Dear All,
1) The fiscal deficit and borrowing numbers are too optimistic. Chances are, these numbers may be higher than what is being projected. The growth target also looks difficult to achieve.
The only good thing in the budget is the direct cash subsidy, but it is not very sure as to when it will be implemented.
2) In general, the Budget has recognised the need for improving rural credit by proposing to create a 1-bln-rupee equity fund especially for microfinance sector and creating another 5-bln-rupee fund for rural and micro credit groups. Another major boost would be increasing the agriculture credit target to 4.75 trln rupees. This will enhance the credit flow to the rural economy. Banks may use microfinance companies for part of this credit delivery. The measures to control the fiscal deficit will boost the economy.
3) The government's aim to create 4 mln tn more food grain storage by Mar 2012 is a good development, but the country is still substantially short of what is required.
4) Hiking ad-valorem export duty to 20% on iron ore across categories will result in a fall in exports, which in turn will cause a decline in domestic output. As fines and lumps are mined together, there will be lower availability of the commodity, leading to a rise in prices in the domestic market.
5) The finance minister should have given more focus on the public-private partnership model for creating public infrastructure projects, since there are achievements and failures in that model in the last 4-5 years. Water is an important area, and the budget has not said much on that.
6) Hike in iron ore export duty to 20% is the highest so far, since the time the duty was levied in 2007. This move is going to slow down mining activity of iron ore fines in Goa, which may result in reduction in state royalty, in turn dragging Goa's revenue.
7) The most encouraging part of the Budget is that the government is going to implement Goods and Services Tax. This will help eradicate the menace of black money from the agriculture sector and create a level-playing field for agriculture industries.
8) Foreign individual investors earlier could buy units of equity fund schemes through foreign institutional investors route only. Now, they will be able to invest directly in equity fund schemes, which is very positive for mutual fund industry.
There will be capital inflows and foreign individual investors will now be comfortable in investing in equity fund schemes. However, detailed guidelines are awaited to draw final conclusions on the move.
9) For the information technology sector, nothing much was expected and the finance minister's decision on not extending STPI (Software Technology Park of India) tax incentive has already been taken care of by creating infrastructure in SEZs.
10) The Budget announced key positive measures for the stainless steel sector which were much awaited. Completely exempting stainless steel scrap from customs duty was a pleasant surprise. Also, cut in customs duty on ferro-nickel to 2.5% from 5% is a welcome move as nickel prices have more than doubled in the last one year, and are likely to remain volatile in the medium term. These two measures will directly result in cost reduction of $50-$70 per tn for the company in the coming quarters.
11) Cement companies may increase prices in the coming days due to the additional duty levied on the commodity. There is scope for increasing prices because demand is strong. The positive for cement companies is that customs duty on petcoke and gypsum has been cut but that will not be sufficient to negate the impact of higher duty payouts.
12) The government has invited foreign capital for funding India's growth, through infrastructure and corporate bonds. The finance minister has spelled reforms in FDI in insurance, banking, infrastructure, despite not being very explicit about it, probably deliberately.
13) Overall, it is a slightly positive Budget as the 60-bln-rupee further fund infusion (into banks) has been announced, although there is no clarity on whether State Bank of India's rights issue is included in this infusion allocation. However, banks' demand to be allowed to issue infrastructure bonds has not been accepted.
14) I don't think the Budget indicates that private sector credit demand will be impacted by government borrowing in the next financial year. However, the liquidity position remains unclear and yields may have a downward bias.
The only good thing in the budget is the direct cash subsidy, but it is not very sure as to when it will be implemented.
2) In general, the Budget has recognised the need for improving rural credit by proposing to create a 1-bln-rupee equity fund especially for microfinance sector and creating another 5-bln-rupee fund for rural and micro credit groups. Another major boost would be increasing the agriculture credit target to 4.75 trln rupees. This will enhance the credit flow to the rural economy. Banks may use microfinance companies for part of this credit delivery. The measures to control the fiscal deficit will boost the economy.
3) The government's aim to create 4 mln tn more food grain storage by Mar 2012 is a good development, but the country is still substantially short of what is required.
4) Hiking ad-valorem export duty to 20% on iron ore across categories will result in a fall in exports, which in turn will cause a decline in domestic output. As fines and lumps are mined together, there will be lower availability of the commodity, leading to a rise in prices in the domestic market.
5) The finance minister should have given more focus on the public-private partnership model for creating public infrastructure projects, since there are achievements and failures in that model in the last 4-5 years. Water is an important area, and the budget has not said much on that.
6) Hike in iron ore export duty to 20% is the highest so far, since the time the duty was levied in 2007. This move is going to slow down mining activity of iron ore fines in Goa, which may result in reduction in state royalty, in turn dragging Goa's revenue.
7) The most encouraging part of the Budget is that the government is going to implement Goods and Services Tax. This will help eradicate the menace of black money from the agriculture sector and create a level-playing field for agriculture industries.
8) Foreign individual investors earlier could buy units of equity fund schemes through foreign institutional investors route only. Now, they will be able to invest directly in equity fund schemes, which is very positive for mutual fund industry.
There will be capital inflows and foreign individual investors will now be comfortable in investing in equity fund schemes. However, detailed guidelines are awaited to draw final conclusions on the move.
9) For the information technology sector, nothing much was expected and the finance minister's decision on not extending STPI (Software Technology Park of India) tax incentive has already been taken care of by creating infrastructure in SEZs.
10) The Budget announced key positive measures for the stainless steel sector which were much awaited. Completely exempting stainless steel scrap from customs duty was a pleasant surprise. Also, cut in customs duty on ferro-nickel to 2.5% from 5% is a welcome move as nickel prices have more than doubled in the last one year, and are likely to remain volatile in the medium term. These two measures will directly result in cost reduction of $50-$70 per tn for the company in the coming quarters.
11) Cement companies may increase prices in the coming days due to the additional duty levied on the commodity. There is scope for increasing prices because demand is strong. The positive for cement companies is that customs duty on petcoke and gypsum has been cut but that will not be sufficient to negate the impact of higher duty payouts.
12) The government has invited foreign capital for funding India's growth, through infrastructure and corporate bonds. The finance minister has spelled reforms in FDI in insurance, banking, infrastructure, despite not being very explicit about it, probably deliberately.
13) Overall, it is a slightly positive Budget as the 60-bln-rupee further fund infusion (into banks) has been announced, although there is no clarity on whether State Bank of India's rights issue is included in this infusion allocation. However, banks' demand to be allowed to issue infrastructure bonds has not been accepted.
14) I don't think the Budget indicates that private sector credit demand will be impacted by government borrowing in the next financial year. However, the liquidity position remains unclear and yields may have a downward bias.
Phone No: 09891265905
Mail Id: rohit_9sep@indiatimes.com
1 comment:
This budget is indeed a disheartening news... Aren't they bringing GST regime???
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