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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.

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Union Budget 2014-15: Impact on Sectors

  1. 1. Union Budget 2014-15: Impact on Sectors
  2. 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. 3. Real Estate
  4. 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. 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. 6. Financial Sector
  7. 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. 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. 9. Auto Sector
  10. 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. 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. 12. FMCG
  13. 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. 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. 15. Information Technology
  16. 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. 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. 18. Metals & Mining
  19. 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. 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. 21. Power
  22. 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. 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. 24. Capital Goods
  25. 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. 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. 27. To learn more about the Union Budget, click here.
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