Union Budget 2014-15

10th July, 2014

Union Budget 2014-15

Budget 2014-15

Holistic Plan of Action

In comparison to the less than ordinary and unimaginative budgetary proposals of yester years, Modi’s maiden budget comes as a welcome change from the norm. The proposals and reforms suggested in the Union Budget 2014-15 are ground breaking, specific with a good measure of thought & common sense and vastly catered for holistic growth of the economy. The challenging circumstances of a slowing economy, soaring energy prices, inflation, fiscal and current account deficits do not provide adequate leeway to maneuver and hit the path of high growth. Yet the Budget provides a comprehensive plan and directional footprint towards overcoming these hurdles to sustainable growth of 7-8% over the next few years along with providing macro economic stability, lowered inflation, realistic fiscal health targeting and a manageable current account deficit.
Country is in no mood to suffer unemployment & apathetic governance
10th July, 2014

Union Budget 2014-15

Budget 2014-15

Holistic Plan of Action

The Finance Minister while presenting the budget takes cognizance of the fact that decisive action to fuel growth without populism is the need of the hour. And that resources for developmental expenditure cannot be raised at the cost of burdening the future generations with the legacy of debt. He goes on to emphasize the need to mobilize resources through both tax and non-tax revenues to feed the aspirational developmental expenditure. In order to achieve this objective the Modi Government has taken head on the various issues plaguing the Indian economy and come out with imaginative and yet very practical and implementable reforms and measures.

We cannot leave behind a legacy of debt for our future generation
10th July, 2014

Union Budget 2014-15

10th July, 2014

Union Budget 2014-15

Economy at standstill

Boost to industry creation to spur growth

Industry
Measures
• National Industrial Corridor Authority to coordinate the development of the industrial corridors • PSUs capital investment of Rs 2,47,941 crores in FY15 to create a virtuous investment cycle

Impact
E-Governance will usher in transparency and accountability in the government processes.

View
Faster delivery mechanism in government will be positive for the economy

eBiz platform aims to create a business and investor friendly ecosystem in India by making all business related clearances available on a 24x7 single portal
10th July, 2014

Union Budget 2014-15

Economy at standstill

Boost to industry creation to spur growth

Industry
Measures
• The Amritsar Kolkata Industrial master planning will be completed expeditiously for the establishment of industrial smart cities in seven States of India.
• 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 will also be completed • 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 • Kakinada, its adjoining area and the port will be developed as the key drivers of economic growth in the region with a special focus on hardware manufacturing

Mission to bring all stakeholders under one umbrella
10th July, 2014

Union Budget 2014-15

Economy at standstill

Boost to MSME to generate employment

MSME
Measures
• A committee with representatives from the Finance Ministry, Ministry of MSME, RBI to be formed to give concrete suggestions for improving the financing architecture of MSMEs • A Rs 10,000 crore fund to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies • To establish technology centre network to promote innovation, entrepreneurship and agroindustry and set up a fund with a corpus of Rs 200 crore • The definition of MSME will be reviewed to provide for a higher capital ceiling • A programme to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery will be put in place • Entrepreneur friendly legal bankruptcy framework will also be developed for SMEs to enable easy exit

SMEs form the backbone of our Economy. They account for a large portion of our industrial output and employment
10th July, 2014

Union Budget 2014-15

Energy Security

Incentivized fresh investments; to benefit entire value chain

Power
Measures
• Extension of 10 year tax holiday to the undertakings which begin generation, distribution and transmission of power by FY17 • Gram Jyoti Yojana (Rs 500 crore ) for feeder separation to augment power supply to the rural areas; • Rs 100 crore new scheme to promote efficient thermal power • Clean Energy Cess increased from Rs 50 / tonne to Rs 100 / tonne for expanded scope which includes financing and promoting clean environment

Impact
Fresh impetus for new investments; entire power sector value chain to benefit significantly

View
Long Term Bullish on Power Sector Power is a vital input for economic growth and the Government is committed to providing 24x7 uninterrupted power supply to all homes
10th July, 2014

Union Budget 2014-15

Energy Security

Focused efforts to remove coal production inefficiencies

Coal
Measures
• Adequate quantity for existing and upcoming power plants; • Rationalize coal linkages to optimize transport of coal and reduce cost of power • Rationalization of customs duty on • coking coal hiked from 0% to 2.5%; • steam coal and met coke hiked from 2% to 2.5% • CVD reduced from 6% to 2%;

Impact
• Reduce overall cost through reduction of inefficiencies in coal production and transportation; • Revive dead investments

View
Coal India – A long term bet; positive for power generation companies Comprehensive measures for enhancing domestic coal production are being put in place along with stringent mechanism for quality control
10th July, 2014

Union Budget 2014-15

Energy Security

Promote usage of natural gas to replace conventional fuel

Oil &Gas
Measures
• Accelerate production and exploitation of Coal Bed Methane reserves ; scale up usage of PNG rapidly; Build additional 15,000 km of gas pipelines in order to complete the gas grid on PPP basis • Concessional basic customs duty of 5% on machinery and equipment required for setting up of (Bio-CNG) • Overhaul petroleum subsidies, make it more targeted ; new urea policy to be formulated

Impact
Increased usage of natural gas to reduce dependence on crude oil derivatives  easing import requirements

View
Long on Oil and Gas; ONGC, GAIL and Gujarat State Petronet key beneficiaries I am conscious of the fact that Iraq crisis is leaving an impact on oil prices and the situation in the middle-east continues to be volatile.
10th July, 2014

Union Budget 2014-15

Energy Security

Tap the huge potential available in renewable energy

Renewable Energy
Measures
SOLAR ENERGY • Ultra Mega Solar Power Projects in Rajasthan, Gujarat, Tamil Nadu, and Laddakh in J&K; solar power driven agricultural pump sets; development of 1 MW Solar Parks on the banks of canals; Accelerate Green Energy Corridor Project • basic customs duty exemptions on: i) specified inputs for use in the manufacture of EVA sheets and back sheets and ii) flat copper wire for the manufacture of PV ribbons; Extension of the basic customs duty of 5 percent on machinery and equipment for Solar Energy Plant WIND ENERGY Reduction in customs duty from 10% to 5% on forged steel rings used in wind electricity generators; exemption of 4% SAD on raw materials

Implementation of the Green Energy Corridor Project will be accelerated to facilitate evacuation of renewable energy across the country
10th July, 2014

Union Budget 2014-15

Energy Security

Tap the huge potential available in renewable energy

Renewable Energy
Impact
Higher investments in renewable energy necessary to meet the growing demand for electricity

View
Bullish on Orient Green Power

New and Renewable energy deserves a very high priority
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Long term funding constraint, taken care of

Resource Mobilization
Measures
• Country to follow PPP model favoured for infrastructure creation. Already delivered 900 projects delivered on PPP basis. 3P, an institution to support mainstreaming of PPPs to be set up with corpus of Rs 500 crores • Banks permitted to raise long term funds for lending to infrastructure sector with minimum regulatory preemption such as CRR, SLR and PSL • Proposal to create Infrastructure Investment Trusts with pass through benefits

Impact
• Long term funding will be readily available as banks are in a much better position to mobilize resources • Monetization of investments in existing projects and raising resources for new projects will be easier

View
Positive for long gestation infrastructure projects. Major beneficiaries like IRB, ITNL, L&T, etc India has emerged as the largest PPP market in the world with over 900 projects in various stages of development
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Fresh impetus to road creation

Roads
Measures
• Investment in NHAI and State Roads to the tune of Rs 37,880 crores, which includes. Target for NH construction set at 8500 km for FY15. (23 km /day) • To initiate work on select expressways in parallel to the development of the Industrial Corridors. For project preparation NHAI shall set aside a sum of Rs 500 crore

Impact
Road construction which has languished for years will get the necessary boost and go back to therate of ~20km/day road construction which was achieved during previous NDA rule

View
Bullish on infrastructure sector. Road developers like IRB, Sadbhav Engg and major EPC beneficiaries Roads sector constitutes a very import artery of communication in the country
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Renewed focus on ports & SEZ development

Ports & SEZs
Measures
• Sixteen new port projects proposed with a focus on port connectivity • Rs 11,635 crore will be allocated for the development of Outer Harbour Project in Tuticorin • Effective steps to operationalize the SEZ Zones • SEZs in Kandla and JNPT

Impact
New ports will give further impetus to import/export sector as well as decongest the traffic at the existing ports

View
Positive for ports and logistic sector. Major beneficiaries Adani Ports , Gujarat Pipavav, Sical Logistics, SCI, Great Eastern Shipping, ABG Shipyard, L&T, Pipavav Defense

Development of ports is also critical for boosting trade
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Improving connectivity

Airports, Waterways & Shipping
Measures
• Development of new airports in Tier I and Tier II through Airport Authority of India or PPPs • Comprehensive policy to promote Indian ship building industry will be announce in FY15 • SEZs will be developed in Kandla and JNPT • Development of inland waterways. ‘Jal Marg Vikas’ (National Waterways-I) will be developed between Allahabad and Haldia to cover a distance of 1620 kms at cost of Rs 4200 crore in 6 years

Impact
Inland waterways can vastly improve capacity for the transportation of goods in an economical manner. New airports will bring air-travel within reach of millions of Indian

View
Positive for GMR, GVK, ABG Shipyard, L&T, Pipavav Defense

Despite increase in air connectivity air travel is still out of reach of a large number of aspirational Indians
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Investments in real estate through new channels

Real Estate
Measures
• Incentives for REITs which will have pass through for the purpose of taxation • Tax exemption limit increased for self occupied property from Rs 1.5 lakh to Rs 2 lakh

Impact
• REITs would attract long term finance from foreign and domestic sources and reduce the pressure on the banking system while also making available fresh equity • Will ease liquidity condition of developers by giving new access to capital by aiding faster monetization of their assets

View
Positive for DLF, Prestige Estate, Phoenix Mills, Oberoi Realty, Nesco, Puravankara Projects

REITs have been successfully used as instruments for pooling of investment in several countries
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

New smart cities on anvil

Smart Cities
Measures
• To encourage development of Smart Cities, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 Sqm to 20,000 Sqm and from $10 mn to $5 mn respectively with a three year post completion lock in • Projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of three year lock-in

Impact
Smart cities will provide habitation for the neo-middle class and help reduce the burden on existing cities

View
Positive for players like HCC which have project execution experience (Lavasa)

The Prime Minister has a vision of developing ‘one hundred Smart Cities’, as satellite towns of larger cities and by modernizing the existing mid-sized cities
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Affordable housing accorded a top priority

Housing
Measures
• Mission on Low Cost Affordable Housing in urban areas (anchored in NHB) • Rs 4,000 crores to NHB to increase flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment • Inclusion of slum re-development in CSR activities • Rs 8,000 crore to NHB to expand and continue to support Rural Housing

Impact
Impetus to housing sector in urban areas benefiting the poor and lower middle class

View
Positive for players like HDIL, Indiabulls Real Estate, Prestige as well as housing financing companies such as LIC HF, HDFC, etc

Housing continues to be an area of concern for middle and lower middle class due to high cost of financing
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Development of rural areas in focus

Rural Development
Measures
• Shyama Prasad Mukherji Rurban Mission to deliver integrated project based infrastructure (also include development of economic activities and skill development) • Better and more energetic PMGSY with funding of Rs 14,389 crore

Impact
Infrastructure development in rural areas will have a multiplier effect on rural economy and in turn will add to India’s growth

PMGSY initiated during the NDA-I under the stewardship of Prime Minister Atal Behari Vajpayee has had a massive impact in improvement of access for Rural population.
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Development of urban areas a top priority

Urban Development
Measures
• Provision of safe drinking water and sewerage management, use of recycled water for growing organic fruits and vegetable, solid waste management and digital connectivity will be key focus areas for urban development • At least 500 such habitations will be provided support, while harnessing private capital and expertise through PPPs, to renew infrastructure and services in the next ten years • Pooled Municipal Debt Obligation Facility to be increase to Rs 50,000 crore from the current Rs 5,000 crore to support infrastructure development

Impact
Urban areas crumbling under burgeoning population due to lack of infrastructure, will benefit from these steps

View
Positive for players like VA Tech Wabag, Ion Exchange India, Thermax It is time that our cities and towns undergo urban renewal and become better places to live in
10th July, 2014

Union Budget 2014-15

Infrastructure Dvpt

Mining sector to break the shackles

Mining
Measures
• Measures for enhancing domestic coal production are being put in place including supply of crushed coal and setting up of washeries. • Existing impasse in the coal sector to be resolved and adequate quantity of coal will be provided to power plants which are already commissioned to be commissioned by March 2015 • Exercise to rationalize coal linkages which will optimize transport of coal and reduce cost of power is underway. • Government will work towards encouraging investments in mining and resolving the issues in iron ore mining in an expedite manner

Impact
Mining sector which has come to a standstill due to environmental concerns and court interventions to receive a boost from these initiatives

View
Positive for mining as well as power sector The current impasse in mining sector, including, iron ore mining, will be resolved expeditiously
10th July, 2014

Union Budget 2014-15

Job Scarcity Measures
• • • • • •

Eliminate poverty through sustainable livelihood options

Pradhan Mantri Gram Sadak Yojana – Rs 14,389 crore Providing wage and self-employment opportunities in rural areas under MGNREGA Allocated Rs 200 crore for start up entrepreneurs from scheduled castes To develop and promote handloom products – Rs 50 crore To setup 6 more textile mega-clusters – Rs 200 crore Emphasis on improving Tourism and developing manufacturing sector to aid job creation

Impact
• Will lead to asset creation substantially linked to agriculture and allied activities

I am sure these measures would incentivize value addition, generate income and create more jobs in India
10th July, 2014

Union Budget 2014-15

Inflation Measures

Various measure to tackle food inflation

• Fiscal deficit to be reined at 4.1% of GDP in FY15, 3.6% in FY16 and 3.0% in FY17. • Restructuring FCI, reducing transportation and distribution losses and improving efficacy of PDS. • Wheat and rice to be provided at reasonable prices to the weaker sections of the society. • Government shall undertake open market sales to keep prices under control. • Kisan TV, to disseminate real time information to the farmers regarding new farming techniques, water conservation, organic farming etc. • To incentivize expansion of processing capacity, excise duty on specified food processing and packaging machinery to be reduced from 10% to 6%. • To develop scientific warehousing infrastructure in the country, an allocation of Rs 5,000 crore has been done for the year FY15.

We look forward to lower levels of inflation as compared to the days of double digit rates of food inflation in the last two years
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
7.0% 6.0% 5.0% 4.8% As % of GDP

A challenge to curb Fiscal Deficit
5.7% 5.4% 4.8% 4.6% 4.1%

4.0%
3.0% 2.0% 1.0% 0.0% 2010-11 2011-12 2012-13 2013-14BE 2013-14RE 2014-15BE

Continuance of fiscal consolidation cannot be compromised while providing for the essential items
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
Rs.Crore

Should be of lesser concern going forward Subsidies
3.0%

550000 2.5% 450000
350000 250000 150000 50000 2.0% 1.5% 1.0%

0.5%
0.0%

2010-11
Food

2011-12

2012-13

2013-14BE
Fertilizers

2013-14RE

2014-15BE

Petroleum Total Subsidies

Interest and Others Subsidies as a %of GDP (RHS)

I also propose to overhaul the subsidy regime and make it more targeted while providing full protection to the marginalized and poor
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
400,000 350,000 300,000 250,000 Rs. in Crore

Creeping up beyond 3% of GDP; worrisome Interest Payments
3.4% 3.3% 3.2% 3.1% 3.0% 2.9% 2.8% 2.7%

200,000
150,000 100,000 50,000 2010-11 2011-12 2012-13 2013-14RE 2014-15BE

2.6% 2.5%

Int. Payment and Debt Servicing (LHS)

Interest Payment as a %of GDP (RHS)

We cannot leave behind a legacy of debt for our future generations
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
600000 500000 400000 300000 200000 100000 Rs. in Crore

Positively growth oriented Plan Expenditure

0
2010-11 RE- State Plan CE- Central Plan 2011-12 2012-13 RE- Central Plan Total Plan Expenditure 2013-14RE 2014-15BE CE- State Plan Revenue Expenditure (RE)

I want to reiterate my Government’s firm commitment to strengthen the federal structure of the country
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
1300000 1100000 900000 700000 500000 300000 100000 -100000 Rs. in Crore

Defense expenditure increased substantially Non Plan Expenditure

2011-12

2012-13

2013-14BE

2013-14RE

2014-15BE

RE - Int Payment & Debt Servicing RE- Subsidies CE- Loan and Advances to State, UT CE- Others Revenue Expenditure (RE)

RE- Defence RE Others CE- Defence Total Non-Plan Expenditure

While preparing Non-Plan estimates due care has been taken to fully provide for all the essential activities
10th July, 2014

Union Budget 2014-15

Financial Indiscipline
1600000 1400000 1200000 Rs. in Crore

Initiatives to kick start growth; control spending Budgetary Measures

1000000
800000 600000 400000

200000
0 2011-12 Corporation tax Customs Taxes of the Union 2012-13 2013-14BE Income tax Union Excise Duties Direct 2013-14RE 2014-15BE Wealth Tax Service Tax Total

Fiscal prudence to me is of paramount importance because of considerations of inter-generational equity
10th July, 2014

Union Budget 2014-15

Agricultural Stagnation Heralding a technology driven second green revolution Measures
• Pradhan Mantri Krishi Sinchayee Yojana (RS 1,000 crore) to provide assured irrigation and mitigate risk of monsoon vagrancy. • Agrciulture Research institutes (one each in Assam and Jharkhand) along the lines of Indian Agriculture Research Institute, Pusato be set up (Rs 100 crore allocation) • Rs 100 crore Agri Tech Infrastructure Fund

• Agriculture Universities in Andhra Pradesh and Rajasthan and Horticulture Universities in Telangana and Haryana proposed (Rs 200 crore )
• Soil Health Card (Rs 100 crore) for every farmer; 100 Mobile Soil Testing Laboratories pan India • Rs 100 crore “National Adaptation Fund” to tackle climate change • Provide finance to 5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD

We are committed to sustaining a growth of 4% in agriculture
10th July, 2014

Union Budget 2014-15

Business Confidence Measures

Stable tax regime committed to investors

• No more retrospective changes which creates a fresh liability • All fresh cases arising out of the retrospective amendments of 2012 will be scrutinized by a High Level Committee to be constituted by the CBDT • Income arising to foreign portfolio investors from transaction in securities to be treated as capital gains; will remove uncertainty for Foreign Portfolio Investors (FPIs) on taxation arising on account of characterization of their income • Income-tax Department to function as a facilitator as well ; 60 more Aykar Seva Kendras (ASK) to be opened to facilitate service delivery • Resident taxpayers enabled to obtain an advance ruling in respect of their income tax liability above a defined threshold; strengthen the Authority for Advance Rulings by constituting additional benches • Enlarge the scope of the Income-tax Settlement Commission to make it easy for taxpayers to approach the Commission for settlement of disputes • Set up a High Level Committee to interact with trade and industry on a regular basis • E biz platform marking all business investment related clearances & compliances on a 24*7 single portal . All central government department & Ministry to integrate by end CY14. I hope the investor community both within India and abroad would repose confidence and participate in the Indian growth story with renewed vigour.
10th July, 2014

Union Budget 2014-15

Tax Conundrum

Increase in tax exemption limits to boost disposable income

Direct Taxes
Measures
• No changes made in personal tax rates • Personal tax exemption limit increased from Rs 2 lakh to Rs 2.5 lakh and from Rs 2.5 lakh to Rs 3 lakh for senior citizens • Investment limit under section 80 C increased from Rs 1 lakh to Rs 1.5 lakh ; deduction limit on account of interest on loan in respect of self occupied house property increased from Rs 1.5 lakh to Rs 2 lakh

Impact
Increase in tax exemption limit will increase the disposable income, thereby boosting consumer spending

View
Bullish for FMCG and HFCS & Banks entities such as banks and LIC Housing Finance Housing continues to be an area of concern for middle and lower middle class due to high cost of financing
10th July, 2014

Union Budget 2014-15

Tax Conundrum

Streamlining tax structures for various instruments

Direct Taxes
Measures
• Income arising to foreign portfolio investors from transaction in securities will be treated ascapital gains; concessional rate of 15 percent on foreign dividends to continue without any sunset date Tax on long term capital gains on mutual funds (other than equity oriented funds) increased from 10 to 20 percent and holding increased from one year to 36 months; removed tax arbitrage enjoyed by debt mutual funds over fixed deposits • Removed the anomaly on divided distribution tax for corporate and mutual fund • Government to review the Direct Taxes Code Bill, 2010 which lapsed with the dissolution of the 15th Lok Sabha.

Impact
Savings may switch to Fixed Deposits from Debt Mutual Funds

View
Positive on Banks Net Effect of the direct tax proposals is revenue loss of Rs 22,200 crore
10th July, 2014

Union Budget 2014-15

Tax Conundrum

Introduction of GST to smoothen tax related complications

Indirect Taxes
Measures
• To make efforts to introduce the Goods and Services Tax (GST) this fiscal; introduction will streamline tax administration and result in higher revenue collection

The debate whether to introduce a Goods and Services Tax (GST) must now come to an end.
10th July, 2014

Union Budget 2014-15

Tax Conundrum Measures

Increased efforts to reduce litigation on transfer pricing issues

• Strengthen the administrative set up of the Advance Pricing Agreement (APA) scheme to expedite disposal of applications. • Introduce a “Roll Back” provision in the APA scheme wherein an APA entered into for future transactions may also be applied to international transactions undertaken in previous four years in some circumstances. • Introduce range concept for determination of arm’s length price in order to align Transfer Pricing regulations in India with the best available practices • Allow the use of multiple year data (earlier only one year data) for comparable analysis

Transfer Pricing is a major area of litigation for both resident and nonresident taxpayers
10th July, 2014

Union Budget 2014-15

Resource crunch Measures
• • • • • • • •

FDI limit increase to boost foreign inflows

•

Composite cap of FDI increased from 26 to 49 percent in defense manufacturing and insurance Steps to promote the deep and liquid corporate bond market; deepen the currency derivatives market by eliminating unnecessary restrictions Extend a liberalized facility of 5% withholding tax to all bonds issued abroad and extend the validity of the scheme to 30.06.2017 Liberalize the ADR/GDR regime to allow issuance of depository receipts on all permissible securities; introduce a much more liberal Bharat Depository Receipt (BhDR). Allow international settlement of Indian debt securities Reintroduction of Kissan Vikas Patra to encourage people, with banked and unbanked savings to invest Retail investors to get direct shareholding in PSU banks; will help raise Rs 2400 bn by 2018 to meet Base-III norms Introduction of uniform KYC norms and inter-usability of the KYC; introduce one single operating demat account Globalization helps channelize external savings to India to bridge the resource gap but also renders financial sector vulnerable to the vagaries of the global economy.
10th July, 2014

Union Budget 2014-15

Resource crunch

Increased efforts to reduce litigation on transfer pricing issues

Banking
Impact
Participation of retail investors in bank capitalization will lower the burden for capital infusion by the government; emphasis on stressed asset recovery positive for banks’ financial health; boost to the insurance sector

View
Long on Public and Private Banks

Benefits of insurance in India have not reached a large section of the people and insurance penetration and density are very low.
10th July, 2014

Union Budget 2014-15

Resource crunch

Focus on financial inclusion and recovery of stressed assets

Banking
Measures
• A Financial Inclusion Mission to be launched on 15th August 2014; would particularly focus to empower the weaker sections of the society • Structure to be put in place for continuous authorization of universal banks in the private sector • Give greater autonomy to banks while making them more accountable • RBI to create a framework for licensing small banks and other differentiated banks • Six new Debt Recovery Tribunals would be set up at Chandigarh, Bengaluru, Ernakulum, Dehradun, Siliguri and Hyderabad for recovery of stressed assets • Bridge the regulatory gap under the Prize Chits and Money Circulation Scheme (Banning) Act, 1978; • Small savings instrument to cater to the requirements of educating and marriage of the Girl Child will be introduced; a National Savings Certificate with insurance cover will also be launched • Suitable incentives, using banking correspondents, strengthening micro-offices to boost the insurance sector; take up the pending insurance laws (amendment) Bill for consideration of the Parliament. Financial stability is the foundation of a rapid recovery. Our banking system needs to be further strengthened.
10th July, 2014

Union Budget 2014-15

Environmental Issues Financing and promoting clean energy initiatives
Measures
• Clean energy cess increased from Rs 50 per tonne to Rs 100 per tonne levied on coal, peat and lignite mining

Impact
• Increase in cost for mining companies

Cess to include financing and promoting clean environment initiatives
10th July, 2014

Union Budget 2014-15

Water Management Measures

Focused on safe drinking water

• In line to give an added impetus to watershed development in FY14-15,New Programme called “Neeranchal” proposed with an initial outlay of Rs 2,142 crores. • Rs 500 crore has been allocated for water reforms in NCT Delhi • Rs.3,600 crore to be used for national drinking water programme • A sum of Rs. 100 crore to expedite the preparation of Detailed Project Reports (on river linking) has been set aside. • Namami Ganga", an integrated Ganga Development Project; Rs 2,037 crore set aside, which will also be boosted by NRIs’ fund • Rs.100 crore set aside for ghat development and beautification of the river front at Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patna and Delhi.

Rivers form the lifeline of our country.
10th July, 2014

Union Budget 2014-15

Defence & Int Security Measures

Foreign ownership limit raised to 49%

• The composite limit of foreign investment is being raised to 49% with full Indian management and control through the FIPB route • Allocated Rs 2,29,000 crore for defence expenditure in FY15 • Rs 1,000 crore further allocated for developing railway near borders

Impact
• Will lead to foreign currency inflow in the country • Government expenditure on the defence sector will be reduced shrinking the fiscal deficit

View
Positive for L&T, BEL, BHEL, Bharat Forge, Tata Power (JV’s with foreign tech players)

There can be no compromise with the defence of our country
10th July, 2014

Union Budget 2014-15

Neglected North East Measures

Bridging the gap

• Investment in NHAI and state highways to the tune of Rs 37,887 core including Rs 3000 crore for Northeast • An allocation of Rs 53,706 crore has been made for the overall development in North Eastern region in FY14-15 • Organic farming of North East region to receive Rs 100cr • To provide a strong platform to rich cultural and linguistic identity of the North East, a 24x7 channel ‘Arun Prabha’ will be launched • Rs 1000 crore will be provided for rail connectivity in North-east region • Sports university to be established in Manipur

North Eastern Region of India has tremendous potential for development
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations One of the major priorities

Measures
• • • • Rs 33,601 crore allocated for improving school infrastructure facilities Allocated Rs 100 crore for setting up virtual classrooms To set up five more IITs and IIMs – Rs 500 crore Have proposed to ease and simplify norms to facilitate education loans for higher studies.

The country needs a large number of Centers of higher learning
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations Encourage youth and improve sports

Measures
• To set up national level sports academies for major games across the country • Allocated Rs 200 crore for upgrading stadiums in Jammu and Kashmir valley • To transform employment exchanges in to career centres – Rs 100 crore

Impact
• Will lead to development of brand India • Tourism to improve further, leading to more job creation

View
Improve Tourism, Hospitality and Infrastructure in the country

Sports are an integral part of growing up and personality development
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations Imminent need to further bridge the divide

Measures
• Greater transparency in government processes through IT enabled platforms • National Rural Internet and Technology Mission for services in villages and schools – Rs 500 crore

Impact
• More acceptance of internet and technology in rural India

To ensure Broad band connectivity at village level
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations National Pride

Measures
• Allocated Rs 200 crore to support the Gujarat Government for the mission to build statue of Sardar Vallabh Bhai Patel

10th July, 2014

Union Budget 2014-15

Miscellaneous allocations Safety and Welfare

Measures
• • • • • Allocated Rs 50,548 crore for welfare of SC and ST and further Rs 32, 387 crore under TSP Allocation of Rs 100 crore for welfare of the tribals Pension scheme for senior citizens under Varishtha Pension Bima Yojana An outlay of Rs 50 crores will be spent towards safety for women on public road transport Allocated Rs 150 crore to increase the safety of women in large cities

Women’s safety is a concern
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations Health for All

Measures
• • • • Allocated Rs 3,600 crore for providing safe drinking Allocated Rs 500 crore to set up 12 more government medical colleges Improving affordable healthcare in rural India National programme launched to improve malnutrition situation in India

A national programme in Mission Mode is urgently required to halt the deteriorating malnutrition situation in India
10th July, 2014

Union Budget 2014-15

Miscellaneous allocations Several major space missions are planned in FY15

Measures
• Several major space missions are planned in FY15 viz. flight of heavy capacity launcher GSLV MkIII, one launch of PSLV and two navigational satellites • Mars Orbiter spacecraft expected to be orbiting from September 24, 2014

Impact
• Improvement in weather forecasting, channel broadcasting and internet technology

Several major space missions are planned in FY15
10th July, 2014

Union Budget 2014-15

Miscellaneous

Consumer segment to receive further boost

FMCG
Measures
•Excise duty hiked for cigarettes in the range from 11-72% •Custom Duty on fatty acids, crude palm stearin, RBD and other palm stearin and specified industrial grade crude oils is being reduced from 7.5% to 0% for manufacture of soaps and oelochemicals subject to actual user condition •Excise duty on specified food processing and packaging machinery reduced from 10% to 6%.

Impact
•Increase in cost of cigarettes, which will be passed on to the consumers. •Soap manufacturers will benefit from reduction in customs duty •Packaging companies and food processing industry will benefit from excise duty reduction

View
Negative for ITC, Godfrey Phillips. Positive for HUL, GCPL, Britannia, Nestle, GSK Consumers, Paper Products, Manjushree Technopack I propose to increase the specific excise duty on cigarettes in the range of 11 percent to 72 percent
10th July, 2014

Union Budget 2014-15

Miscellaneous

To encourage manufacturing of TV in the country

Consumer Durables
Measures
• Colour picture tubes exempted from basic customs duty to make cathode ray TVs cheaper and reduction in excise duty to nil for LCD and LED TV’s below 19 inches

Impact
Will reduce the overall costs for end consumers and boost manufacturing domestically

View
Positive for Videocon

Cathode ray TVs are used by weaker sections who cannot afford to buy more expensive flat panel TVs
10th July, 2014

Union Budget 2014-15

Miscellaneous

Indirectly supporting the farm equipment sector

Farm Equipment
Measures
• Financing 0.5 mn farmers through NABARD. • Planned banking agricultural disbursement at Rs 800000 crore. • Interest subvention at 7%. Additional 4% for timely payment. • Impact • • Beneficial for farm equipment manufacturers

View
• Positive for M&M and VST Tillers

I propose to provide finance to 5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD in the current financial year
10th July, 2014

Union Budget 2014-15

Miscellaneous

No more negative is a big positive

Automobiles
Measures
• Excise duty concessions extended beyond 30th June 2014 for a period of 6 months up to 31st December 2014 • To continue with this concessional rate of 15% on foreign dividends without any sunset date

Impact
• As excise duty decision was taken few days back, it won’t have any impact on sector • Indian companies with foreign subsidiaries to benefit from continuation of concessional rate

View
• Neutral for auto sector. Positive for Tata Motors.

I have already extended the excise duty concessions beyond 30th June 2014 for a period of 6 months up to 31st December 2014
10th July, 2014

Union Budget 2014-15

Miscellaneous

No major announcement

Media
Measures
• Service tax will be levied on sale of space or time for advertisements in online and mobile advertising.
• Impact • • Slightly negative for e-Commerce players

View
• Negative for Infoedge

I propose to provide finance to 5 lakh joint farming groups of “Bhoomi Heen Kisan” through NABARD in the current financial year
10th July, 2014

Union Budget 2014-15

Budget Summary
(Rs. in Crore) Revenue Receipts Net Tax Revenue Non tax Revenue Capital Receipts Recoveries of receipts Other Reciepts (Disinvestments) Debt Reciepts Total Receipts Non Plan Expenditure Non Plan Revenue Interest Payments Non Plan Capital Plan Expenditure Plan Revenue Plan Capital Total Expenditure GDP Nominal Gross Fiscal Deficit Fiscal deficit as a % of GDP Revenue Deficit Revenue deficit as a % of GDP Primary Deficit Primary deficit as a % of GDP

Nominal GDP to grow at 13%
2011-12 751,436 629,764 121,671 568,918 18,850 18,088 531,980 1,320,354 891,991 812,049 273,150 79,941 412,375 333,737 78,638 1,304,366 2012-13 879,232 741,877 137,354 531,139 15,060 25,890 541,202 1,410,371 996,745 914,304 313,170 82,441 413,625 329,208 84,417 1,410,370 2013-14BE 1,056,331 884,078 172,252 608,967 10,654 55,814 542,499 1,665,298 1,109,974 992,907 370,684 117,067 555,322 443,260 112,062 1,665,296 2013-14RE 1,029,252 836,026 193,226 561,182 10,803 25,841 524,539 1,590,434 1,114,903 1,027,687 380,066 87,215 475,532 371,851 103,681 1,590,434 2014-15BE 1,189,763 977,258 212,505 605,129 10,527 63,425 514,016 1,794,892 1,219,891 1,114,609 427,011 105,282 575,000 453,503 121,497 1,794,891 Chg FY14 Chg BE BE/RE FY15/FY14 -3% -5% 12% -8% 1% -54% -3% -4% 0% 4% 3% -25% -14% -16% -7% -4% 13% -3% -14% -3% -14% -16% -26% 16% 17% 10% 8% -3% 145% -2% 13% 9% 8% 12% 21% 21% 22% 17% 13% 13% 1% -11% 3% -9% -30% -38%

8,974,947 10,159,884 10,020,620 11,320,463 12,839,952 515,990 490,597 542,499 524,539 531,177 5.7% 4.8% 5.4% 4.6% 4.1% 394,348 365,896 379,838 370,288 382,923 4.4% 3.6% 3.8% 3.3% 3.0% 242,840 177,428 171,814 144,473 101,620 2.7% 1.7% 1.7% 1.3% 0.8%

policy regime that will result in the desired macro-economic outcome of higher growth, lower inflation, sustained level of external sector balance and a prudent policy stance 10th July, 2014

Union Budget 2014-15

Ventura Securities Limited Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W), Mumbai – 400079 This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private circulation.

10th July, 2014