REPORT ON
UNION BUDGET OF
FINANCIAL YEAR
2013-14
Submitted by:
RAJESH NARULA
Roll No-435
Section-M4
HIGHLIGHTS OF UNION BUDGET 2013-14
Zero duty on import of ships, vessels
Duty free limit for Gold rose to Rs. 50,000 in ca...
Defence allocation has been increased to Rs 236000 crore in the upcoming fiscal,
marginally up from Rs 195000 crore this y...
To increase refinancing of SIDBI to help MSME
Funds to tech incubators by corporate will be considered as CSR expenditure
...
FY 2013-14 total expenditure at Rs 16.65 lakh crores
Foreign investment instrumental in tackling CAD
Rs 13215 cr for mid-d...
ANALYSIS
Automobile
Broadly Neutral for OEMs.
Marginally negative for Mahindra and Mahindra and Tata Motors as higher exci...
FMCG
Increase in the budget of rural development program is favorable for FMCG players like
HUL, Dabur India, Marico, etc ...
Oil & Gas
Any increase in domestic natural gas price would be positive for oil and gas producers
including Reliance Indust...
CONCLUSION
We believe that the Finance Minister has delivered a budget that suggests economic stability
supersedes politic...
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Report on union budget of financial year 2013

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Report on union budget of financial year 2013

  1. 1. REPORT ON UNION BUDGET OF FINANCIAL YEAR 2013-14 Submitted by: RAJESH NARULA Roll No-435 Section-M4
  2. 2. HIGHLIGHTS OF UNION BUDGET 2013-14 Zero duty on import of ships, vessels Duty free limit for Gold rose to Rs. 50,000 in case of a male passenger and Rs. 1 lakh for female passengers. One-time Amnesty Scheme for service tax due from 2007: FM To set aside '9,000 cr as compensation to states for CST: FM To impose service tax on all AC restaurants: FM Nirbhaya Fund for women safety Royalty tax hiked from 10% to 25%. Transactions on immovable properties are usually undervalued. This justifying his move of imposing TDS of 1% on land deals over Rs 50 lakh. High-end smart phones to get more expensive. SMEs allowed to listed on MSME exchange without making a public offer SED on cigarettes hiked by 18%; cigars and cheroots’ too Custom duty on imported motor vehicles hiked To up import duty on set-top boxes to 10% from 5% To up import duty on luxury cars to 100% from 75%: FM Coal blending only solution FY2013-14 non plan expenditure at Rs 12 lakh crore TDS at 0.1% of land deals over '50 lakh: FM To reduce STT on equity futures, MF units: FM CTT to be introduced in non-agri commodities in futures @0.01% Extend 80IA by 1 year: FM Tax holiday for power plants extended to March 2014: FM DDT surcharge raised to 10% from 5% No room to give away tax sops 5-10% surcharge on companies with income over 10 cr To continue with education cess of 3% No case to revise direct tax rates, slabs: FM Revenue deficit at 3.9% for FY13: FM 10% surcharge on people whose taxable income above Rs 1 cr per year FY 14 Fiscal deficit at 4.8%; revenue deficit at 3.3% Youth skill development gets Rs.1000 cr Plan expenditure for FY14 at 5.55 lakh crores 294 more cities to be connected by FM Radio Rs 1000 cr for ensuring safety and dignity of women FIIs may hedge forex exposure through ETFs
  3. 3. Defence allocation has been increased to Rs 236000 crore in the upcoming fiscal, marginally up from Rs 195000 crore this year. Aligarh, Varanasi universities get Rs 100 crore. Rs 6275 crore to Ministry of Technology, Rs 5216 crore to Department of Space, Rs 5280 crore to Department of Energy. These amounts are substantial increases. Generation based incentives for wind energy projects Low cost finance provided for viable renewable energy projects To expand private FM radio to 294 cities Chennai- Bengaluru Industrial corridor: DIPP and Japan's JICA preparing plan Power transmission system from Srinagar to Leh; Rs 226 crore provided in current Budget 839 new fm channels to be auctioned Low cost finance provided for viable renewable energy projects Generation based incentives for wind energy projects Insurance, pension companies can trade directly in debt segment in stock exchanges Pension, insurance funds can invest in ETFs 6275 cr for ministry of science and technology Govt plans to spend Rs 16.65 lakh crore for the coming fiscal year FIIs to be allowed in currency derivatives segment SEBI to simplify procedures for FIIs, unify categories for FIIs Rs 2000 crore for Urban Housing fund Regulatory authority for the road sector Dedicated debt section in Stock exchanges KYC of banks sufficient to acquire insurance policies Insurance firms to open branches in tier iii cities without IRDA approval Rs 2000 cr for urban housing fund Social security package for unorganized sector Congratulates SEBI for regulation of markets 14,000 crore for capital infusion for public sector banks Social security package for unorganized sector Banks to be permitted to act as insurance brokers By Oct 2013 to get approval to constitute panel on transaction costs, financial policies India's first woman's bank as public sector bank; Rs 1000 cr as initial capital Bank for women Rs 14,000 cr to public sector banks for additional capital infusion to meet BASEL III requirements by March 2014 Public sector banks: 12517 cr - additional capital for banks by March 2013 Rs 500 cr to SIDBI to act as guarantee to a factoring fund Rs 24,000 cr for textile technology upgradation Additional 96 cr in 2013-14 for ministry of textiles for Interest Subvention Handloom sector is in distress--- working capital -term loans - concessional rate of 6%
  4. 4. To increase refinancing of SIDBI to help MSME Funds to tech incubators by corporate will be considered as CSR expenditure Natural Gas pricing policy to be reviewed To issue inflation indexed bonds/certificates Housing loans up to Rs 25 lakh to be allowed additional deduction of Rs 1 lakh PPP policy with Coal India as partner to increase coal production Worry about coal imports; will rise to 185 mn tons in 2016-17; We must reduce dependence on imported coal Some companies can issue tax free bonds up to Rs 50,000 cr for infra To raise Rs 25,000 cr via tax-free bonds in FY 13:FM Rs 5000 cr to be made available to NABARD to finance agri-produce storage 3000 km of road projects will be awarded in first six months of FY14 Inflation Indexed bonds to be introduced to wean people's savings away from gold Tax benefit in RGESS for 3 years In mutual funds, listed stocks, Rs 10-lakh to 12 lakh income limit Rajiv Gandhi Equity Savings Scheme to be liberalized Rs 10,000 cr additional for food security bill in FY 2014 Infra debt funds for investment in infrastructure 55 lakh cr for infrastructure in the 12th plan 4% farm loan scheme extended to private sector banks NABARD to give funds to build godowns, warehouses and cold-storage Rs 27049 Cr for Ministry of Agriculture, 22% Y-oY Rs 250 crore given away to Food security mission Coconut rejuvenation scheme Rs 75 cr to be extended all over Kerala Farm credit target at Rs 7 lakh crore India not unaffected by what is happening in the global economy, says Chidambaram China, Indonesia: Only the two economies growing faster than India No reason for gloom or pessimism, asserts Chidambaram Greater worries on CAD Excessive import of gold, oil, slowing of exports a concern $75 bn to finance CAD-- FDI, FII, external commercial borrowing the options Says opening up economy is a must to contain CAD Battle against inflation should be fought on all fronts Food inflation is worrying Steps to augment the supply side for food India economy has experienced slowdown after 2010 Plan expenditure in 2013-14 to go up 29% Budget to create opportunities for youth, to give them decent jobs, income, safety, security of households Adequate funds to benefit women, children and minorities Total expenditure is 96% of the earlier budgeted expenditure
  5. 5. FY 2013-14 total expenditure at Rs 16.65 lakh crores Foreign investment instrumental in tackling CAD Rs 13215 cr for mid-day meal scheme Clean Drinking water Rs 15, 260 cr JNNURM- continued in 12th plan- Rs 14873 cr, 10000 buses to be purchased especially by Hill states Rs 33,000 cr allocation for MGNREGS 46% hike in Rural Development Spending Rs 500 crore for crop diversification projects Budget presentation begins
  6. 6. ANALYSIS Automobile Broadly Neutral for OEMs. Marginally negative for Mahindra and Mahindra and Tata Motors as higher excise duty will be passed on to the customers which may impact demand. Marginally positive for Tata Motors and Ashok Leyland. Positive for Tata Motors and Ashok Leyland as it will revive demand for buses. No materials impact on stocks in our coverage universe. The concession available on specified parts of electric/hybrid vehicles would promote the manufacture, sale and usage of such vehicle in the country. The increase in allocation under rural development program in positive for OEMs having strong rural presence, such as Mahindra and Mahindra, Maruti Suzuki and HeroMoto Corp. No major impact on Maruti Suzuki (royalty at 5.2% of sales in FY2012) as applicable rate will be the rate of tax stipulated in DTAA with Japan, which stands at 10%. Banking Capital infusion of Rs. 14000cr in PSU banks will enable it to grow at a healthy rate and move progressively towards meeting the more stringent tier-I CAR requirements of Basel-III. Interest subvention for short term crop loan retained for PSU banks, RRBs, Co- operative banks and private banks will create a level playing field for private banks and encourage them to lend in these segment. Apart from being a positive for the insurance companies, it will also slightly aid the fee income profile of banks. An additional deduction of Rs.1lac under Section 24 for taking home loan from bank or housing finance company. It will aid retail loan growth of these companies (particularly for companies operating in lower ticket sizes of loans like LIC Housing Finance, GIC Housing Finance, Dewan Housing Finance, etc. Capital Goods Higher investment in plant and machinery would encourage companies to revive stalled projects and make new projects; thus positive for all companies in Capital Goods Sector. Cement Reduction in custom duty in bituminous coal is marginally positive for cement companies, as it would reduce fuel costs. Additional income tax deduction of Rs.100000 towards interest for home loan, it is expected to boost cement demand from the housing cement.
  7. 7. FMCG Increase in the budget of rural development program is favorable for FMCG players like HUL, Dabur India, Marico, etc as it would increase income in the hands of rural consumers, thereby boosting consumption. Cigarette makers have in the past exhibited ability to increase prices whenever there was a hike in excise duty. Thus, a hike in SED on cigarettes is not expected to impact the profitability of cigarette manufacturing companies like ITC, although it might affect volumes in the near term. Infrastructure Issuance of tax free bonds through various institutions is positive for E&C players as it would boost infrastructure development across railways, port, housing and highways, by facilitating funds rising from various government bodies that award infrastructure projects. Positive for all road developers as it would provide more opportunities on the order inflow front to them. Positive for E&C companies such as IVRCL and Va Tech Wabag, as it would create more opportunities in the water and irrigation segment. Rate of tax on interest payments on external commercial borrowings is maintained at 5% for infrastructure sector companies. It would reduce borrowing costs for companies and hence, and would help fuel infrastructure projects with low-cost funds. IT Higher allocation to education sector would boost business opportunities for education companies. Sarva Shiksha Abiyan will provide growth opportunities for companies focused towards formal and vocational education such as Educomp solution, Everonn Education, Core Education Technologies and NIIT. Media Government proposes new FM radio channels are positive for radio operators such as Entertainment Network India (ENIL), Sun TV etc. Custom duty increased from 5% to 10% is positive for domestic STB manufacturers. Metals Public-Private Partnership (PPP) with Coal India, to raise production. This would be positive for Coal India over the medium to long-term as it could help Coal India to increase the production and off takes rate of coal. Proposal to levy 4% excise duty on silver production. This would be slightly negative for Hindustan Zinc. Proposal to levy 10% export duty on bauxite. This would be marginally positive for Sterlite Industries as it increases domestic availability of bauxite for producing aluminium.
  8. 8. Oil & Gas Any increase in domestic natural gas price would be positive for oil and gas producers including Reliance Industries (RIL), ONGC, Oil India and Cairn India. Issue a policy on shale gas exploration and production. This would be positive for gas producers including RIL, ONGC, Oil India and Cairn India. Move to revenue sharing model for gas from profit sharing model. This will provide predictable for government’s share of earning from gas blocks; it could potentially speed up new projects. Pharmaceuticals The Health and Family Welfare Ministry has been allotted Rs.37330. The Finance Minister also proposed on allocation of Rs. 4727cr for medical education, training and research. It will benefit all the companies in the sector. 15% allowance for investment in Plant & Machinery above Rs. 100cr. It will benefit all the companies in the sector. Power Positive for companies which are into wind power generation. Negative for imported coal based power plant, since it increase the cost of imported coal. Medium to long term positive for the power generation companies since Public-Private Partnership with coal raises production. Real Estate If a TDS of 1% is imposed on the value of the transfer of immovable properties (except for agriculture land) with tick size of over Rs.5000000, there will be no material impact. An additional deduction of Rs.100000 under Section 24 (over and above Rs. 1.5lakh) will be available for an individual taking loan up to Rs. 25lacs for his first home from a bank or housing finance company. This would continue to benefit developers such as HDIL, Anant Raj and Prestige Estate Projects having low cost affordable housing projects. Telecom The government is considering auction of spectrum in the 800MHz, 900MHz and 1800MHz bands. But most of it is already factored in the stock price. Excise duty on mobile phones priced above Rs.2000 raised to 6% from 1% currently would result to a marginal increase in mobile handset price.
  9. 9. CONCLUSION We believe that the Finance Minister has delivered a budget that suggests economic stability supersedes political considerations. We regard it as a prudent but non-reformist budget. Despite the many misses, delivering on the fiscal deficit target is a key positive. We believe that it is crucial for averting a sovereign rating downgrade and thereby ensuring stability of capital flows to finance the current account deficit. Credibly lower fiscal deficit target for FY2014 is also expected to provide monetary policy with more headroom to ease policy rates and crowd in private sector investment. Going forward, we believe that maintaining the momentum on reforms beyond the Budget is pertinent to tackle structural supply side constraints in the economy, particularly in the mining and power sector, for revival of growth in the economy.

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