carry 70% of the freight traffic by year...

TM

THE RAILWAY BUDGET WRAP-UP

Main Targets:• Market is estimating a business opportunity of nearly Rs6.7tn for the Railways over the

next 5 years• It is further speculated that the prices of AC one-tier and two-tier are likely to see a

marginal increase, while those of second class and AC three-tier could be hit harder• Railways has been contemplating on speeding up train movement in busy corridors and

has taken up the task of fencing-off the Delhi-Howrah and Delhi-Mumbai routes• Estimated cost is around Rs4.5mn per km which will enable trains to run at 160 km per

hour• Finance Minister Arun Jaitley may announce a special safety fund for the fiscal 2017-18

Passenger Comfort:• Recent rail accidents have raised the need for modernization of Indian Railways and has

put strong emphasis on improvement of safety measures in Indian Railways. The railministry is also expected to take steps towards indigenously developing Train CollisionAvoidance System (TCAS)

• In 2016, Indian Railways introduced a travel insurance scheme which allowedpassengers to get an insurance coverage up to Rs1mn. As per market speculators, thegovernment is planning to make this insurance coverage mandatory for all railwaypassengers

1st Feb 2017

Market Expectations

TM


Focus on Rail Infrastructure:• Under Mission25Tonnes, the ministry has planned to introduce high axle load wagons to

carry 70% of the freight traffic by year 2020.• Indian Railways is expected to continue with its efforts towards retrofitting coaches with

bio toilets, improved cleanliness and catering services, installation of railway displayscreens at stations and providing Wi-Fi services at A-1 to C category stations

• In order to support the recent demonetization move by the government, the railwayswill look at adding 400 stations under free Wi-Fi network

• Last year, the projected plan was to create nearly 1600 km of line electrification and thegovernment is expected to add another 2000 km of line under the same program

• During 2015-19, the government has planned 11100 km of line doubling and 17200 kmof new line commissioning to overcome the over utilization problem

1st Feb 2017

Market Expectations (contd)

TM


• Service charge on E-Tickets booked through IRCTC has been withdrawn• Cashless reservations have gone up from 58% to 68%• Accrual based financial statements to be rolled out by March 2019 as a part of the

accounting reform• Railway has set up joint ventures with 9 State Governments. As of now 70 projects have

been identified for construction and development• For 2017-18, CAPEX is pegged at Rs1.31 lakh crore. This includes Rs55,000cr to be

provided by the government• Rs18,000cr allocated towards Metro Rail project in BE 2017-18

1st Feb 2017

Financial Performance, Achievements and Investments

TM


• 500 stations to be made differently abled friendly by providing lifts and escalators• Nearly 7,000 stations to be fed with solar power in the medium term. 300 stations have

already been powered by solar energy. Works to be taken up for 2,000 stations as a partof 1,000 MW solar missions

• For Swachh Rail, SMS based ‘Clean my Coach’ service has been stared. ‘Coach Mitra’facility to be started. This shall be a single window interface to register all coach relatedcomplaints and requirements

• All coaches of Indian Railways to be fitted with bio toilets by 2019. Two solid wastemanagement plants are being set up at New Delhi and Jaipur railway stations

• Rashtriya Rail Sanraksha Kosh will be created as Rail safety fund. The corpus for thesame will be Rs1,00,000cr spread over a period of five years

• The ministry is estimating the elimination of Unmanned level crossings on Broad Gaugelines by the year 2020

• Ministry aims at procuring expert international assistance to improve safety awarenessand maintenance practices

1st Feb 2017

Passenger Comfort and Measures for Safety

TM


• The ministry aims at modernisation and upgradation of identified corridors. The same isexpected to increase the throughput by 10% over the next 3 years

• Railway is contemplating end to end integrated transport solutions for certain selectcommodities through partnership with some logistics players

• The ministry is contemplating laying-down of 3500km of railway lines in 2017-18 against2800km in 2016-17

• Steps to be taken to launch dedicated trains for tourism and pilgrimage• Aims at redevelopment of at least 25 stations• New metro rail policy will be announced. This will open an avenue for new jobs for the

youth• A new Metro Rail Act will be enacted to facilitate greater private participation and

investment in construction & operation.

1st Feb 2017

Freight Traffic and Trains

TM

• 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

Ten distinct Themes to foster the broad agenda

THE UNION BUDGET WRAP-UP 1st Feb 2017

TM

• With a better monsoon, agriculture is expected to grow at nearly 4.1% in the currentyear

• The target for agricultural credit in 2017-18 is fixed at Rs 10 lakh crores• The 60 days’ interest waiver announced on 31 Dec 2016 is bound to benefit the farmers• Government intends to support NABARD for computerisation and integration of all

63,000 functional Primary Agriculture Credit Societies with the Core Banking System ofDistrict Central Cooperative Banks. With an estimated cost of Rs1900cr, the same isexpected to be done in a span of 3 years at an estimated cost of Rs1,900cr.

• The coverage under Fasal Bima Yojana scheme will be increased from 30% of croppedarea in 2016-17 to 40% in 2017-18 and 50% in 2018-19 for which a budget provision ofRs9000cr has been made.

• The ministry aims at establishing new mini labs in Krishi Vigyan Kendras (KVKs) andensure 100% coverage of all the 648 KVKs in the country

• Ministry intends to integrate farmers who grow fruits and vegetables with agroprocessing units for better price realization

• The long term Irrigation Fund set up in NABARD is projected to be augmented by 100%where the total corpus of this Fund would be Rs40,000cr

• Aim at a Dedicated Micro Irrigation Fund in NABARD with an initial corpus of Rs5000cr inorder to achieve the mission of ‘per drop more crop’

Agriculture and Rural Sector


TM

• The coverage of National Agricultural Market (e-NAM) is contemplated to be expandedfrom 250 markets to 585 APMCs.

• The ministry is proposing a model law on contract farming• Dairy Processing and Infrastructure Development Fund will be set up in NABARD. The

same is expected to have a corpus of Rs2000cr which is poised to be increased toRs8000cr over a span of 3 years.

• More than Rs3lakh crores spent in rural areas every year.• Target to bring 1 crore households out of poverty and to make 50,000 Gram Panchayats

poverty free by 2019 to mark the 150th

birth anniversary of Gandhiji.• Women participation in MGNREGA has increased to 55% from less than 48%.• Allocation in MGNREGA at Rs48,000cr in 2017-18, the highest ever.• Under ‘Pradhan Mantri Gram Sadak Yojana (PMGSY)’ construction of roads accelerated

to 13 kms roads per day in 2016-17 as against an average of 73 km during 2011-2014.• Allocation under ‘Pradhan Mantri Awaas Yojana –Gramin’ increased from Rs15,000cr in

BE2016-17 to Rs23,000cr in 2017-18 with a target to complete 1 crore houses by 2019for the houseless and those living in kutcha houses.

• Well on target to achieve 100% village electrification by 1st May 2018.• Sanitation coverage in rural India has gone up from 42% in Oct 2014 to about 60%.• Total allocation for Rural, Agriculture and Allied sectors is Rs1,87,223cr.

Agriculture and Rural Sector (contd)


TM

• FIPB Route for FDIs to be abolished from FY2017-18 after its successful implementationof E-Filing and online processing of FDI applications. More than 90% FDI inflows are nowthrough automatic route

• Further liberalization of FDI policies under construction and shall be rolled out in thecoming months

• Registration of financial market intermediaries like mutual funds, brokers, portfoliomanagers etc to be made fully online by SEBI. This will improve ease of doing business.

• For FPIs, a common application form for registration, opening bank and demat A/c, andissue of PAN to be introduced. SEBI, RBI and CBDT to work in coordination for this. Thiswill enhance operational flexibility and ease of access to Indian capital markets

• Individual Demat accounts to be linked with Aadhar• Systematically important NBFCs regulated by RBI and above a certain net worth to be

categorized as QIBs to participate in IPOs. This shall strengthen the IPO market tochannelize more investments

• Listing and trading of Security receipts issued by a company under the SARFAESI Act tobe permitted in SEBI registered stock exchanges.

• A new ETF with diversified CPSE stocks and other government holdings to be launchedin 2017-18.

Banking and Financial Reforms


TM

• Rs10,000cr allocated for recapitalization of banks in 2017-18. Govt to launch two newschemes to promote usage of BHIM app viz. Referral Bonus Scheme for individuals and aCashback Scheme for merchants

• Referral Bonus Scheme for individuals and Cashback Scheme for merchants. Aadharenabled payment system ‘Aadhar Pay’ to be launched soon.

• 10 lakh new POS terminals to be brought in by banks by March 2017 and 20 lakh bySeptember 2017. ‘Aadhar Pay’ to be launched shortly as a payment gateway.

• Target revised to Rs2.44 lakh crore from Rs1.8 lakh crore under the ‘Pradhan MantriMudra Yojana (PMMY)’ for lending. Priority to be given to Dalits, Tribals, backwardclasses and women.

• Mission with a target of 2,500cr digital transactions through UPI, USSD, Aadhar Pay,IMPS and debit cards to be set up.

Banking and Financial Reforms (contd)


TM

• Allocation for Capital Expenditure increased by 25.4% over the previous year.• Rs4.11lakh crore being transferred to the states and union territories with legislatures as

against Rs3.6lakh crores in BE2016-17.• Net market borrowing of Government restricted to Rs3.48lakh crores after buyback in

2017-18, this is much lower than Rs4.25lakh crores of the previous year.• Revenue Deficit of 2.3% in BE2016-17 stands reduced to 2.1% in the Revised Estimates.

The Revenue Deficit for next year is pegged at 1.9% , against 2% mandated by the FRBMAct.

Prudent Fiscal Management


TM

• Net Tax Revenue as of 2013-14 was Rs11.38 lakh cr. It grew by 9.4% in 2014-15 and 17%in 2015-16. The year 2016-17 will end with a growth rate of 17% for the second year in arow.

• In the Profit Linked income tax exemption for promoters of affordable housing scheme;instead of built up area of 30 and 60 sq.mtr., the carpet area to be counted.

• 30 sq.mtr. to be applicable only in case of municipal limits of 4 metropolitan cities andthe rest of the country including in the peripheral areas of metros, 60 sq.mtr. to beapplied. Scheme is now to be completed in 5 years instead of 3 years

• For builders with constructed buildings as stock-in-trade, tax on notional rental incomewill only apply after one year of the end of the year in which completion certificate isreceived.

• Holding period for computing long term capital gains from transfer of immovableproperty reduced from 3 years to 2 years. Base year for indexation shifted to01.04.2001.

• Time limit for revising a tax return reduced to 12 months from the end of FY, at par withthe time period for filing a return. Time limit for completion of scrutiny assessmentbeing reduced further from 21 months to 18 months for AY2018-19 and further to 12months for AY2019-20 and thereafter.

Taxation


TM

Individual• Reduction in tax rates for individual assesses between incomes of Rs2.5lacs to Rs5lacs to

5% from the present 10%.• Surcharge of 10% to be levied of tax payable on categories of individuals whose annual

taxable income is between Rs50lakhs to Rs1cr. Existing surcharge of 15% of tax onpeople earning more than Rs1cr to continue.

• Threshold limit for maintaining books of accounts for individuals and HUF increasedfrom Rs10lacs to Rs25lacs or income from Rs1.2lacs to Rs2.5lacs.

• Professionals opting for presumptive taxation with receipt up to Rs50lacs p.a can payadvance tax in one installment instead of four.

• Sec 115BBDA of Income Tax Act which provides for levy of 10% tax on dividend incomeexceeding Rs10lakhs to be extended to all resident persons except domestic companiesor trusts or institutions or fund registered u/s 12AA or referred to in sec 10(23)C.

• Money, immovable property or specified movable property received withoutconsideration or with inadequate consideration, by any person, subject to certainexemption and exceptions, shall be taxable if its value exceeds rupees fifty thousand u/s56 of the Income Tax Act.

• Set off of losses from House Property against any other head of income to be restrictedto Rs2lakhs during the current year. The loss not so set off to be carried forward for setoff for 8 assessment years.

Direct Taxation


TM

Corporate• Concessional withholding rate of 5% charged on interest earned by foreign entities in

external commercial borrowings or in bonds and Government securities is extended to30.6.2020. This benefit is also extended to Rupee Denominated (Masala) Bonds.

• For Start ups, the condition of continuous holding of 51% of voting rights has beenrelaxed subject to the condition that the holding of the original promoter(s) continue.

• The profit linked deduction available to the start up for 3 years out of 5 years is changedto 3 years out of 7 years.

• MAT credit to be carried forward for 15 years instead of 10 years at present.• Corporate tax rate for MSME with an annual turnover of upto Rs50cr reduced to 25%.• Allowable provision for NPA increased from 7.5% to 8.5%. Interest taxable on receipt

basis instead on accrual basis in respect of NPA accounts of all non-scheduled banks alsoto be treated at par with scheduled banks.

• Under presumptive taxation scheme, 6% of the turnover to be counted as presumptiveincome instead of 8% currently.

• Cash expenditure allowable for deduction to be capped at Rs10,000.• Cash donation to be received by a Charitable trust to be capped at Rs2,000. Maximum

amount of cash donation that a political party can receive to be Rs2,000 from oneperson.

• Threshold limit for Audit of business entities increased from Rs1cr to Rs2cr.

Direct Taxation (contd.)


TM

GST:• The GST Council has finalised its recommendations on almost all the issues based on

consensus on the basis of 9 meetings held.• Preparation of IT system for GST is also on schedule.• The extensive reach-out efforts to trade and industry for GST will start from 1st April,

2017 to make them aware of the new taxation system.

Excise & Custom Duty:• Basic Custom duty on LNG reduced to 2.5% from 5%.• BCD, Excise/CV Duty and SAD on Miniaturized POS Card Reader for m-POS, micro ATM

standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners and their partsand components to be exempt.

Indirect Taxation


TM

• Total allocation for infrastructure development stands at Rs3,96,135cr for 2017-18• Budget allocation of Rs2,41,387 has been made for the transportation sector as a whole

in 2017-18• For the road sector, budget allocation for highways went up to Rs64,900cr in 2017-18

from Rs57,976cr in BE2016-17• 2,000 kms of coastal connectivity roads have been identified for construction and

development. This shall provide better connectivity with ports and remote villages• Under the ‘Pradhan Mantri Gram Sadak Yojna (PMGSY)’, a total of about 1,40,000 kms

of roads have been constructed from 2014-15 till current year• Specific programme for development of multi-modal logistics parks along with multi-

modal transport facilities to be drawn up and maintained• Select airports in Tier 2 cities to be taken up for operation and maintained by the PPP

mode. Airport Authority of India (AAI) act to be will be amended to effect monetizationof land assets

• By the end of 2017-18, high speed broadband connectivity in optical fibre to be madeavailable in more than 1.5 Lakh gram panchayats, with wifi hot spots and access todigital services at low tariffs

Infrastructure


TM

• Under ‘BharatNet’ project, a total of 1,50,000 kms of OFC has been laid• Rs10,000cr to be allocated for BharatNet project in FY2017-18• In the Energy Sector, it is proposed to set up 2 strategic crude oil reserves at

Chandikhole in Odisha and Bikaner in Rajasthan. Strategic reserve capacity to be 15.33MT after this

• Second phase of Solar Park development to be taken up for additional 20,000 MWcapacities

• Eco-System to make India a global hub for electronics manufacturing is being created• Allocation for incentive schemes like M-SIPS and EDF increased to an all time high of

Rs745cr in 2017-18. Over 250 investment proposals worth Rs1.26 lakh crores forelectronics manufacturing have been received in last 2 years.

• A new and restructured central scheme viz. ‘Trade Infrastructure for Export Scheme(TIES)’ to be launched in 2017-18

Infrastructure


TM

• The Govt aims to eliminate the following chronic diseases in totality:- Measles by 2020-Kala-Azar & Filariasis by 2017-Leprosy by 2018-Tuberculosis by 2025

• Reduce IMR from 39 in 2014 to 28 by 2019 and MMR from 167 in 2011-13 to 100 by2018-20

• Approximately 1.5 Lac Health centres to be transformed to ‘Health & Wellness Centres’.• In the scheme of financial assistance to pregnant women, Rs6,000 to be directly

transferred to the bank a/c of pregnant women who undergo institutional delivery andvaccinate their children

• 5,000 new Post Graduate Medical seats to be created per annum• Setup of two new AIIMS in Jharkhand and Gujarat• Aadhar based smart cards for senior citizens containing their health details to be

introduced. 15 districts will be taken up on pilot basis in 2017-18. LIC to implement ascheme for senior citizens to provide assured pension, with a guaranteed return of 8%p.a. for 10 years.

Social Spending- Health & Education


TM

• Innovation fund for Secondary Education to be set up in 3,479 educationally backwarddistricts. This shall encourage local innovation for ensuring universal access, genderparity and quality improvement

• For leveraging IT, ‘SWAYAM’ platform to be launched with nearly 350 online courses forstudents to virtually attend courses taught by the best faculty

• ‘National Testing Agency’ to be set up as the premier testing organization to conduct allentrance examinations for higher education institutions

• Rs4,000cr to be allocated to the launch of ‘Skill Acquisition and Knowledge Awarenessfor Livelihood Promotion program (SANKALP)’. This shall provide relevant training toapproximately 3.5cr youth

• Rs2,200cr to be allocated to the launch of the next phase of ‘Skill Strengthening forIndustrial Value Enhancement (STRIVE)’. This will focus on improving the quality andmarket relevance of vocational training through industry cluster approach

• Extend the ‘Pradhan Mantri Kaushal Kendras (PMKK)’ to 600 districts across the countryfrom currently 60 districts. These centres offer advanced training and courses in foreignlanguage. 100 International Skill Centres to be set up across the country

Social Spending- Health & Education


TM

Major Programmes Budget 2017-18 (Rscr)Mahatma Gandhi National Rural Employment Guarantee Programme 48000

Pradhan Mantri Awas Yojna 29043

National Rural Drinking Water Mission 6050

National Social Assistance Progamme 9500

Pradhan Mantri Gram Sadak Yojna 19000

National Education Mission including Sarva Shiksha Abhiyan 29556

National Programme of Mid-Day Meal in Schools 10000

Integrated Child Development Services 20755

National Health Mission 27131

Swachh Bharat Mission 16248

National Livelihood Mission - Ajeevika 4849

Urban Rejuvenation Mission : AMRUT & Smart Cities Mission 9000

Green Revolution 13741

White Revolution 1634

Blue Revolution 401

Pradhan Mantri Krishi Sinchai Yojana (PMKSY) 7344

Mission for Empowerment and Protection for Women 1089

Environment, Forestry and Wildlife 962

Employment Generation Programmes other than MGNREGS 11640

Pradhan Mantri Fasal Bima Yojana 9000

Optical Fibre Cable based network for Defence Services 3000

Price Stabilisation Fund for pulses 3500

Bharatnet 10000

Metro Projects 18000

Recapitalization of Public Sector Banks according to the Indradhanush scheme 10000

Integrated Power Development Scheme and Deen Dayal Upadhyaya Gram Jyoti Yojna 10635

Namami Gange- National Ganga Plan 2250

Sagarmala 600

LPG connection to poor households 2500

THE UNION BUDGET WRAP-UP

Source: Union Budget 2016-17

1st Feb 2017

TM

Sectoral Impact Analysis


TM


Sector Announcement ImpactOil and Gas •BCD reduced from 5% to 2.5% for LNG

•To create integrated public sector ‘oil major’

Infrastructure,Cement & Metal

•Record allocation of Rs3.96 lakh crore•Also affordable housing is given infrastructure status•Capital gain tax reduced to 2yrs from 3 yrs

Chemicals and Petrochemicals

•BCD reduced from 7.5% to 5%

Healthcare •Various initiatives in terms of disease eradicationwere mentioned•Corporate tax – No mention•Most of the expectations had no mention in thebudget

Fertilizer •Higher agricultural credit, higher allocation for irrigation projects, crop insurance scheme and, MGNREGA scheme, expansion in coverage of eNAM•Subsidy is same as previous year at Rs32,00cr•Subsidy for the P&K segment has been hiked by 6%

Automobiles •Reducing tax burden of individual of income Rs2.5-5 lakhs boosts prospective small car sales •Spike in Infra spend would spur buying in commercial space

TM


Sector Announcement ImpactFMCG •Increased personal disposable income in the hands

of the salaried class due to cut in the tax rates, increased spending in rural areas and record high allocation of Rs48,000cr for MNREGA

Media and Entertainment

Abolishing the FIPB would induce more foreignstudios to invest in IndiaOnline payments and digital transactions getting aboost

Education •Increased emphasis on Science education•Innovative fund for secondary education•350 virtual courses on Swayam Platform

TM

SUMMARY


NOTHING NEGATIVE IS POSITIVE

The budget post demonetization was expected by many to dole out some goodies both forthe individuals and corporates. There were lot of expectations both on the positive side andon the negative side ( LTGT and STGT were expected to be tinkered). The absence of anynegativity that affects the investor directly was a big positive relief which was evidentthrough the positive reaction by the markets. If one analyzes the budget, one can concludethat the focus was on Agrarian Economy (Rural), Infrastructure stimulus and job creationthrough various programmes planned out.

The major positive from the budget was the abolishing of FIBP and maintenance of FiscalPrudence. The other major factor which was positive was defining of affordable housing asInfrastructure Status. This proposal gives a major boost to the Infrastructure and Housingsector and related activities.

It appears that the Electronics manufacturing sector would be the next big growth area as alot of focus has been on this in the budget.

The key lies in the implementation of the budget proposals if done would propel Economicgrowth in distant future.

TM

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Disclaimers and Disclosures


carry 70% of the freight traffic by year...

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