The interim budget for 2019 had some positives for farmers and the salaried class but also increased concerns about fiscal stability. Key points announced include a Rs. 75,000 crore package for small farmers, full tax rebate for income up to Rs. 500,000, and higher tax deductions. However, the budget revised the fiscal deficit target to 3.4% of GDP and announced new spending measures, which could put pressure on government finances going forward and impact inflation. The markets reacted cautiously to the budget announcements.

1. Impact Analysis
The Union Budget, 2019; Key Highlights
The Government’s Account Statement
• Fiscal Deficit: 3.4% of GDP
• Average inflation: 4.6% of GDP; inflation in December 2018 was down to 2.19%
• Current Account Deficit: 2.5% of GDP for FY2019
• Foreign Direct Investment (FDI) during the last 5 years: ~$239 billion.
• Net Market Borrowing: Rs.4.7trn
Inflation highlights:
• The government has fallen short of Good & Services Tax (GST) collections by around Rs.1 trillion for this year but
Rs.500 billion has been made up by higher direct tax collections
• Full tax rebate is given to individuals by exempting income of up to Rs.500, 000/- from tax. Therefore, for those having
gross income of up to Rs.650, 000/-, may not be required to pay any income tax if they make investments in provident
funds, specified savings, insurance etc.
• Additional tax benefit is provided to salaried persons, standard deduction is being raised from the current Rs.40, 000 to
Rs.50, 000
• Tax Deducted at Source (TDS) threshold on interest earned on bank/post office deposits is raised from Rs.10,000 to
Rs.40,000.
• Corporate tax collections in FY19RE is higher than budgeted; 13% growth is estimated in FY20
Global Economy
Data Source: THE FINANCE BILL, 2019 dated February 1, 2019,
Taxation
• Government increased its expenditure by around 13%, largely driven by spending on providing income to small farmers
summing up at Rs.800 billion
• Under “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)”, vulnerable landholding farmer families, having cultivable
land up to 2 hectares, will be provided direct income support at the rate of Rs.6,000 per year in three equal instalments
• For poor and backward class people, government has now ensured 10% reservation in educational institutions and
Government services.
• Rs.60,000crores have been allocated under MGNREGA in BE 2019-20 for rural development
• The government has fixed the minimum support price (MSP) of all 22 crops at minimum 50% more than the cost for
farmer's progress and its increase in income
• Rashtriya Gokul Mission for Animal Husbandry and Fisheries sector has allocated Rs.750crore in the current year
• National Disaster Relief Fund (NDRF), will provide the benefit of interest subvention of 2% and prompt repayment
incentive of 3% for the entire period of reschedulement of farmer loans.
• Medicines at affordable prices are made available under Pradhan Mantri Jan Aushadhi Kendras
• Pradhan Mantri Gram Sadak Yojana, construction of rural roads has been tripled. 15.80 lakh habitations out of a total of
17.84 lakh habitations have already been connected with pucca roads
Rural Economy Focus
• To ensure clean banking, Banking Reforms and Insolvency and Bankruptcy Code (IBC), the 4Rs approach of
recognition, resolution, re-capitalisation and reforms has been followed.
• National Programme on 'Artificial Intelligence„ has been envisaged to take the benefits of Artificial Intelligence and
related technologies to the people
• In order to empower MSMEs and Traders, a scheme of sanctioning loans up to Rs.1crore in 59 minutes has been
launched.
Other Initiatives

2. Interim Budget 2019 held a few good surprises for the farmer community and the salaried classes but was largely in line
with market expectations. The Budget, the last one to be presented by the NDA government before the April and May
2019 General Elections, saw the markets ending a volatile session, up by about half a per cent.
The budget is a pro-rural, housing and middle-class centric one. Interim Finance Minister Piyush Goyal announced a Rs
75,000 crore package (at Rs 6000 a year) for small and marginal farmers who own up to 2 hectares of land. This is
expected to provide a boost to rural consumption and relief to rural distress as it could benefit about 12 crore farmers.
However, this additional recurring expenditure could be a concern for the market as it could put pressure on the
government‟s fiscal situation going forward.
On the fiscal front, the govt revised its FY19 fiscal deficit expectations to 3.4% from 3.3% earlier while continuing to
maintain the current account deficit (CAD) at 2.5%. The government also indicated at simplification of the direct tax
system which could boost tax collections going forward.
For the salaried classes, the government, in an unexpected move, announced full tax rebate for those earning an income
of upto Rs 5 lakhs. Further, the govt announced an increase in TDS (tax deducted at source) limits for bank & post office
deposits to Rs 40,000 and hiked standard deduction for the salaried to Rs 50,000. All these measures could help boost
consumption in the economy and benefit companies in the auto and consumption sector.
We maintain our neutral stance on the equity markets and would take cognizance of the upcoming general elections
(April/May) as the key trigger for the rest of the year. Policy decisions by the RBI, apart from global factors such as end of
the bond-buying programme by central banks globally, escalation of trade-wars, pace of foreign inflows, among others,
would be other significant triggers for the market.
We believe we have entered the accumulation phase of investing as most of our market triggers are in the moderate zone,
prompting us to move to a neutral zone from cautious. Equity accumulation, particularly mid-and smallcaps, should be in a
staggered manner through SIP/STP. For lumpsum, we recommend asset allocation and/or largecap-oriented schemes.
Themes such as banking and infrastructure could be explored in 2019, post the recent oil price correction. With valuations
fully priced in, special situation themes could also play out during 2019.
Equity: Our Analysis & Outlook
Scheme Recommendations
Pure Equity
Schemes ICICI Prudential Bluechip Fund
ICICI Prudential Multicap Fund
These schemes are positioned
aggressively to gain from recovery in
the economy. These Schemes aim to
generate long term wealth creation.
Long-Term SIP
Schemes
ICICI Prudential Value Discovery Fund
ICICI Prudential Smallcap Fund
ICICI Prudential Midcap Fund
ICICI Prudential Large & Mid Cap Fund
These schemes aim to generate long
term wealth creation over a full market
cycle.
Asset Allocation
Schemes
ICICI Prudential Balanced Advantage Fund
ICICI Prudential Equity & Debt Fund
I ICICI Prudential Multi-Asset Fund
ICICI Prudential Equity Savings Fund
ICICI Prudential Regular Savings Fund
These schemes aim to benefit from
volatility and can be suitable for
investors aiming to participate in
equities with low volatility.
Thematic /
Sectoral
Schemes
ICICI Prudential Infrastructure Fund
ICICI Prudential Banking & Financial Services
Fund
ICICI Prudential India Opportunities Fund
Investors could invest in these thematic
schemes for tactical allocation. It would
be a high risk investment option.
Impact Analysis

3. Interim Budget 2019 had a few good surprises for the farmer and salaried community but made debt markets nervous on
account of the announcement of a slew of packages as concerns about the worsening fiscal situation abound. The 10-yr
G-sec, which was volatile during the second half of 2018, ended the day at 7.61%.
We believe the Budget is mildly expansionary and could lead to recurring expenditure for the government and may create
pressure on the government‟s fiscal condition. However, from the point of view of the rural economy, the government‟s
announcement of a Rs 75,000 crore package for small and marginal farmers (with landholdings up to 2 hectares of land)
could provide relief to the distress in the agriculture sector.
Fiscal deficit target for FY19 being revised to 3.4% could see some upside risk to the fiscal next year. Further, the
announcement of a slew of packages for the farmer community and sops for the middle class could push inflation higher
and cause the RBI to change its stance of policy easing going forward. However, the current inflation levels at 2.5%, being
within the RBI‟s comfort zone, could still prompt action from the central bank.
The rally in duration seen in the last couple of months has put yields at the lower end of our estimates. So going forward,
we recommend going long on low/short duration schemes and short on long duration schemes. We have also moved our
outlook to the neutral zone from cautious as our model parameters have moved into the orange zone. Therefore, investors
could look at gradual incremental addition of duration.
Next year, the bond market could see higher borrowing and there is a possibility that the RBI may not be present in a big
way. Bond yields could rise higher on these supply worries along with uncertainty about elections later this year.
Worries on the supply-side, fiscal deficit, and election uncertainty could create pressure on the longer end of the yield
curve.
We would recommend low/short duration schemes which could mitigate interest rate volatility, accrual schemes which
provide better carry, and dynamic duration schemes which are flexible enough to benefit out of interest rate volatility. We
remain watchful on any fiscal slippages, reversal in prices of any perishable food items, uncertainty regarding global
events and escalating trade tensions between US and China.
Debt: Our Analysis & Outlook
Scheme Recommendations
Cash Management
Solutions
ICICI Prudential Savings Fund
ICICI Prudential Floating Interest Fund
ICICI Prudential Ultra Short Term Fund
These schemes aims to
benefit from better risk
adjusted returns
Short Duration
Schemes
ICICI Prudential Short Term Fund
ICICI Prudential Banking & PSU Debt Fund
ICICI Prudential Corporate Bond Fund
These schemes aims to
benefit from mitigating
interest rate volatility
Accrual Schemes ICICI Prudential Credit Risk Fund
ICICI Prudential Medium Term Bond Fund
These schemes aims to
benefit from capturing
yields at elevated levels
Dynamic Duration
Scheme
ICICI Prudential All Seasons Bond Fund This scheme aims to
benefit from volatility by
actively managing duration
Impact Analysis
Note: The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined
by dividing the present value of the cash flow by the price.

4. Disclaimer
Scheme Risk-o-meters
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
None of the aforesaid recommendations are based on any assumptions. These are purely for reference and the investors are requested to consult
their financial advisors before investing. All data/information used in the preparation of this material is specific to a time and may or may not be
relevant in future post issuance of this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of
updating any data/information in this material from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI
Prudential Trust Limited (the Trust) and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature,
including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of
this material in any manner. Nothing contained in this document shall be construed to be an investment advice or an assurance of the benefits of
investing in the any of the Schemes of the Fund. Sectors/stocks mentioned in the article do not constitute any recommendation and the Fund
through its schemes may or may not have any future position in these sectors/stocks. Recipient alone shall be fully responsible for any decision
taken on the basis of this document.
Impact Analysis

5. Scheme Risk-o-meters
Impact Analysis

6. Scheme Risk-o-meters
Impact Analysis