The budget for 2018-19 that was introduced by the Finance Minister, Shri Arun Jaitley in the parliament early this month has reinforced the government’s agenda to bring reforms and improve macros. The FM maintained FY2018 fiscal deficit target of 3.5 per cent and has set a target of 3.3 per cent for FY2019, which is slightly higher than the earlier target of 3.0 per cent. However, with improving tax compliance and GST collection, the target looks achievable.
In this Budget, the FM has particularly focused on strengthening agriculture and rural economy. Also, the FM has announced 10 per cent long term capital gain tax on equity investments over `1.0-lakh. The Government has given a lofty disinvestment target of `100,000-cr for FY18 and `80,000-cr for FY19 to support its fiscal maths. The government has generated disinvestment proceeds of `54,338-cr so far and the `37,000-cr ONGC-HPCL deal is expected to bring the overall divestment proceeds in FY18 to cross `1.0-lakh crore mark.
During the year, stake sale/IPO of GIC Re and New India Assurance mobilised `17,357-cr during FY18. The government has initiated strategic disinvestment in 24 PSUs, which include Air India in this fiscal, and has kept `80,000-cr disinvestment target for FY19.
One of the key highlights of the budget is that, in order to further make the small enterprises more competitive, the government has reduced the tax rate to 25 per cent v/s. 30 per cent for entities having revenue of up to `250-cr. This will help in removing some distress from the MSMEs.
On the infrastructure basket spend side, it is to go up by 21 per cent in FY19BE (`5.97-trillion).

Sectoral Impact

INFRASTRUCTURE

Announcement
-  Allocation for road and highways enhanced by 16 per cent YoY to `710-bn.
-  Allocation for railways enhanced by 32 per cent YoY to `551-bn.
-  Continued focus on urban development with allocations of `418-bn.
-  `330-bn for PMAY-Grameen, `315-bn for PMAY-Urban, and `190-bn for PMGSY.
-  Irrigation allocation of `26-bn under the Pradhan Mantri Krishi Sinchai Yojana. This would benefit various EPC companies.
-  Capital Outlay on Indian Railways increased by 22 per cent to `915.6-bn.
-  Increase in airport capacity more than five times to handle a billion trips a year.
-  Created a dedicated Affordable Housing Fund to be funded from priority sector lending shortfall and fully serviced bonds by central government.

Impact
-  Positive for Road EPC players, and other diversified EPC players, and those focused on inland waterways projects.

---------------

AUTOMOBILE

Announcement
-  MGNREGA allocation has increased from `48,000-cr in FY2018 to `55,000-cr in FY2019. Also, substantially increased allocation of National Rural Livelihood Mission to `5750-cr in FY2019.
-  35,000 km of Roads under Bharat Mala to be expedited and hike on Infrastructure spent.
-  Increase in custom duty of Radial tyres used in trucks and buses.

Impact
-  These decisions are likely to create a positive sentiment among first time buyers for entry level small cars, two wheelers and tractors. Also, it would be positive for CV, especially Heavy duty vehicles and construction equipment. Lastly, it would be positive for all tyres domestic companies.

---------------

BUILDING MATERIALS

Announcement
-  Continued focus on affordable housing through schemes like PMAY–Grameen and PMAY–Urban to boost demand for tiles and plywood players.
-  Planned construction of 20mn toilets under Swachch Bharat Mission.

Impact
-  Positive for manufacturers of Tiles, Sanitaryware, plyboards, etc.

---------------

CAPITAL GOODS

Announcement
-  Various measures to boost rural income.
-  Emphasis on road construction – `5.97-trillion allocation for Bharat Mala project.
-  Continued focus in power sector – `160-bn allocation for SaubhagyaYojona and `38-bn for Deendayal Upadhayaya Gram Jyoti Yojna.
-  Railways modernization initiatives – `950-bn allocation for overall upgradation in the rail infrastructure, including signalling, automation, tracks. Two major urban projects in Mumbai and Bengaluru at the cost of `570-bn.
-  Smart Cities Mission – `2-trillion outlay for developing 99 smart cities.

Impact
-  Positive for stimulating rural demand; B2C companies like Havells, Bajaj Electricals, Eveready, Crompton consumer etc. to benefit. Also, positive for stimulating demand for Industrial goods, which would be positive for B2B companies like L&T, Cummins India, Siemens, ABB, and ACE.
-  Focus on power sector would be positive for rural electrification. So, companies like L&T, Siemens, ABB, CG Power would benefit. Similarly, with the focus on railways modernisation, companies like L&T, Siemens, Cummins India, Kalpataru Power, Texmaco would stand to benefit. Also, companies like L&T, Siemens, Cummins India, Kalpataru Power, Elgi Equipment, Maharashtra Seamless would benefit on account of the Smart Cities Mission.

---------------

CEMENT

Announcement
-  Higher allocation for Infrastructure, increased thrust on Housing for All by 2022, and building toilets under Swachh Bharat Abhiyan.
-  Infrastructure receives massive `5.97-lakh crore for FY19, up by 21 per cent.

Impact
-  Positive for cement producers with pan-India presence, like Ultratech Cement, Shree Cement and The Ramco Cements.

---------------

METALS & MINING

Announcement
-  Rise in allocation to infra space.

Impact
-  Marginally positive for steel producers, as it would lead to incrementally better demand for steel.

---------------

SHIPPING AND LOGISTICS

Announcement
-  Heavy work on in full swing on the western dedicated freight corridor (WDFC) – First Phase of which is expected to be commissioned in FY20E.
-  Budgetary support of `4.95-bn for FY19 vs. `3.51-bn in FY18 for Cochin Shipyard Limited (CSL), which would benefit CSL.

Impact
-  WDFC is expected to benefit companies involved in container rail operations, inland container depots and container freight stations.