Budget 2017: FM increases allocation to Defence sector

The Finance Minister has increased the amount bailed out, allocating Rs 2,74,114 crore to the Defence sector, which is excluding pension. Out of the total capital allocated, Rs 86,000 crore has been dedicated to defence capital.

The Centre has also developed a defence travel system through which the soldiers can book tickets. A web based system for the defence pensioners has also been developed.

The Defence sector is of prime importance to any nation, and our country, India, currently ranks 4^th in the world according to the expenditure made in the sector.

Reacting to the news, BEL and Astra Microwave are trading up with the gains of 1.66% and 0.93% respectively. 

Budget 2016: Positive for bond market

Since the announcement of Union Budget 016-17, on February 29, yields on the 10-year benchmark paper have come down by over 15 bps. They are now trading at 7.62 percent, as against 7.78 percent, a day before the Budget was announced. Analysts expect bond yields to hover at 7.50 levels, in anticipation of the next rate cut, for the short term.

Since the announcement of Union Budget 016-17, on February 29, yields on the 10-year benchmark paper have come down by over 15 bps. They are now trading at 7.62 percent, as against 7.78 percent, a day before the Budget was announced. Bond yields and prices are inversely related. Just before the Budget was announced, most market participants had expected bond yields to touch 8 percent levels. However, the budget was more positive for bond market as the finance minister, Arun Jaitley, pegged fiscal deficit for 2016-17 at 3.5 percent of the gross domestic product and said that it is prudent to stick to consolidation. This has also led to expectations for a reduction in policy rates by the Reserve Bank of India (RBI). While the central bank will review its monetary policy next month, on 5 April, most analysts expect the RBI to slash the repo rate by 25 basis points. Markets also anticipate an out-of-cycle rate cut.

On budget day, the benchmark 10-year bond yields came down by 16 bps, to close at 7.62 percent, after falling as much as 18 bps during intraday trading. Analysts now expect bond yields to hover at 7.50 levels, in anticipation of the next rate cut, for the short term. The RBI did not cut rates in its monetary policy review on February 2, but was waiting for the Budget to decide on its next move. “Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17,” the RBI said in its last monetary policy.

Going by the current numbers, inflation too has remained within the Reserve Bank of India’s (RBI) indicated trajectory. Consumer Price Inflation or the CPI stands at 5.69 percent in February, lower than RBI’s projected target of 6 percent for January 2016.

On account of liquidity concerns, in the beginning last month, yields on the ten-year benchmark bond were trading higher at 7.83 per cent. The central bank has reduced its benchmark repo rate by 125 basis points to 6.75 percent from 8 percent in calendar year 2015.

With advance tax payments to kick in this month, which would lead to tightness of liquidity in the system, the RBI said it will inject adequate additional liquidity using a combination of appropriate instruments, while continuing with its normal Liquidity Adjustment Facility (LAF) operations. “With a view to addressing the expected tightening of liquidity conditions in March on account of advance tax payments by corporates and in order to provide flexibility to the banking system in its liquidity management towards March-end 2016, the Reserve Bank of India will inject adequate additional liquidity using a combination of appropriate instruments, while continuing with its normal LAF operations. Based on a continuous assessment of the evolving liquidity conditions, the tenor and magnitude of additional liquidity operations will be announced a few days in advance of each tranche,” a RBI release said, last month.

Last week, the central bank said it will infuse Rs 15,000 crore liquidity through open market operations (OMOs) purchase of government securities.

After the June rate cut, bank borrowing under the LAF fell to zero on average, in line with the RBI’s strategy of easing its monetary stance. But around the time of the October cut, banks began to borrow again, demanding an average of Rs 1 lakh crore per day, rising to Rs 1.75 lakh crore per day by February 2016, the Economic Survey said. Short-term market interest rates are most influenced by RBI policy. In the periods following the first three rate cuts, the spread between the 91 day T-bill rate and the repo rate declined. But it increased sharply starting in August and continuing after the rate cut in October, it added. 

Budget impact: Positive for Banks, NBFCs but unchanged allocation for re-capitalisation to hit PSU banks

Positive for the sector in general as this would keep government's market borrowings in check and encourage RBI to ease rates.

Unchanged allocation has been made for re-capitalisation of banks in FY17 and over the medium-term. The Government’s language on extending further support remains constructive but delayed action could increase re-capitalisation requirement significantly. Introduction of new bankruptcy code would be positive in quicker resolution of distressed loans, however, the benefits are expected to accrue over long-term. Bank Board Bureau likely to be implemented in FY17 but little detail provided so far on the roadmap for implementation.  State owned banks remain as key instrument for achieving government’s financial inclusion plans and delivering rural credit.
All state-owned banks could get hurt.

BFSI/Exchanges – Positive

Key Announcement	Impact
Retention of Fiscal Deficit target of 3.5% for FY17	Positive for the sector in general as this would keep government's market borrowings in check and encourage RBI to ease rates
No increase in FY17 re-capitalisation committment of Rs. 25,000cr for PSU Banks	Negative for PSU Banks; more so for smaller banks having very weak capital position
Bank Board Bureau to be operationalized during FY17 and a roadmap for consolidation of PSU Banks to be spelt out	Positive for PSU Banks; especially for the smaller PSBs as they could be merged with relatively stronger large PSB
Debt Recovery Tribunals will be strengthened for speedier resolution of stressed assets	Positive for the sector, especially for PSU Banks
Government to take forward the process of transformation of IDBI Bank and would also consider the option of reducing its stake to below 50%.	Positive signaling impact for beleaguered PSU Banks
NBFCs to be eligible for deduction to the extent of 5% of income in respect of provision for bad and doubtful debts	Positive for all NBFCs; would be earnings accretive
Multiple measures and incentives announced to spur development of affordable housing	Positive for Housing Finance Cos such as DHFL, LIC HF, Repco, Can Fin, etc
For first home buyers, additional interest deduction of Rs 50,000 per annum for loans up to Rs. 35 lakh sanctioned during the next financial year provided the value of the house does not exceed Rs 50 lakh.	Positive for Housing Finance Cos in general
Credit target under Pradhan Mantri Mudra Yojana (scheme launched to benefit small/micro entrepreneurs) increased significantly to Rs. 180,000cr for FY17	Positive for Banks, NBFCs and MFIs having exposure to Micro & Small Enterprise lending
Allocations materially raised to various schemes focused on farm, rural and social sectors	Positive for NBFCs having higher exposure to rural lending  such as Mahindra Finance, Magma, SCUF, etc
A number of measures will be undertaken to facilitate deepening of corporate bond market	Positive for NBFCs; could help in reducing cost of funds in the longer term
Enabling the sponsor of an ARC to hold up to 100% stake in it and permit non-institutional investors to invest in securitization receipts	Positive for the Banking sector as a whole as ARCs can play a larger role in tackling stressed assets in the system
100% FDI permitted in ARCs through automatic route. FPIs allowed to invest up to 100% of each tranche in securities receipts issued by ARCs subject to sectoral caps	Could increase the number of ARCs in the country which can help banks in offloading stress
Foreign investment up to 49% allowed in Insurance sector via the automatic route	Positive for Reliance Capital, Max India, Bajaj Finserve, ICICI Bank, Kotak Bank, HDFC Ltd., Cholamandalam Invt, etc

Budget 2016-17 stays the Fiscal Consolidation Course: India Ratings

A look at the budget math indicates that the revenue expectation is highly optimistic and for the government to stay on the consolidation path, they will need to cut capital expenditure, says India Ratings and Research (Ind-Ra).

A look at the budget math indicates that the revenue expectation is highly optimistic and for the government to stay on the consolidation path, they will need to cut capital expenditure, says India Ratings and Research (Ind-Ra). The budget pegs revenue receipts to increase by 14.2%. This hinges on 18.1% growth in income tax, 12.2% growth in excise duty and 76.67% growth in non-tax revenue from communication services. The assumed buoyancy of income tax is optimistic; excise resilience seems believable on the back of the increase in clean environment cess and infrastructure cess. Non-tax revenue from other communication services appears to be optimistic. As usual disinvestment receipts (budgeted at INR360bn) are dependent on market conditions and the government’s ability to stagger it throughout the year. Strategic disinvestments have proved to be a problematic area for the government in the past and will impact receipts. The budget is hopeful on the expenditure side and non-plan revenue expenditure excluding interest, subsidy, pension and salary is budgeted to decline by 7.1%, which is highly optimistic. In order to adhere to the 3.5% fiscal deficit to GDP target, the finance minister may follow the old route of cutting down capital expenditure, as has been the case even in 2015-16. Both capital expenditure and capital expenditure including grants for capital creation has declined as a proportion of GDP in 2015-16 (RE) from 2015-16 (BE).

Room for Rate Cut Opens Up: Ind-Ra believes rate reduction may be as early as April 2016 policy meeting, following the government sticking to both FY16 and FY17’s fiscal deficit target. Additionally, the ongoing supply pressure in the bond market is likely to ease in the near term- as government budgets for lower net borrowing of INR4.25trn in FY17 via dated securities (compared to INR4.41trn FY16RE). This along with the governments intent to enact the Insolvency and Bankruptcy Code is likely to benefit the domestic bond market outlook as well as have a salutary positive impact on the Indian currency. Although budget FY17 stuck to the road map presented earlier, it has announced constitution of a committee to review the implementation of the FRBM act with a view to make it more dynamic and counter cyclical. This will give the government more elbow room to undertake growth boosting measures, while adhering to fiscal discipline. Consequently, fiscal targets and its implementation during the coming years may undergo a change.  The union budget FY17, has also provided the structure of monetary policy committee with 3 members each from the government and the RBI. RBI governor will have the deciding vote in case of a tie. Ind-Ra believes while this arrangement will facilitate the two way flow of thinking and result in a better synchronization of monetary and fiscal policy, it will also protect the supremacy of RBI in case of monetary policy.

Taxing Budget - Sensex, Nifty come crashing down as Jaitley speaks

The BSE Mid-cap Index is trading down 1.14% at 9,464, whereas BSE Small-cap Index is trading down 1.30% at 9,431.

At 12:31 PM, the S&P BSE Sensex is trading at 22,741 down 413 points, while NSE Nifty is trading at 6,933 down 96 points.

The BSE Mid-cap Index is trading down 1.14% at 9,464, whereas BSE Small-cap Index is trading down 1.30% at 9,431.

SBI, ICICI Bank, Tata Steel, ONGC, Dr.Reddy's Lab and Sun Pharma are among the gainers, whereas  ITC, GAIL, HUL, Cipla, Bharti Airtel and Adani Ports are losing sheen on BSE.

Some buying activity is seen in realty, metal, banking, finance, basic materials and capital goods sectors, while FMCG, consumer durables and IT sectors are showing weakness on BSE.

The INDIA VIX is down 1.26% at 21.5875. Out of 1,792 stocks traded on the NSE, 730 declined, 730 advanced and 363 remained unchanged today.

A total of six stocks registered a fresh 52-week high in trades today, while 152 stocks touched a new 52-week low on the NSE.

The Indian rupee opened lower by 7 paisa at 68.69/$ on Monday as against previous close of 68.62/$. On Friday, rupee remained weak in the offshore NDF markets, weighed by the strength in greenback against the basket of currencies.


ITC slipped 1.4% to Rs.287 on BSE. The expectations are that there will be a likely increase in excise duty on cigarette. According to reports, tobacco products may again attract higher taxes in the upcoming Union Budget 2016-17. Highlighting a discrepancy between the existing tobacco prices and rising income levels, the health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products, as per reports.

UltraTech Cement gained 1% to Rs. 2,795 on BSE. The company will acquire Jaiprakash Associates' cement factories in six states for an enterprise value of Rs. 16,500 crore, among the biggest distress sales of assets as India's banks get proactive on bad loans.


Andhra Bank jumped 1.5% to Rs.47.55 on BSE. The bank has informed BSE that the Board of Directors of the Bank has approved raising of equity capital by issuance of 2,88,53,210 equity shares of Rs. 10/- each for cash at Rs. 47.30p. per share (including premium of Rs. 37.30p. per share) as may be determined by the Board in accordance with regulation 76(4) of SEBI (ICDR) Regulations, 2009 and aggregating upto Rs. 136.48 Crore on preferential basis to Life Insurance Corporation of India subject to Shareholders' approval at the Extraordinary General Meeting proposed to be held on March 21, 2016.

Live: Key Highlights of Union Budget 2016-17

Budget 2016 speech comes to a close; Finance Bill has been moved in Parliament. Expenditure for FY17 set at Rs. 19.78 Lakh Crore. FY17 Fiscal Deficit target At 3.5%.

Lights, Camera, Action....And the Oscar goes to SPOTLIGHT. Will FM maintain the world's spotlight with the Union Budget this time. Watch all the action here...

Budget 2016 speech comes to a close; Finance Bill has been moved in Parliament

Creating 11 New Benches Of Indirect Tax Tribunal
 
Propose To Abolish 13 Different Cesses Levied By Ministries
 
Revenue Secy to head committee on taxation. No penalty, interest in ongoing retrospective tax cases

Govt to levy 1% on petrol and CNG cars, 2.5% on diesel cars and 4% on SUVs

Excise duty on Tobacco products increased by 10-15%
 
11 new benches of Cutsoms Excise Services Appelate Tribunal to be introduced
 
Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties
 
Levy of heavy penalty for non payment of tax has led to high litigation. Proposal to modify scheme for penalties
 
A new grading system of imposing penalties to be introduced on the basis of under reporting or concealment of income
 
Move towards a low tax regime with non litigious approach

Clean Energy Cess to renamed as Clean Environment Cess
 

Limited tax compliance window from Jun 1 - Sep 30 for declaring undisclosed income at 45% incl. surcharge and penalties

Clean energy cess increased from RS. 200/ton to 400/ton on coal, lignite and peat

 
Krishi Kalyan Cess to be imposed on all taxable services for agricultural sector
 
15% Surcharge on income above 1 Crore

Excise duty on tobacco products other than Bidi to above 10%.

Levy 0.5% Agri Cess on All Taxable Services from June 1

Service tax exempted for housing construction of houses less than 60 sq. m

GAAR will be implemented from April 1 2017
 
100% deduction for profits of undertakings from housing projects in cities during Jun '16 - Mar '19
 
New manufacturing cos. after March 1, 2016 to be taxed at 25% plus cess + surcharge
 
DDT Exempted From REITs

Service tax exempted for general insurance schemes under Niramayi Swasthya Bima Yojana
 
Accelerated depreciation to be limited to 40% wef from April 1, 2017 as part of phasing out of exemptions to industry

A Special Patent Regime proposed to power innovation and research

Committed to implementing GAAR from April 1, 2017

Committed to increase investment in asset reconstruction companies
 
Incentives for new manufacturing companies and relatively small enterprise companies

Accelerated Depreciation Limited For R&D To 150% From FY18

Limit of deduction of rent paid increased to Rs 60,000 per annum

Government acknowledges the role of tax payers in Nation building

2 crore tax payers to get relief of Rs 3,000 in case of income under Rs 5 lakh
 
Revenue deficit estimate for FY 2015-16 down to 2.5% from earlier estimates
 
Propose the ceiling of tax rebate under 87A from Rs. 2000 to Rs. 5000
 
Presumptive Income Of 8% for Turnover of Rs. 2 Cr

Propose the ceiling of tax rebate under 87A from Rs. 2000 to Rs. 5000 

Revenue deficit estimate for FY 2015-16 down to 2.5% from earlier estimates
 
Propose to set up a panel to review the FRBM

Plan - non-plan classification of expenditure to be done away with from FY 2017-'18

Expenditure for FY17 set at Rs. 19.78 Lakh Crore

Chapter that had western beginning will have Indian ending. We hope to emulate it in 2017, 70th anniversary of our Independence
 
FY17 Fiscal Deficit target At 3.5%: Arun Jaitley
 
Aadhar Bill to be introduced in current session of parliament

RBI Act to be amended to give statutory backing for monetary policy: FM
 
Public Money should reach the poor and deserving without any leakage
 
Aadhar Bill to be introduced in current session of parliament

An increased allocation of Rs 1,80,000 Crores under PM MUDRA Yojana
 
Rs 25,000 crore for recapitalization of public sector banks: FM
 
A public utility resolution of disputes bill will be introduced during 2016-17: FM

Rs 25,000 Crores to be allocated for re-capitalisation of Public Sector Banks
 
Comprehensive Code to be introduced to provide a specialised resolution mechanism for bankruptcy of banks/insurance companies
 
Banking Board Bureau will be operationalized, we stand solidly behind public sector banks

More number of benches of Security Appellate Tribunal to be introduced by amending SEBI Act
 
A vibrant financial sector is critical to the growth of the Indian economy: FM

Dept of Disinvestment to be renamed as Dept of Investment and Public Asset Management

100% FDI through FAPB route in marketing of food products produced and manufactured in India

A comprehensive approach to be adopted for Govt. investment in CPSEs: FM

FDI changes in Insurance, Pension, Asset Reconst and Stock Exchanges 

Govt is drawing a comprehensive plan to be implemented in the next 15-20 years for exploiting Nuclear energy

Initiatives being introduced to reinvigorate infrastructure sector through PPP
 
A new credit rating system for infrastructure will be developed. 

Drawing Up Comprehensive Plan Over 20 Years to Augment Nuclear Power
 
Giving Rs. 3,000 Cr to promote Nuclear Power Generation*

Considering to incentivize gas production from deep sea, ultra deep water and high temp. areas

To Amend Motor Vehicle Act to Open Up Road Passenger Sector

Total outlay for infrastructure Rs. 2,21,246 crores in 2016/17
 
We expect to award 10,000 km of National highway construction projects in 2016: Jaitley

Total Investment In Roads Sector At Rs. 97000 Cr
 
Allocate Rs55,000 Crores for roads and highways, total investment in Road Sector would be Rs97,000 crore

India achieved highest Motor Vehicles Manufacturing and highest number of kms of Road Construction awarded in 2015

Model Shops and Establishments Bill to be circulated, for voluntary adoption by states
 
Rs 2.87 lakh crore will be given as grant in aid to gram panchayats, municipalities: FM
 
3000 drug stores to be opened under PM Aushadhi Yojana

Senior citizens will get additional healthcare cover of Rs 30,000 under the new scheme
 
Govt to provide health insurance of upto Rs 1 lakh for each family

Govt. will pay EPF contribution of 8.33% for all new employees for 1st three years

62 new Navodya Vidyalayas to be opened in uncovered districts under Sarva Siksha Abhiyaan
 
A higher education financing agency to be setup with initial capital of Rs. 1000 crore
 
A Digital Depository to be established which will be a One-stop place for all education related e-certificates
 
Decided to set up 1500 multi-skilled training institutes in the country; Rs. 1700 crore allocated for this initiative

SC/ST Hub to be constituted under MSME Ministry to encourage SC/ST entrepreneurship 
 
Rs 2.87 lakh crore aid to gram panchayats and municipalities

Cabinet has approved Stand Up India scheme. Rs. 500 crore has been provided

Start a PPP based National Dialysis Mission: Arun Jaitley
 
A National Dialysis Services Program to be introduced under National Health Mission

To launch new health protection scheme for weaker section of society  
 
Rs 87,765 crores allocated for rural development

Aim to double the income of farmers in 5 years: FM
 
Rs 2000 rs towards LPG connections to Women from BPL families

Quantum jump of 228% in grants to gram panchayats and urban local bodies in accordance with FFC recommendations
 
100 village electrification to be achieved by 1st May, 2018

Rs 9,000 crores allocated to Swaccha Bharat Abhiyaan
 
Digital Literacy Mission Scheme to be implemented in Rural areas
 
5542 villages have been electrified till Feb 23rd, 2016, to achieve 100% village electrification till May 1st, 2018
 
2.87 lakh crore grants to gram panchayats and municipalities - a quantum jump of 228%: FM
 
Special focus has been given on timely credit to farmers: FM

A sum of Rs. 38,500 has been allocated to MNREGA. Will be the highest amount spent on NREGA
 
Allocation to PM Fasal Bima Yojana for 2016/17 is Rs. 5500 crores
 
65 eligible habitats to be connected via 2.23 lakh kms of road.Current construction pace is 100 kms per day   

5 lakh acres to be brought under organic farming over a three year period
 
Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojana: FM
 
Farm, rural sector, infra, social sector to have more Government expenditure: FM
 
To spend Rs 170 bn by next year, Rs 865 bn over 5 years to boost irrigation   

Propose Rs 5,500 Cr For Crop Insurance Scheme For FY17
 
Allocation of Pradhanmatri Gram Sadak Yojna to be increased to 19,000 Crore
 
Govt is launching a new initiative to provide cooking gas to BPL families with state support.
 
Aim to double farmers’ income by 2022: Jaitley
 
Next financial year will cast an additional burden due to implementation of 7th Pay Commission and OROP: Jaitley 

Aim to double farmers’ income by 2022: Jaitley

Nominal premium and highest ever compensation in case of crop loss under the PM
 
27000 crs for roads project for 2.23 lac kms of roads
 
28 lakh hectars will be brought under the new farm irrigation plan

Rs. 500 Cr Assigned To Pulse Production

5 lakh acres to be brought under organic farming over a three year period

Rs. 35,984 crores total allocation for farmers' welfare
 
A long-term irrigation fund will be crated at Nabard. Corpus of Rs. 20,000 crore

CPI inflation has come down, GDP growth now 7.6%. CAD declined to 14.4% and will be 1% of GDP by end of fiscal: Jaitley
 
Pradhanmantri Krishi Sinchaai Yojna stregthened and implemented in Mission Mode

Aim is to double the income of farmers by 2022
 
World Economic Forum says India’s growth is extraordinary: Jaitley
 
My budget proposal is a transformative agenda based on 9 pillars: Arun Jaitley

India wants to double farm incomes in five years
 
We are grateful to our farmers
 
FM says that recapitalization of banks will be done during next fiscal
 
FM says: Increased outlay for social sector programs
 
7th Pay commission can hit govt finances
 
Will strive to pass GST Law, Bankruptcy Law. Will legislatively back Aadhar: Arun Jaitley.

FM says : Increased outlay for social sector programs
 
Nominal premium and highest ever compensation in case of crop loss under the PM Fasal Bima Yojana

FY16 CAD projected at 1.4% of GDP
 
We wish to increase expenditure on infra, rural development and bank recapitalization: Arun Jaitley

We believe in the principle that money with the government belongs to the people

The growth of GDP has accelerated to 7.6%, says Jaitley   

Inflation Has Been Under Control Despite 2 Failed Monsoons

Presenting the budget when the global economy is in a serious crisis: Arun Jaitley
 
Global slowdown from 3.9% to 3.1% in 2015

Against all headwinds, Indian economy has held ground firmly: Arun Jaitley