REITs), increase in allocation for the National Housing Bank, and allowing slum development as one of the activities under Corporate Social Responsibility. • These will directly affect the real estate and construction sector positively.
  • 5. What will be the impact? • In addition, higher tax-exemption on home loan interest could also help increase demand for houses. • These are much-required measures to the sector, which has been affected by poor demand and high costs.
  • 6. Financial Sector
  • 7. What has changed? • Banks are the second-biggest beneficiary after real estate, especially public-sector banks. • The budget allowed for banks to raise capital by selling government stake and hiked the foreign direct investment limit in the insurance sector to 49%. • It also allowed banks to raise long-term funds for lending to the infrastructure sector with minimum regulatory obligations such as CRR, SLR and PSL.
  • 8. What will be the impact? • This will help banks raise funds more easily for infrastructure projects and reduce financial burden. • Increase in tax exemptions on investments too could see funds flowing to the financial sector through increased savings. • However, the hike in the target of credit flow to the farmers from Rs 7.0 trillion in FY14 to Rs 8.0 trillion in FY15 could have a negative impact on PSU banks as they may be forced to lend more.
  • 9. Auto Sector
  • 10. What has changed? • The finance minister had already extended excise duty concessions to the auto sector before the budget. • There were no direct measures for the sector in the speech.
  • 11. What will be the impact? • However, measures like investment allowance benefit to the small and medium enterprises, reduction in basic custom duty on battery scrap, and reduction in excise duty on LED raw materials, will positively affect auto ancillary companies and suppliers. • The budget’s concentration on improving agriculture too is positive for the auto sector. • This is because, a betterment in agriculture will improve rural income, which could lead to an increase in demand for cars and two-wheelers.
  • 12. FMCG
  • 13. What has changed? • The biggest impact on FMCG companies will be because of increased personal savings due to changes in income tax exemptions.
  • 14. What will be the impact? • With more money in hand, demand is expected to be fuelled, which will in turn lead to rise in sales for companies. • Custom duty reductions on chemicals and petrochemicals could also benefit soap companies as costs would fall. • The hike in excise duties on cigarettes could hamper ITC. • However the impact is expected to be marginal as demand usually remains largely unaffected by price changes.
  • 15. Information Technology
  • 16. What has changed? • The government has set aside Rs 10,000 crore to fund start-ups and entrepreneurs. • It has also concentrated on improving technology in governance.
  • 17. What will be the impact? • This is a big positive for the sector as it will lead to increase in the usage of technology, thus providing more business to Indian companies.
  • 18. Metals & Mining
  • 19. What has changed? • Many measures were announced that would positively impact the metals & mining sector. • These include sustained infrastructure thrust to stimulate steel demand; promotion of housing for low-medium income groups; reviving road sector by setting a target of constructing 8,500kms in FY15; and emphasis on setting up of 16 new ports. These will lead to additional demand for metals.
  • 20. What will be the impact? • The changes in indirect taxes like increase in export duty on bauxite from 10% to 20%, reduction in import duty on dolomite from 5% to 2.5%, and increase in custom duty on imported flat- rolled products of stainless steel from 5% to 7.5% have positive implications for the sector as they discourage imports and encourage domestic companies. • The increase in custom duty on coking coal from nil to 2.5%, however, could negatively impact major steel producers like JSW Steel, Tata Steel and Sail, which are dependent on imports.
  • 21. Power
  • 22. What has changed? • The finance minister proposed an extension of the sunset date for power sector undertakings to on or before March 31, 2014 for claiming 100 per cent deduction of profits for 10 years. • This move is a positive move but was largely expected.
  • 23. What will be the impact? • The budget also proposed an increase in import duty on coal to fuel domestic coal supply. • However, this could negatively impact power producers largely dependent on coal imports. • Wind power developers would be positively impacted by the move to reduce duties on wind power components to 5% from 10% earlier.
  • 24. Capital Goods
  • 25. • Companies engineering equipment and machinery would be largely benefited by the budget. • It announced an extension of investment allowance on new plant and machinery. • The government also extended the 10-year tax holiday to power utilities. This could fuel demand for machinery and equipment. What has changed?
  • 26. What will be the impact? • The increase in the government’s defence spending, as well as the hike in foreign direct investment (FDI) in the sector to 49%, will have positive implications. • The increase in infrastructure focus could also be good news for the capital goods sector.
  • 27. To learn more about the Union Budget, click here.
  • 28. Get eBooks Website Thank You Open a DEMAT Account
  • 29. Disclaimer: Kotak Securities Limited.Reg Off.: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400051. CIN: U99999MH1994PLC134051, Tel No.:+22 43360000, Fax No.: +22 67132430. website:www.kotak.com. Correspondence Address: Infinity IT Park, Bldg. No. 21, Opp Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Tel no:66056825. SEBI Reg Nos: NSE INB/INF/INE230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCXSX INE 260808130/INB260808135/INF 260808135, NSDL IN-DP- NSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance officer- Mr. Sandeep Chordia. (Telephone Number 022 6605 6825, Email idks.compliance@kotak.com). In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: service.securities@kotak.com • For Demat Account related queries:ks.demat@kotak.com. Alternatively, you may feel free to contact our customer service desk at our toll free numbers18002099191 or 1800222299. You may also call at30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at ks.escalation@kotak.com and if you feel you are still unheard, write to our customer service HOD atks.servicehead@kotak.com Investments in securities are subject to market risk; please read the SEBI prescribed Combined Risk Disclosure Document prior to investing. Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the like and take professional advice before investing. We and our affiliates, officers, directors, and employees worldwide may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company (ies) discussed herein or act as advisor or lender / borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions The content/illustrations shared in the presentation is based on information available from the past budget(s)

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