Industry in Union Budgetbudget 2014

1. A CRITICAL
ANALYSIS ON
“INDUSTRY” IN
UNION BUDGET
2014

2.  PRESENTED BY:
 1) PUJA SAHA
 2) ASHA LAXMI NAIR
 3) AVIJEET KHUNTIA
 4) RISHABH MAITY

3. HIGHLIGHTS
 IT INDUSTRY:
1) The outlay of Rs. 7060 Crores on Smart Cities
2) The e-governance program to inter-link all ministries and departments
3) eBiz platform on 24x7 basis with integrated payment gateway
 POWER INDUSTRY
1) Rs 100 crore for preparatory work of new scheme on thermal power technology
2) Ultra modern solar projects to get Rs 500 crore in Ladakh, Rajasthan
3) Rs 4,200 cr set aside for Jal Marg Vikas project on river Ganga connecting Allahabad to Haldia over 1,620 km
 AVIATION INDUSTRY
New airports in smaller cities in association with AAI and PPP model
 Property Infrastructure Industry
Foreign Direct Investment policy to be setup in a mass scale
 BETTER CONNECTIVITY TO NORTH EAST
New trains and fund for better connectivity to north east is to be set up
 Manufacturing industry
Exemtion in duty in domestically manufactured items.

4. A National Industrial Corridor Authority, with its headquarters in
Pune
The master planning of three new smart cities in the Chennai-
Bengaluru Industrial Corridor region, viz., Ponneri in Tamil Nadu,
Krishnapatnam in Andhra Pradesh and Tumkur in Karnataka
The perspective plan for the Bengaluru Mumbai Economic
corridor (BMEC) and Vizag-Chennai corridor would be
completed with the provision for 20 new industrial clusters
To establish technology centre network to promote innovation,
entrepreneurship and agro-industry, to set up a fund with a
corpus of Rs 200 crore.
The central government has been laying considerable
emphasis on improving connectivity in the land-locked
northeast region.

5. TEXTILE INDUSTRY
•Six more textile clusters to be set up in Bareily, Lucknow, Surat, Kuttch, Bhagalpur,
Mysore.
•Textile mega cluster in Varanashi.
•A Hastkala Academy for the preservation, revival, and documentation of the
handloom/handicraft sector in PPP mode in Delhi
•Rs 30 crore for handloom development
•Rs 10,000 cr fund for helping start-ups
•Kakinada port to be developed with special focus on manufacturing
•Export promotion mission to bring all stakeholders including states under one umbrella

7. IT INDUSTRY

8. The outlay of Rs. 7060 Crores on Smart Cities will not just
push the frontier of urbanisation in India but also create a
new set of markets for tech players
 New employment and wealth creation opportunities will
abound in the start up eco-system with the Rs. 10,000
Crore fund created to boost start ups and SMEs.

9.  The duty reduction (from 4% to 0%) on imported PC components will give
local electronics and computer manufacturing a boost;
 However, the education cess on imported electronics, including PCs and
Smartphones, will challenge consumption growth as it will increase street
prices.
 The spread of the Internet to rural areas will greatly enhance the quality of
life for the communities.
 In this context the National Rural Internet and Technology Mission with the
fund allocation of Rs. 500 Crores. Over time will boost both the IT and the
ecommerce sectors.

10. POWER INDUSTRY

11.  Focus on solving the coal impasse by increasing coal production and
assuring coal supply to power plants makes the government's priorities very
clear to the industry.
 The government's expectations of achieving a sustained growth of 7 per
cent hinges on the growth in the power sector. To achieve the growth
percentage, the power sector must grow above 7 per cent.
 The government's vision to provide 24x7 access to electricity therefore needs
to be further complemented with clarity on issues like addressing the cause
of losses by the State Electricity Boards (SEBs) and incentivising them to
make it profitable.
 It is not however clear in the budget as to how critical enablers such as land
acquisition, acceleration in environmental clearances and removal of
associated bottlenecks would be addressed

12. New airports in smaller cities, towns

13. New airports which will be developed in smaller cities and towns will surely encourage air travel in
the country,
The Airport Authority of India (AAI) will build the airports through public private partnership (PPP)
process. This will lower the air fare and this will open the economic gate to the average class
passengers.
Public Private partnerships could increase and provide greater infrastructure solutions
It will offer faster project completion and reduced delays on infrastructure projects
The Public private partnerships return of investment (ROI) is greater when compare to traditional
methods, due to innovative design and financing approaches

14. Budget can create 5-8 million jobs
in 3-4 years

15.  With the government putting strong emphasis on job creation, measures
proposed in the Union Budget can help create 5-8 million jobs in next 3-4
years across various sectors.
 The sectors that are likely to see an immediate job creation are
infrastructure, transport, power, consumer goods, e-commerce, startups
and tourism.
 National multi-skill programme, 'Skill India', will skill the youth with an
emphasis on employability and entrepreneurship.
 By promoting tourism and agro-based industries, employment opportunities
will be expanded.

16. Real Estate: Boost for property
buyers

17.  The realty sector are expected to improve liquidity for
real estate companies, improve demand for housing
and increase the supply of affordable houses.
 The increase in the tax deduction limit on account of
interest on loans in respect of self-occupied house
property from Rs 1.5 lakh at present to Rs 2 lakh is
expected to improve purchasing power.

18. Northeast to get better rail
connectivity

19.  A total of Rs 5,116 crores has also been earmarked to speed up execution
of several projects in the regions in the current fiscal year, marking a jump
of over 54 per cent from the last year.
 There are 23 projects underway in the north-east, of which 11 are national
projects.
 People hope that the promises will be delivered.
 If delivered, this will open the gate of NE to the rest of the INDIA and more
interaction will groomed up which has lacked in the previous years.

20. AUTOMOBILE SECTOR

21.  The government has adopted a balanced approach towards the
automobile industry, though without any major policy
announcements.
 the excise duty benefits announced in the interim budget have
been extended till December 2014 and any further changes would
depend on the demand in the automotive sector in the next five
months.
 The Goods and Service Tax (GST) is a welcome move and increase
thrust on infrastructure development, especially in the northeast and
rural areas, is likely to increase vehicle ownership there
 the announcement of infrastructure growth like developing 100
smart cities and rural roads will benefit the industry in the long term
 The speeding up of highway projects and development of 8,000 km
of roads will boost medium and heavy commercial vehicles as also
the proposals for the housing and power sectors

22. HOSPITALITY INDUSTRY

23.  While there are welcome initiatives, provisions will take between five to
ten years to impact the growth of domestic and international tourist
travel.
 The introduction of electronic visas and visas-on-arrival initiated earlier
this year can be a major game-changer for Indian tourism with respect
to foreign travel into India.
 The improvement and modernization of railways, proposed new airports
of international standards and the thrust on improved road connectivity
argue well for the hospitality industry.

24.  The sector is desperately in need of incentives in Tier 2
and Tier 3 cities to make hotel investments there
reasonably attractive
 The sector also needs better borrowing terms through
the infrastructure lending route, and relaxed ECB
norms
 The sector needs to be spared from double taxation
through service and luxury tax/VAT at the state and
centre levels.
 Indian hospitality was looking forward to
rationalisation of taxes and ease of raising capital.

25. Budget 2014 aims at low
prices via domestic
manufacturing

26.  The Budget clearly made a case for more domestic
manufacturing by doing away with the inverted duty structure
for many products that made domestic manufacturing
uncompetitive.
 FM has exempted all inputs and components used in the
manufacture of personal computers from the four per cent
special additional duty (SAD) which will develop more domestic
manufacturing.
 This will generate more job opportunities and more domestic
products in low price.

27. CORPORATE
WINNERS

28. CORPORATE WINNERS
 Increase in foreign direct investment cap in the insurance sector to 49
percent from 26 percent now will benefit companies such as ICICI Bank Ltd,
Max India Ltd, Housing Development Finance Corporation Ltd (HDFC) that
have insurance ventures with foreign partners.
 Real estate companies such as DLF Ltd, Unitech Ltd, Phoenix Mills Ltd will
benefit from the proposal to provide incentives for setting up real estate
investment trusts.
 Plan to develop 100 smart cities and increase in allocations to support rural
housing will help developers and housing finance companies such
as HDFC, LIC Housing Finance Ltd and Dewan Housing Finance Corp Ltd.

29.  The proposal to allow manufacturing units to sell products via e-
commerce platforms is likely to benefit the local units of foreign
retailers such as Nike Inc, Marks and Spencer Group and Puma
SE.
 Insurance and asset management companies will gain from a
proposal to increase the tax exemption limit on certain
investments to 150,000 rupees from 100,000 rupees per year.
 Companies such as Larsen & Toubro Ltd will benefit from plans
to increase spending to build roads and ports.

30. CORPORATE LOOSERS

31. A proposal to increase excise duty on cigarettes is
negative for companies such as ITC Ltd and VST
Industries Ltd.
No change in import duty on gold and silver from the
current 10 percent is negative for companies such as Titan
Company Ltd and Gitanjali Gems Ltd. Etc as some had
expected a cut.

32. Discussion
 In Aviation industry: 1) Every Public private partnership has risks involved, and the government will the
pay the price to transfer those risks to the private sector. 2) In PPP, Profits of the projects can
vary depending on the assumed risk, competitive level, complexity and volume of the project being
performed. 3) There is risk that the proposed contracting alternative being offered is not the best
suited option
 In Defense sector, where FDI will come, Government representative must be highly specialized
personnel and contracting experts.
 Land acquisition for different projects maybe a big problem.
 The announced funds are only for the initiation. There is no given pathway for future funds.
 There maybe be problem in recruiting mass labour in upcoming projects.
 Technological advancement and automation is to be updated for mass scale domestic
manufacturing.
 To give a constant power supply, a constant supply and storage of coal and fuel will be a major
problem.
 There maybe many red ribbon problems, many environmental PILs which will slow down the growth
process.

33. Conclusion
 The Budget looks pragmatic and realistic and was in line with expectations.
 Defined focus on domestic manufacturing & infrastructure, investment
allocations to build Smart Cities & to increase broadband penetration of
Indian villages, liberalization of FDI in ecommerce sector, promised actions
to finalize GST this year etc., are all steps in the right direction and
indicative of a positive start to a long-term process.
 To conclude, this Budget is quite optimistic with clear roadmap ahead and
it will be quite interesting to track how it plays out eventually in the sector of
INDUSTRY.