Budget 2019 2019
Key Takeaways Good Boost to rural and urban middle income households Fiscal prudence largely maintained despite election pressures Commitment to adhere to the fiscal deficit glide path and attain 3% by 2021 Revival of Real Estate sector by giving much needed sops Expansion of tax exemption to Rs 5 lakh provides much needed succour to the urban middle class Smart Not so Good Fiscal Deficit for FY20 expected to be 3.4% with no improvement over FY19. Increase in subsidies overshadows growth in Capital expenditure Fiscal math aided by high GST growth assumptions and high divestment/ dividend targets
Key Highlights
Revenue Expenditure bumped up, capex slows in FY20BE 3,000 2,500 2,000 1,500 1,000 500 14 14 11 7 5 1,372 1,467 1,538 1,691 1,879 2,141 2,448 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY 2020 BE 16 14 12 8 6 4 2 400 350 300 250 200 150 0 50 29 20 12 5 6 8 188 197 253 285 263 317 336 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE 35 30 25 20 15 5 5 Revenue Expenditure Budget Capital Exp 3,000 2,500 2,000 1,500 1,000 500 15 13 8 8 7 1,559 1,664 1,791 1,975 2,142 2,457 2,784 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE 16 14 12 8 6 4 2 1,200 1,000 800 600 400 200 % 0.8% 40% 644 617 611 311 338 263 229 188 197 253 285 263 317 336 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE Total Expenditure through Budget Budget Capital Exp Nonbudget Capex Revenue expenditure growth of 14% in FY 19 Revised Estimate (RE) and FY 20 Budgeted Estimate (BE) 2019 RE budget Capital Expenditure is higher by 20% but the growth falls to 6% in FY 20 BE Total Capex (Budget + Nonbudget) is flat in FY 20BE over FY19RE after strong growth in the last 2 years All figures in 000cr
High in Food subsidy, other subsidies muted 200 150 0 50 70.8 27.9 18.5 9.0 8 21.0 92 118 139 1 0 171 184 80.0 60.0 40.0 20.0 20.0 40.0 76 74 72 70 68 66 64 62 60 5.5 5.5 7 1.9 0.2 8.4 67 71 72 66 66 70 75 8.0 6.0 4.0 2.0 2.0 4.0 6.0 8.0.0 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 REFY2020 BE FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE Food Fertiliser 90 80 70 60 50 40 30 20 51 8.2 11.2 1.5 29.4 50.2 85 60 30 28 24 25 37 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE 60.0 40.0 20.0 20.0 40.0 60.0 350 300 250 200 150 0 50 17.1 1.1 1.8 2.9 15.6 6.3 39.2 211 247 245 249 242 204 191 266 297 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE 11 FY2020 BE 50.0 40.0 30.0 20.0.0.0 20.0 Petroleum Subsidy Subsidies up 40% in FY 19 RE and 11% in FY 20 BE as compared to growth of 21% and 9% seen in FY 17 and FY 18 respectively in subsidies led by significant growth in food subsidies in FY 19RE and petroleum subsidy in FY20BE on account of rise in oil prices in FY19 Higher budgeted Petroleum subsidy should alleviate fears of under recoveries for Oil Marketing Companies All figures in 000cr
Capital Expenditure muted after 4 years of aggressive spending Railway Metro Defence Roads YoY in Capital Outlay for FY20BE 21.0% 19.2%.0% 7.7% Though growth in overall capital expenditure has been muted, focus has been on roads, railway and defence Railway capital outlay has been increased by 21%, Metro capital outlay is up by 19.2% Allocation to roads has been increased by 7.7% through budgetary allocation, but this would be higher including offbudgetary sources like NHAI Capital outlay in Defence is up by % YoY, though overall Defence outlay is up 7% YoY
Election Focus
Rural Spending Key Rural + Agri Related Schemes in Rs cr Scheme FY2018 FY2019 FY19 over FY2019 FY2020 FY20 over RE vs BE BE FY 8 RE BE FY19RE Income Support Scheme 20,000 75,000 275% Ma ha tma Ga ndhi Na tiona l Rura l Empl oyment Gua ra ntee Pr 55,166 55,000 0% 61,084 11% 60,000 2% Urea Subs i dy 44,223 45,000 2% 44,995 0% 50,164 11% Food Subs i dy for Decentra l i zed Procurement of Foodgra i ns 38,000 31,000 18% 31,000 0% 33,000 6% Di rect Benefi t Tra ns fer 13,097 16,478 26% 16,478 0% 29,500 79% Pra dha n Ma ntri Awa s Yojna (PMAY) 31,164 27,505 12% 26,405 4% 25,853 2% Nutri ent Ba s ed Subs i dy 22,244 25,090 13% 25,090 0% 24,832 1% Pra dha n Ma ntri Gra m Sa da k Yojna 16,862 19,000 13% 15,500 18% 19,000 23% Interes t Subs i dy for Short Term Credi t to Fa rmers 13,046 15,000 15% 14,987 0% 18,000 20% Crop Ins ura nce Scheme 9,419 13,000 38% 12,976 0% 14,000 8% Pra dha n Ma ntri Kri s hi Si ncha i Yojna 6,613 9,429 43% 8,251 12% 9,516 15% National Social Assistance Progam 8,694 9,975 15% 8,900 11% 9,200 3% National Rural Drinking Water Mission 7,038 7,000 1% 5,500 21% 8,201 49% Ra s htri ya Swa s thya Bi ma Yojna 505 2,000 296% 2,700 35% 6,556 143% Deen Da ya l Upa dhya ya Gra m Jyoti Yojna 5,050 3,800 25% 3,800 0% 4,066 7% Procurement of Cotton by Cotton Corpora tion under Pri ce Su 3 924 800% 924 0% 2,018 118% Total 2,71,224 2,80,201 3% 2,98,591 7% 3,88,905 30% The Big Highlight of the Budget 2019 was the introduction of the Income Support Scheme for marginal farmers budgeted at Rs. 75,000 cr in FY20. Direct Benefit Transfer and Swasthya Bima Yojana saw a significant growth in allocation Overall allocation to these schemes has increased by 30% in FY20BE as compared to 7% growth in FY19RE. All figures in 000cr
Tax Relief for Middle Class Income Tax Exemption Standard Deduction Other Measures Rs. 5.0lakh Rs. 50,000 Higher TDS Residential house inv. Higher income tax exemption threshold of Rs. 5.0 lakh vs. Rs. 2.5 lakh Impact of Rs. 18,500 crores Higher standard deduction of Rs. 50,000 vs. Rs. 40,000 Impact of Rs. 4,700 crores Higher Tax Deducted at Source (TDS) threshold on interest earned on bank/post office deposits Relief for investment in second residential house, etc.
Real Estate Revival
Fiscal Math
Largely Credible 800 700 600 500 400 300 200 0 18 17 13 9 7 6 395 429 453 485 571 671 760 20 15 5 700 600 500 400 300 200 0 27 23 18 17 9 11 238 258 288 365 431 529 620 30 25 20 15 5 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE Corporate tax Income tax 1,400 1,200 1,000 800 600 400 200 30 21 14 12 6 499 547 714 866 917 1,048 1,172 35 30 25 20 15 5 1,800 1,600 1,400 1,200 1,000 800 600 400 200 19 17 15 11 13 4 816 904 944 1,1 1,242 1,484 1,705 25 20 15 5 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE Indirect taxes Net Tax Rev Corporate tax collections in FY19RE higher than budgeted; 13% growth in FY20 reasonable Personal income tax collection growth at 17% despite the Rs200bn tax cut implies assumption of the buoyancy seen in the last few years All figures in 000cr
GST twister 800 744 GST collections Estimate 18% 761 700 644 600 500 443 400 300 200 0 FY2018 (9 Months) FY2019 BE FY2019 RE FY2020 BE 18% growth in GST collections may be 34% higher than reasonable, but with improved compliance it should be possible. All figures in 000cr
Family jewels to the rescue 120 0 80 60 40 20 1 28 12 13 29 38 42 48 0 20 80 13 90 120 0 80 60 40 20 20 40 160 140 120 0 80 60 40 20 25 31 1 14 26 90 90 112 123 91 119 136 40 30 20 20 30 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE Divestments Dividends and Profits 300 250 200 150 0 50 27 27 1 9 11 29 199 198 251 273 193 245 273 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE NonTax Revenue 40 30 20 20 30 40 Disinvestment targets continue to be elevated PSUs and RBI dividend continue to act as balancing figure to reduce budget deficit Nontax receipts in FY19RE Rs200bn higher than budgeted: expectation of special Reserve Bank of India (RBI) dividend?
FRBM target a tall order 800 700 600 500 400 300 200 0 5 3 2 4 516 490 503 511 533 536 595 634 704 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE Fiscal Deficit 1 11 7 11 FY2020 BE 15 5 5 7.0 6.0 5.0 4.0 3.0 2.0 1.0 5.9 4.9 4.5 4.1 3.9 3.5 3.5 3.4 3.4 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE Fiscal Deficit % of GDP FY2020 BE 25,000 20,000 15,000.8 9.9 11.0.5 12.2 11.5 14.0 12.0.0 8.0 in absolute fiscal deficit for FY 19 RE and FY 20 BE is 7% and 11% respectively, growing lesser than Nominal GDP,000 5,000 11,234 12,445 13,682 15,184 16,785 18,841 21,007 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 RE FY2020 BE 6.0 4.0 2.0 Fiscal Responsibility and Budget Management (FRBM) target of 3% Fiscal Deficit maintained for FY 21, despite no improvement in FY20 Nominal GDP
NDA 201419: A Reflection 1 2 3 While the budget is an annual exercise of the government s finances, a holistic way to analyse the budget is to look at the path chosen by the government over its entire term if it has been consistent with its promises. In this context, NDA s governments 5 th budget, despite the pressure of impending general elections has stayed largely true to the course of the previous 4 years. The introduction of new subsidies, income support for farmers and increased food subsidy, will dent the spending on capital expenditure for FY20; capital expenditure has been the highlight of this government in all previous budgets.
Key Charts
Focus on Capital Expenditure 20152020 17.5% 263 229 178 200 194 208 188 90 113 157 159 167 188 197 644 617 611 311 338 253 285 263 317 336 FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 REFY 2020 BE Budget Capex Nonbudget Capex After growing at a robust growth rate for the first 4 years, capital expenditure is estimated to grow at the lowest rate in FY20. Despite this slowdown, the overall CAGR for the 5 years of the NDA regime remains impressive at 17.5%
in Subsidies remains muted 3 44 15 38 58 64 68 97 85 73 85 92 60 30 118 139 20152020 3.0% 28 24 1 0 25 171 37 184 77 61 62 70 66 67 71 72 66 66 70 75 FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 REFY 2020 BE Fertiliser Food Petroleum Riding on benefit of lower petrol and fertilizer subsidies on account of lower crude oil prices, the NDA government was able to hike subsidy on food. The lower growth in subsidies (CAGR of 3%), also due to lower leakages on account of Aadhar, Jan Dhan and DBT, helped government fund the Income Transfer scheme for farmers.
FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 RE FY 2020 BE FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 RE FY 2020 BE Fiscal deficit growth lower than nominal GDP 800 700 38 20152020 6.6% 50 40 Fiscal Deficit % of GDP 600 500 400 300 200 0 24 11 5 3 2 337 418 374 516 490 503 511 533 536 595 634 704 4 1 11 7 11 30 20 20 6.0 6.5 4.8 5.9 4.9 4.5 4.1 3.9 3.5 3.5 3.4 3.4 Fiscal Deficit Fiscal Deficit has grown at a CAGR of 6.6% over the term of this government Though Fiscal Deficit as a % of GDP reduced from 4.5% in FY14 to 3.4% in FY 19, election related doleouts have resulted in Fiscal Deficit expanding by 11%in FY 20, almost double of that of the 5 year CAGR. The government has missed the targets for FRBM for 2 years FY 19 and FY 20
FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 RE FY 2020 BE FY 2009 FY 20 FY 2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY 2019 RE FY 2020 BE Expansion of the tax base 20152020 15.6% 20152020 9.9% 12.1% 1,172 1,048 917 866 714 620 499 547 529 477 431 349 395 213 245 299 323 356 395 429 453 485 571 671 760 6 122 139 164 197 238 258 288 349 273 249 4.9 5.6 5.6 3.8 4.5 4.5 4.8 4.4 4.4 5.2 5.7 5.5 1.9 1.9 1.8 1.9 2.0 2.1 2.1 2.1 2.3 2.6 2.8 3.0 3.8 3.8 3.8 3.7 3.6 3.5 3.4 3.3 3.2 3.4 3.6 3.6 Corporate tax Income tax Indirect Taxes Corporate tax Income tax Indirect Taxes Tax collections have been buoyant, with Corporate, Income and Indirect taxes increasing at a rate of 15.6% over the last 5 years. Total Tax as a % of GDP has seen a rise in each of the last 5 years increasing from 9.9% in FY 15 to 12.1% in FY20 BE.
Budget and IDFC Equity Funds The thrust of the budget appears to give a boost to domestic consumption. Following schemes of IDFC MF have a significant overweight on consumption oriented sectors: IDFC Multi Cap Fund IDFC Focused Equity Fund IDFC Large Cap Fund
Product Label IDFC Multi Cap Fund Multi Cap Fund An open ended equity scheme investing across large cap, mid cap and small cap stocks IDFC Large Cap Fund Large Cap Fund An open ended equity scheme predominantly investing in large cap stocks IDFC Focused Equity Fund An open ended equity scheme investing in maximum 30 stocks with multi cap focus
Disclaimer MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy / theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of IDFC Mutual Fund. The information/ views / opinions provided is for informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision and the stocks may or may not continue to form part of the scheme s portfolio in future. The decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. Neither IDFC Mutual Fund / IDFC AMC Trustee Co. Ltd./ IDFC Asset Management Co. Ltd nor IDFC, its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
THANK YOU