UNION BUDGET 2017

Economic Growth to Continue
Adequate liquidity
Government Capex
Low Fiscal Deficit
Low Inflation
Low Interest Rates
Indian Economy

Major Changes in Budget Presentation
3
•Provides for Integrated Planning and development of Infrastructure
•Undoes the Colonial Legacy & political interference in Railway plans
Railways Merged with
Union Budget
•This allows for timely approval and allocation of resources for the Fiscal
•Government Expenditures and Plans can kick start from the beginning of
the financial year
•Expense categorization to be under Capital & Revenue Heads
•Reduces Policy complexity in implementation and monitoring
Budget Announcement
Date Preponed to 1st
Feb
Plan & Non Plan
Categorization Done
away with

Some Facts & Figures
Fiscal Deficit for FY18 at
3.2% of GDP,
Increased in Capital
Expenditure by 11%
YOY,
100% Village
Electrification by May
2018,
1 Crore new Houses
under PMAY by 2019
for the houseless and
those living in kutcha
houses,
Foreign Exchange
Reserve reached 361
Billions USD,
FDI grew 36% in H1
2016-17 over H1 2015-
16 despite 5% reduction
in global FDI inflows

Structural Reform in Financing Budgets
Source: FY18 Union Budget. As % ofGDP
Government by disciplining its Fiscal Deficit is looking to:
• Improve India’s International Credit Rating,
• Creates Headroom for RBI to reduce key policy rates and
• Makes investment/ borrowings for private sector cheap

Transform, Energise and Clean India
TRANSFORM the quality of governance
and quality of life of our people;
ENERGISE various sections of society, especially
the youth and the vulnerable, and enable them
to unleash their true potential;
CLEAN the country from the evils of corruption,
black money and non-transparent political funding

Themes to foster agenda
Farmers : committed to double the income in 5 years;
Rural Population : providing employment & basic infrastructure;
Youth : energising them through education, skills and jobs;
The Poor and the Underprivileged : strengthening the systems of social security,
health care and affordable housing;
Infrastructure: for efficiency, productivity and quality of life;
Financial Sector : growth & stability by stronger institutions;
Digital Economy : for speed, accountability and transparency;
Public Service : effective governance and efficient service delivery through people’s
participation;
Prudent Fiscal Management: to ensure optimal deployment of resources and
preserve fiscal stability;
Tax Administration: honouring the honest.

Farmers and Agriculture
Agricultural credit in 2017-18 at a record level of Rs. 10 lakh crores
60 days interest waiver
Support NABARD for computerisation and integration of all Primary
Agriculture Credit Societies with the Core Banking System of District
Central Cooperative Banks in 3 years.
Coverage under Fasal Bima Yojana scheme will be increased from 30%
of cropped area in 2016-17 to 40% in 2017-18 and 50% in 2018-19.
New mini labs in Krishi Vigyan Kendras (KVKs)

Rural Population
Aim to bring one crore
households out of poverty
and to make 50,000 Gram
Panchayats poverty free by
2019.
Women participation in
MGNREGA has increased to
55% from less than 48%
MGNREGA allocation the
highest ever at `Rs. 48,000
crores in 2017-18.
Pace of construction of
PMGSY roads accelerated to
133 km roads per day in
2016-17, against an avg. of
73 km during 2011-2014.
100% village electrification
by 1st May 2018
Total allocation for Rural,
Agriculture and Allied
sectors is Rs. 1.87 Lacs
crores

Infrastructure
TOTAL BUDGET for
Rail, Road and
Shipping – 2.41 Lacs
Crores
Capital and
Development Exp. In
railways -1.31 Lacs
Crores
Unmanned Level
Crossing (Broad
gauge) will be
eliminated by 2020,
New Railways Lines
– 3500 kms.,
500 Stations – with
Lifts and Escalators
SMS Based – Clean
my Coach
All Coaches with bio
toilets – 2019
New Metro Rail Act -
greater private
participation and
investment.
2,000 kms of coastal
connectivity roads
Airports in Tier 2
cities for operation
and maintenance in
PPP model
Optical Fiber
Broadband to 1.5
Lacs gram
panchayats.
Second phase of
Solar Park with
capacity of 20,000
MW.

Other Measures
Aadhar based Smart
Cards for Senior
Citizens containing
their health details
FIPB (Foreign
Investment
Promotion Board) to
be abolished
IRCTC, IRFC and
IRCON will be listed
in stock exchanges.
create an integrated
public sector ‘oil
major’
A new ETF with
diversified CPSE
stocks and other
Government
holdings
Rs. 10,000 crores for
recapitalisation of
Banks
Head Post Offices as
front offices for
Passport services
10 lakh new POS
terminals
2,500 crore digital
transactions
through UPI, USSD,
Aadhar Pay, IMPS
and debit cards
Aadhar Enabled
Payment System,
will be launched
shortly

Personal Income Tax
Tax Rate for individual
assesses between income
of Rs. 2.5 lakhs to 5 lakhs
reduced to 5% from the
present rate of 10%
Surcharge of 10% of tax
payable on categories of
individuals whose annual
taxable income is between
Rs. 50 lakhs and Rs. 1 crore.
Simple one-page Form for
individuals having taxable
income upto Rs. 5 lakhs
other than business income
Tax rebate of Rs. 2,500 if
Income is upto Rs. 3.5Lacs.

Personal Income Tax
Annual Taxable Income Existing Tax New Tax Gain
Rs 2.5 Lakhs - - -
Rs 3.5 Lakhs 5,150 2,575 2,575
Rs 5 Lakhs 20,600 12,875 7,725
Rs. 10 Lakhs 128,750 115,875 12,875
Rs. 50 Lakhs 1,364,750 1,351,875 12,875
Rs. 75 Lakhs 1,673,750 1,826,963 (153,213)
Rs. 100 Lakhs 2,909,750 3,186,563 (276,813)

Tax to GDP – Big
improvement required
Source: Budget Speech
1.74
2.46
No. of Persons employed in
organised sector in 'cr
People not
filingtax
People filing
tax
3.79
1.81
No. of Persons employed in
Unorganised sector in 'cr
People not
filingtax
People filing
tax
No. of companies registered in
India in 'lacs
5.97
7.97
Companies
who filed tax

Tough roads for Non Compliance
Penalty of Rs. 5,000/-if return is filed after due dates before 31st Dec.
Penalty of Rs.10,000/- if filed after 31st Dec.
However, if the income is less then 5 lacs then the penalty will be lower at Rs.
1000.
Time period for revising a tax return is being reduced to 12 months.
Now Tax Authorities can open cases upto 10 years ( earlier 7 years) if search and
seizure operation reveals undisclosed income and assets worth over Rs. 50 Lacs.

Ease of Doing Business
The profit (linked
deduction) exemption
available to the start-ups
for 3 years out of 5 years
is changed to 3 years
out of 7 years.
MAT credit is allowed to
be carried forward up to
a period of 15 years
instead of 10 years at
present
Income tax for
companies with annual
turnover upto Rs. 50
crore is reduced to 25%
Threshold limit for audit
of business entities who
opt for presumptive
income scheme
increased from Rs. 1
crore to Rs. 2 crores.
Threshold for
maintenance of books
for individuals and HUF
increased from turnover
of 10 lakhs to 25 lakhs or
income from 1.2 lakhs to
2.5 lakhs
Under scheme for
presumptive taxation for
professionals with
receipt upto Rs. 50 lakhs
p.a. Advance tax can be
paid in one instalment
instead of four.

Go Digital…
Under scheme of presumptive income for small and
medium tax payers whose turnover is upto 2 crores,
the present, 8% of their turnover which is counted as
presumptive income is reduced to 6% in respect of
turnover which is by non-cash means.
No transaction above Rs. 3 lakh would be permitted
in cash subject to certain exceptions.

Road Ahead…
US fed
raising
interest
rates
India
Quarterly
Earnings
UP
Election
Outcome
European
Banking
Crisis
China Slow
down
GST Roll
Out

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Sector BudgetProposal Nature of Impact Comments
Telecom
Proceeds from License fee and spectrum
charges from telecom service providersat
INR 443bn against INR 787bn in FY17RE Neutral
As per expectation government is not planning for
spectrum auction in FY18. INR 443bn comprises only
recurring charges and deffered payments from
earlier spectrumauctions
Budgeting of INR 6.9bn as extra budgetary
resourse for Hemisphere properties Positive Progress in Tata comm excess land monetisation
Impact of Budget on Key Sectors
Sector Budget Proposal Nature of Impact Comments
Capitalgoods
Defence capital acquisition outlay ofINR
865bn against INR 717bn for FY17RE Positive Growth of about 20% overFY17RE
Budgetary support towardsRailways
capital expenditure at INR 550 bnagainst
INR 463bn in FY17RE Neutral Inline withexpectation
Overall outlay for infrastructure
development at INR 3961bn against INR
3586bn in FY17RE Positive
Increase of 10.5% over last year provides scope for
EPC and equipment companies to grow
Outlay for IPDS and DDUGJY for
improvement in urban and rural,
transmission and distribution
improvement increased to INR 106 bn from
INR 79bn in FY17RE Positive
Increases the pie for EPC contractors and
equipment manufacturers
Section 80-IA sunset clause isnot extended Negative

Sector BudgetProposal Nature ofImpact Comments
Power Lower BCD on LNG from 5% to 2.5% Noimpact
Under Power Sector Development Fund, government was already
supplying LNG without any duties, taxes.
Sec 80-IA exemption not extended beyond
FY17E Negative
Largely in continuation with earlier stance, construction companies
claiming the benefit will have full tax in FY18E.
Infrastructure Roads sector outlay up 11% toINR1.24t Positive Positive for both developerand construction companies.
Railways Capex up 9% YoY toINR1.3t Positive Positive for contractors like L&T, KEC andKalpataru
Infrastructure status to Affordable housing Positive
RE sector focus contractors like Alhuwalia contractors, BL Kashyap,
etc could bebeneficiary.
RealEstate
Holding period reduced to 2 years, vs 3 years
for eligibilityof LTCG exemption Positive
Inventory churn would help better price discovery. Partly negative
for primary developer / new launches.
Setoff lossses under Housingproperty
restricted toINR2lac Negative
Lower setoff vs unlimited setoff earlier will lower investor
demand, positive in long termthough.
Infrastructure status to Affordable housing Positive
LT funding will help improve RE sector /developer outlook with
focus on low/mid incomehousing.
Units area at 30sq.mtr (municipal limit of 4
metro)/60sq.mtr on carpet basis, vs build up
area; 100% PAT dedn for developer, time
increased to 5 years vs 3 years. Positive
Developers with focus on low/mid income housing project would
benefitimmensely. These could also entice developers to reinvent
business model to cater to this large market pie.
Developer can have 1 year stock in trade for
completedbuilding Negative
While positive given earlier stance of zero holding allowance, the
developer holding high inventory in completed project will be
negatively impacted (higher tax burden, on no/deemed cash
flows). This could lead to higher inventory sell-off.
Impact of Budget on Key Sectors

Sector FY18 Budget Proposals Nature of Impact Comments
Oil & Gas
Customs duty on LNG cut from 5% to 2.5% Positive Minor savings of US$ 0.2/mmbtu (Rs 0.4/sc m) at current
spot price. Beneficial for cos. across the value chain viz.
Petronet LNG (savings in internal consumption & higher R-
LNG vols.), GAIL (lower input cost for petchem
segment), IGL, MGL, Gujarat Gas (spread improvement to
the extent benefit is retained or pass on to customers to
make CNG/PNG/natural gas slightly more competitive
against alternate fuel)
Petroleum subsidy allocation of INR 275 bn
for FY17E and INR 250 bn for FY18E
Neutral Subsidy allocation for FY17 is adequate. For FY18,
allocation is adequate assuming current oil price at USD
55/bbl. If oil price is higher, then monthly price hike on
kerosene and LPG has to continue or allocation to be
increased by INR 70-80 bn to keep oil cos. out of
subsidy net at USD 60/bbl oil price
No reduction in cess on crude oil Negative Expectation was it will reduce to 10% which would have
increased ONGC's and Oil India's EPS by INR 2.5/sh and
INR 5.5/sh respectively.
Proposal to create mega oil company Neutral Too early to determine impac t and will be determined by
through merging some cos. how merger is structured. However, it is a difficult to
proposition to implement due to opposition from
employees union.
FY18 Budget Proposals Nature of Impact
Metals & Mining
Customs duty on HRC for welded tubes and
pipes reduced from 12.5% to 10%
Positive Mildly positive for pipe cos. such as Welspun Gujarat,
Jindal Saw and Maharashtra Seamless (ERW)
Customs duty on nickel reduced from 2.5%
to Nil
Positive Beneficial for stainless steel producers
Aluminium ore export duty at 15% Neutral Bauxite already had export duty and now extended to
other ores including laterite.
Impact of Budget on Key Sectors

Sector BudgetProposal Nature of Impact Comments
Consumer Reduction in personal incometax Positive Will boost low ticket consumption
Increased spendingon MNREGA Positive Will boost FMCG consumption
6% excise hike oncigarette Positive
This is a moderate hike in tax against
a steep hike expected.
Impact of Budget on Key Sectors
Sector Budget Proposal Nature of Impact Comments
Agriculture Fertilizer subsidy - Total fertilizer subsidy allocated is INR700bn
(INR498bn for urea + INR202bn for complex fertilizers).
Requirement for FY18 is estimated currently to be INR550bn.
Hence incremental subsidy allocated (INR150bn)will benefit
fertilizer companies as portion of their prior period receivables
get paid. Positive
Positive for fertilizer companies. This
will decrease their working capital
requirements and improve the RoCEfor
the business.
Agricultural Credit - target for FY18 has been fixed at a record
level of INR1,000bn. To support flow of credit to farmers,
government to support NABARD for computerisation and
integration over 3 years at a cost of INR19bn Positive
Can help improve demand for
agricultural inputs
Crop Insurance - Pradhan Mantri Fasal Bima Yojna(PMFBY)
coverage to be increased from 30% of cropped area in FY17 to
40% in FY18 and 50% in FY19. Budget provision of INR90bn in FY18
vs budget provision of INR55bn in FY17 Positive
Can help improve demand for
agricultural inputs
Irrigation - Pradhan Mantri Krishi Sinchai Yojana (PMKSY)- Per
Drop More Crop, allocation has been increased to INR74bn from
earlier budget of INR58bn. In addition, a Long Term Irrigation
Fund has already been set up in NABARD. Prime Minister has
announced an addition of INR200bn to its corpus. This will take
the total corpus of this Fund to INR400bn. A dedicated Micro
Irrigation Fund will be set up in NABARD to achieve the goal, ‘per
drop more crop’. The Fund will have an initial corpus of INR50bn.
Positive
Can help improve demand for
agricultural inputs

Sector Budget Proposal
Nature of Impact
(Positive/Negative/Neutral) Comments
Cementand
BuildingMaterials
Infrastructure status to affordable Housing Positive Housing accounts for 60-65% ofoverall
cement consumption in India and this
will increase the overall cement
demand.
Housing demand will have spillover
effect on building materialsdemand.
It will be partially offset by slowdown in
investment led housing demand.
For affordable housing instead of built up area, 30sqm
and 60sqm of carpet area will be considered. 30 sqm in
municipal limits and 60 sqm for rest of country will be
considered
Positive
Allocated Rs 290bn under Pradhan Mantri Awas Yojana
in rural and urban v/s allocation of Rs 209 bn in previous
year. Net increase of Rs 81 bn. Proposes to complete 10
mn houses by 2019 for the houseless and those living in
kutchahouses
Positive
In a negative move for landlords (those who buy and
rent), the set-off loss against income from house
property has been limited to Rs200k/annum against no
priorlimit
Negative
Increase in budget allocation for highways from around
Rs 580bn to Rs 650bn. Addition of 200bn to dedicated
long term irrigation fund in Nabard
Mildly Positive Roads have a lessercontribution to
overall cement demand and irrigationis
more driven by state budgets.
Person whose land has got pooled under land pooling
scheme of AP government for creation of new capital
will be exempt from capital gains tax provided they
were holding it as on 2/6/2014
Positive Exemption of capital gains taxwill
incentivise people to sell land and
improve land acquisition for the
upcoming capital finally drivingcement
demand from thecapital
Cut in import duty on LNG from 5% to 2.5% Positive Tile players have around 20% of costsas
power and fuel and they will benefit to
the extent of the price cuts which will
be passed on by LNG players
Impact of Budget on Key Sectors