The much-awaited budget is out, the market was nervous last week and we saw a fall of more than 6%. However, the market seems to be enjoying the budget and on the budget day, it was up almost 5%, the highest budget day rally since 1997.
Let us see the key points discussed in the market, what all the budget has for investors and what sectors will be in focus in the coming months.
The broader outlook
- At present, India' fiscal deficit stands at 9.5% of the GDP and the estimated number for 2021-22 is 6.8%. Fiscal deficit comes into picture when the expenditure of the government exceeds its revenue in a year and it is the difference between the two. Higher percentage of its donates that the government is spending on development works like roads, highways, airports which will later generate revenue for the government. However, a deficit of 9.5% is a sign of worry for India at present even though the world is coming out of the pandemic situation.
- A Unified Securities Market Code to be created, consolidating provisions of the SEBI Act, Depositories Act, and two other laws
- In the insurance sector, the FDI limit to increase from current 49% to 74%
- Government to form an asset reconstruction company which will care of stressed loans of the banks
- Deposit insurance increased from Rs 1 lakh to Rs 5 lakh for bank depositors
- Proposal to decriminalize Limited Liability Partnership Act of 2008. This will benefit more than two lakh companies in easing their compliance requirements
- Two PSU bank and one general insurance firm to be disinvested this year, also, strategic sale of BPCL, IDBI Bank, Air India to happen
- An IPO of LIC to debut this fiscal
- Startups will get capital gains exemption by one more year to 31 March 2022
- The government also proposed to incentivise incorporation of one-person companies, a move which will benefit startups
- A world-class' fintech hub at GIFT City (Gujarat International Finance Tec-City) to be set up that will encourage and develop innovative financial technology products and services
Health and Sanitation:
- Government to launch a new scheme, PM Atma Nirbhar Swasthya Bharat Yojana
- Modernizing of existing health units at 32 airports, 15 seaports and land ports
- 100 new Sainik Schools to be set up
- 750 Eklavya schools to be set up in tribal areas
- A Central University to come up in Ladakh
- Vehicle scrapping policy to phase out old and unfit vehicles – all vehicles to undergo a fitness test in automated fitness centers every 20 years in case of personal vehicle and every 15 years in case of commercial vehicles
- Highway and road works announced in Kerala, Tamil Nadu, West Bengal and Assam
- 100% electrification of Railways to be completed by 2023 from current 63%
- Metro services announced in 27 cities - To boost urban infrastructure, MetroLite and Metro New technologies will be deployed to provide metro rail systems in tier two cities and the peripheral areas of tier-one cities.
- Senior citizens above 75 years who get pension and earn interest from deposits need not file ITR
- Reopening window for IT assessment cases reduced from 6 to 3 years. However, in case of serious tax evasion cases (Rs. 50 lakh or more), it can go up to 10 years
- Affordable housing projects to get a tax holiday for one year
- Compliance burden of small trusts whose annual receipts do not exceed Rs. 5 crores to be eased
- Duty of copper scrap reduced to 2.5%
- Custom duty on gold and silver to be rationalized. Gold and silver has a customs duty of 12.5 per cent. The duty was raised from 10 per cent in July 2019 that increased prices of precious metals sharply. To bring it closer to previous levels, the government is rationalising custom duty on gold and silver. The import duty on gold will be now 10.75 percent.
- Agriculture infrastructure fund to be made available for Agricultural Produce Market Committee (APMC) for augmenting their infrastructure
- 1,000 more Mandis to be integrated into the E-NAM market place
Sectors on focus
Infrastructure - The government has aggressive spending plans, one of the most benefited sectors is Infrastructure. The budget for Infra saw a 34% increase. The government also will set a Developmental Financial Institution (DFI) that will enable low-cost funds for infrastructure investments.
Insurance - With the increase in the cap of FDI in the insurance sector, more inflow is expected in this sector and related companies surely will benefit.
Pharma - The pharma sector has higher overall expenditure in this budget which will boost the growth of the companies.
There has been no change in tax slabs and experts believe - it is not a budget for common people. However, the budget attempts to strengthen the long-term fundamentals of the economy by taking steps toward agriculture, Health, infrastructure, etc.
Stocklylab helps you in picking only quality stocks through its fundamental analysis algorithm and fundamentals don’t lie.