Key Market Highlights (01/02/2018) GSEC 10yr benchmark closed 18 bps higher at 7.6046% vs. previous day close of 7.4298%. 10yr benchmark tumbled, hitting a near two year high amid concerns over greater rural spending and widened fiscal deficit target by govt. in its budget 2018-2019. The benchmark yield opened at 7.4400% and touched a high of 7.6120% and a low of 7.3716% before closing at 7.6046%. In the Union budget 2018-19 the government; -Revised FY18 Fiscal deficit target to 3.5% from targeted 3.2% of GDP and set FY19 fiscal deficit target at 3.3% of GDP Revised gross borrowing for FY18 to 5.99 lakh crs from budget estimate of 5.8 lakh crs; while net borrowing for FY18 has been raised to 4.02 lakh crs at 67.6% of gross fiscal deficit - However gross borrowing for FY19 has been raised to 6.05 lakh crs lower than an expected 6.5 lakh crs while net borrowing reduced to 3.90 lakh crs nearly 62.5% of gross fiscal deficit CURRENCY Rupee closed at 64.015 vs. yesterday's close at 63.58. Rupee weakened due to month end dollar demand from importers and FPI outflows. Rupee opened at 63.64 went to a high of 63.555 and touched a low of 64.03. EQUITY The market ended on a negative note today. BSE Sensex lost 58.36 points or ( 0.16 %) to close at 35,906.66. Nifty 50 lost 10.80 points or ( 0.10 %) to close at 11,016.90. COMMODITY Gold was seen trading at Rs.30400/10gm, while silver was seen trading at Rs. 39482/kg & Nymex crude was seen trading around at Rs. 65.11/barrel.
BUDGET SUMMARY 2018-19 Fiscal Policy Total Revised Estimates for expenditure in 2017-18 are `21.57 lakh crore (net of GST compensation transfers to the States) as against the Budget Estimates of `21.47 lakh crore. Fiscal Deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised Fiscal Deficit estimates for 2017-18 are `5.95 lakh crore at 3.5% of GDP. Projecting a Fiscal Deficit of 3.3% of GDP for the year 2018-19. Fiscal Deficit Chart IMF, in its latest Update, has forecast that India will grow at 7.4% next year. India achieved an average growth of 7.5% in first three years of our Government. GDP growth at 6.3% in the second quarter signalled turnaround of the economy. We hope to grow at 7.2% to 7.5% in the second half. Exports are expected to grow at 15% in 2017-18 and expecting in 2018-19 achieve high growth of 8% plus.
GDP Growth in Modi Government Indian economy is now 2.5 trillion dollar economy seventh largest in the world. India is expected to become the fifth largest economy very soon. Charts on largest economies on world
Agriculture Emphasis on generating double income for farmers by 2022. Minimum Support Price (MSP) for the Kharif Crops has been set at 1.5 times of the cost of production. Agricultural market and infrastructure fund with a corpus of Rs 2000 crore will be set up for developing agricultural marketing infrastructure in the 22000 Grameen Agricultural Markets (GrAMs) and 585 APMCs.. Agriculture ministry to promote cluster based development of agri-commodities in partnership with the Ministries of Food Processing, Commerce and other allied Ministries. Organic farming by Farmer Producer Organizations (FPOs) and Village Producers Organizations (VPOs) in large clusters, preferably of 1000 hectares each, will be encouraged. Allocation of Ministry of Food Processing is being doubled from Rs. 715 crore in 2017-18 to Rs. 1400 crore in 2018-19 under Prime Minister Krishi Sampada Yojana. Export of agro- commodities has been liberalised to meet India s agricultural exports potential of US $100 billion. Current Export of agro- commodities is US $ 30 billion. Institutional credit for agriculture sector has been raised to Rs.11 lakhs crore from Rs.10 lakh crore in 2017-18. Favourable taxation treatment to Farmer Producer Organisations for helping farmers aggregates their needs of inputs, farm services, processing and sale operations. Launch of Operation Greens to promote Farmer Producers Organizations (FPOs), agri-logistics, processing facilities and professional management. A sum of Rs 500 cr has been allocated for the same. Facility of Kisan Credit Card extended to fisheries and for animal husbandry farmers to help them meet their working capital needs. Small and marginal farmers will get more benefits. Rs 10,000 crore set aside for Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) and Animal Husbandry Infrastructure Development Fund (AHIDF). Launch of Re-structured National Bamboo Mission with corpus of Rs 1,290 crore to promote bamboo sector in a holistic manner.
Rural Economy 8 crore poor families will be given free gas connection via Ujjwala scheme. Rs 16,000 crore allotted towards Prime Minister Saubhagya Scheme for connecting 4 crores households with electricity. 2 Crores toilets will be constructed under Swachh Bharat Mission. Under this mission, Government has already constructed more than 6 crore toilets. Allocation of Rs.5,750 crores to National Rural Livelihood Mission. For boosting livelihood opportunities and private enterprise, target for loans to self help group for women has been increased to Rs 75,000 crore from Rs.42,500 Crore in 2016-17. Rs. 2600 crore are allocated for Ground water irrigation scheme under Prime Minister Krishi Sinchai Yojna. It will be taken up in 96 deprived irrigation districts. Rs. 14.34 Lakh crore will be spent for creation of livelihood and infrastructure in rural areas. Health Ayushman Bharat programme- Rs. 1200 Crores allocated towards Health and Wellness Centres in India. These 1.5 lakh centres will provide health care services and provide essential drugs and diagnostic services free of cost to the people. Launch of National Health Protection Scheme to cover over 10 crore poor and vulnerable families providing medical insurance coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalization. Allocation of Rs.600 crore to provide nutritional support to all TB patients at the rate of Rs.500 per month for the duration of their treatment. Galvanizing Organic Bio-Agro Resources Dhan (GOBAR-DHAN) Scheme for management and conversion of cattle dung and solid waste in farms to compost, fertilizer, bio-gas and bio-cng.
Social Security For economic and social advancement of people of Scheduled Castes (SCs) and Scheduled Tribes (STs),Rs. 56,619 crore have been allocated for SCs and Rs.39,135 crore for STs. Government has increased total earmarked allocation for SCs in 279 programmes from Rs. 34,334 crore in 2016-17 to Rs. 52,719 crore in 2017-18. Likewise, for STs, earmarked allocation was increased from Rs. 21,811 crore in 2016-17 to Rs. 32,508 crore in 2017-18 in 305 programmes. Allocation of Rs. 9975 Crore for National Social Assistance Programme. Infrastructure Under Smart Cities Mission, out of 100 smart cities 99 cities have been selected, with an outlay of Rs 2.04 lakh crore. 10 prominent tourist sites will be made iconic tourist destinations, with an amalgamation of private funding, marketing and branding. Bharatmala project for providing seamless connectivity of interior and backward areas and borders of the country to develop 35,000 KM under phase 1 with an outlay of Rs 5.35 lakh crore. Government to introduce pay-as-you-use system for toll payments. Rs.77640 Crore has been approved for AMRUT Programme for providing water supply to all households in 500 cities. Highway construction will exceed Rs 9,000 km by end of FY18. Airport Authority of India (AAI) has 124 airports. It has been proposed to increase airport capacity more to 5 times to handle a billion trips a year. UDAN Scheme to connect 64 unconnected airports across the country.
Defence Development of connectivity infrastructure in border areas. Rohtang tunnel has been completed to provide all weather connectivity to the Ladakh region. Construction of Zozila Pass tunnel is in the process. Construction of tunnel under Sela Pass to be taken up. Defence outlay raised to Rs 2.82 lakh crore in 2018-19 from Rs 2.67 lakh crore in current year. Housing for All Construction of 51 Lakhs Houses during 2018-19 under Prime Minister Awas Scheme in Rural Area. Assistance has been sanctioned to construct 37 lakhs houses in urban area. Establishment of Affordable Housing Fund in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India. Education Emphasis on increasing digital intensity in education. Technology will be used to upgrade the skills of teachers through the digital portal DIKSHA. Revitalising Infrastructure and Systems in Education (RISE) by 2022 has been launched in order to step up investments in research and related infrastructure in premier educational institutions. Government will launch Prime Minister s Research Fellows (PMRF) Scheme this year. It will facilitate 1000 best B.Tech students from premier institutions to do Ph. D in IITs and IISc. By 2022, every block with more than 50 per cent ST population will have Ekalvya schools at par with Navodaya Vidyalayas.
Medium, Small and Micro Enterprises (MSMEs) Rs. 3,794/- Crs have been allocated to MSME Sector for giving credit support, capital and interest subsidy and innovations. Trade Electronic Receivable Discounting System (TReDS): Online loan sanctioning facility for MSMEs will be revamped for prompt decision making by the banks through Trade Electronic Receivable Discounting System (TReDS) platform & linking this with GSTN. Government will soon announce measures for effectively addressing Non-Performing Assets and stressed accounts of MSMEs. MUDRA Yojana: It has been proposed to set a target of Rs. 3 Lakh Crs for lending under MUDRA for FY 2018-19 after having successfully exceeded the targets in all previous years. MUDRA Yojana launched in April, 2015 has led to sanction of Rs. 4.6 lakh Crs in credit from 10.38 Crs MUDRA loans. 76% of loan accounts are of women and more than 50% belong to SCs, STs and OBCs. NBFC: NBFCs stepped up financing of MSMEs after demonetization. Refinancing policy and eligibility criteria set by MUDRA will be reviewed for better refinancing of NBFCs. Startups Ministry of Finance is examining the policy and institutional development measures needed for creating right environment for Fintech companies to grow in India To strengthen the environment of Venture Capital Funds and the angel investors, government will take additional measures for their growth and successful operation.
Employment Employees Provident Fund and Miscellaneous Provisions Act, 1952: (EPF) Under the rules, every month, 12% of an employee s basic salary goes into the EPF account and the employer matches the contribution. Of the employer s contribution, 8.33% goes into the Employees Pension Scheme (EPS), which offers pension from the age of 58 years. 8.33% of Employee Provident Fund (EPF) for new employees will be contributed by the Government for 3 years. Contribution of 12% to EPF for new employees will be contributed by the government for 3 years in sectors employing large number of people like textile, leather and footwear. Women employees contribution to the EPF reduced to 8% under Employees Provident Fund and Miscellaneous Provisions Act, 1952 for the first 3 years of their employment from 12% with no change in employers contribution. Additional deduction to the employees of 30% of the wages paid for new employees under the Income Tax Act. National Apprenticeship Scheme to give training to 50 Lakh youth by 2020 with stipend support and sharing of the cost. Fixed term employment will be introduced for apparel & footwear sector. Paid Maternity leave has been increased from 12 weeks to 26 weeks, along with provision of crèches. 306 Pradhan Mantri Kaushal Kendra (aspirational skill centres) have been established for imparting skill training through such centers. Proposed to provide an outlay of Rs. 7,148/- Crs for the textile sector in FY 2018-19.
Direct Tax No change in Individual tax slabs. However, Education Cess of 3% gets replaced by 4% Health and Education Cess. Salaried employees will get a standard deduction of Rs. 40,000 in lieu of Transport Allowance of 19200/- and Medical Reimbursement benefits of 15,000/-. So the net benefit for Salaried is only on tax of Rs.5800. However, for differently abled employees the benefits will continue. Corporate tax rate shall be 25% for companies with turnover upto Rs. 250 Crs in FY 16-17. Till last year it was applicable only for companies with turnover upto Rs.50Crs for FY 15-16. Difference between Stamp Duty Value and Actual consideration is taxable for both the seller and buyer u/s 50C, 43CA and 56. It is now provided that if the difference is not more that 5% of consideration the provisions shall not be attracted. 80JJAA deduction relaxation of 150 days also extended to leather and footwear industry. Emoluments paid to new employees will be counted as eligible if they don't meet the no of days criteria in the first year but meet in subsequent years. 100% deduction for Farmer Production companies in line with co-operative society for 5 years. The limit of deduction for health insurance premium and/ or medical expenditure u/s 80D for senior citizens increased from Rs. 30,000 to Rs. 50,000 in respect of any health insurance premium and/or any general medical expenditure incurred. Senior citizens will get interest exemption of Rs. 50,000 on bank deposits as against existing 10,000 including FD and RD accounts. Thus no TDS u/s 194A. Limit of deduction for medical expenditure in respect of certain critical illness u/s 80DDB for senior as well as very senior citizens increased to Rs. 1,00,000. Under PM Vay Vriddhi Yojna guaranteed 8% return to senior citizens by LIC of India. Investment limit now raised from 7.5 lakh to 15 lakh. Income Distribution Tax payable by Equity Oriented Mutual Funds @10%. Tax on LTCG-STT paid will be applicable at 10% if gains more than Rs. 1,00,000. However sale upto 31/1/18 not covered. Further gains accrued till 31/1/18 not taxable if sale upto 31/7/18. E assessments will be done across the country for removing person to person interface.
Separate regulatory body shall be formed to regulate International Financial Services Centre (IFSC). Exemption will be given to Non residents for transfer of derivatives and other securities. Non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates. Provision of section 40(ia) and 40A(3) and 40A(3A) are being made applicable to Charitable Trust. Hence expenditure incurred without deduction of tax and in cash will not be eligible as application of income under section 10(23C) and section 11(1)(a). Agriculture Commodity Derivatives income /loss also not to be considered as speculative under section 43(5). Income Computation and Disclosure Standards (ICDS) being given statutory backing in view of decision of Delhi High Court decision. Marked to market loss computed as per ICDS to be allowed under section 36. Gain or loss in Foreign Exchange as per ICDS to be allowed under new section 43AA. Construction Contract income to be computed on percentage completion method as per ICDS. Valuation of Inventory including Securities to be as per ICDS. Interest on compensation, enhanced compensation. Claim or enhancement claim and subsidy, incentives to be taxed in the year of receipt only as per new Section 145B. Conversion of stock in trade to capital asset to be charged as business income in the year of conversion on Fair Market value on the date of conversion. 54EC benefit of investment in Bonds to be restricted to Capital gain on land and building only. Further period of holding being increased from 3 years to 5 years. PAN to be obtained by all entities including HUF other than individuals in case aggregate of financial transaction in a year is Rs 2,50,000 or more. All directors, partners, etc of such entities also to obtain PAN. All companies irrespective of income to file return and in case it is not filed, such companies will be liable for prosecution irrespective of the fact weather it has tax liability of Rs 3,000 or not. Assessments to be E assessment under new section 143(3A) No adjustment under section 143(1) while processing on account of mismatch with 26AS and 16A. Deemed dividend to be taxed in the hands of the company itself as Dividend Distribution of tax @ 30%.
Penalty for non-filing financial return as required under section 285BA being increased to Rs 500 per day. Indirect Tax No significant indirect tax changes as GST has included most. Custom duty on mobile phones increased to 20% and some of their parts & accessories and TV to 15% to promote make in India. Customs duty on raw cashew has been reduced to 2.5% from 5% to help cashew processing industry. Education Cess and Secondary & Higher Education Cess on Imported goods has been abolished and in its place Social Welfare Surcharge @ 10% of the custom duty has been imposed. Changes to the Customs Act, 1962 has been made to further improve ease of doing business in cross border trade. Name of Central Board of Excise and Customs [CBEC] changed to Central Board of Indirect Taxes and Customs (CBIC). Disclaimer: This document has been prepared by Kaizen Partners and is meant for the recipient for use as intended and not for circulation. The information contained herein is from the public domain, company published data or sources believed to be reliable. The information published is analyzed by the respective analyst publishing the report. The data contained herein doesn t represent any view that is intended to influence any decision making by the person reading the content of this report. Kaizen Partners does not guarantee the accuracy, adequacy or completeness of any Data in the Report and is not responsible for any errors or omissions or for the results obtained from the use of such Data. Kaizen Partners and its group companies have presence in other parts of the world. Kaizen Partners is a unit of Kaizen Dharti Biz Ventures & Advisory Pvt Ltd. Kaizen Partners Hyde Park, Office #504, 5 th Floor, Saki-Vihar Road, Saki naka, Andheri East, Mumbai-400 072 Email id: info@kaizenpartners.in, Website: www.kaizenpartners.in Tel: 022-4520 6666