Here’s what you should expect in this Budget
The theme of this year’s budget would necessarily have to be sustainable revival of the economy and employment creation through targeted tax incentives and higher spending on infrastructure while maintaining an eye on fiscal consolidation. Excerpts from a CARE Ratings analysis.
There are sector expectations as well as some macro numbers that we believe will be the assumptions here. Some of the numbers that we have projected are:
1. Size of the Budget (expected) to be Rs 32-33 lakh crore
2. GDP growth assumed of 15% in nominal terms
3. Capex of Rs 5 lakh crore
4. Fiscal deficit of 5-5.5% of GDP
5. Gross market borrowing of Rs 10.1-11.3 lakh crore depending on the deficit ratio
6. Rs 12,000 crore to be spent by the government on vaccination
7. Modest increase in subsidy bill
8. MNREGA to be retained at Rs 1 lakh crore
9. We do not expect any change in tax rates
Here are some points on our wish list:
1. Creation of a DFI
2. A bad bank set up by government which picks up assets based on opinion given by CRAs
3. A fund for stalled projects which again picks up projects on which CRAs give their view
4. Reintroduction of the subsidy scheme on ratings for SMEs – the NSIC scheme. This is needed given the focus the government has given to this segment in the AN framework
Here are some expected announcements for specific sectors:
Real estateFor the upcoming budget, to stimulate demand on a pan-India basis, the industry expects the government to revise the circle rates in order to bridge the gap between the agreement value or extend the deadline and the benefit of increasing the differential between agreement value and circle rate from 10% to 20% to other realty segments to such as residential units priced above Rs 20 million and commercial spaces.
With the PMAY-U or “Housing for All” target coming to a close (by 2022), it is expected the government will announce allocations over and above the usual limit to spearhead and fast track the construction process.
Oil and gas
To provide some respite to E and P players, reduction in the above taxes could provide some relief to their cash flows and business viability in the gas exploration aspect. The government wants to transform India into a gas-based economy and 54% of natural gas consumption is met through LNG imports. We expect LNG customs duty to be waived off completely from the current 2.5%, to benefit domestic regasification terminals.
Warehousing and storageAs the Indian government prepares for a mega Covid-19 vaccination drive in the coming months, the safe delivery of vaccines for mass immunisation will be a massive challenge and the country will need to significantly ramp up its cold chain facilities. The urgency triggered by Covid-19 vaccine is a great opportunity for India to build all the cold storage it has needed for a long time. The Centre has also reportedly directed states to make a robust plan for vaccine storage and distribution.
For the upcoming budget, the centre can provide subsidies to the State governments for the development of these cold storages.
Authors: Kavita Chacko is Senior Economist; Sushant Hede is Associate Economist; Bhagyashree Bhatti, Urvisha Jagasheth, Rashmi Rawat,Vahishta Unwalla, and Natasha Trikha are Research Analysts at CARE Ratings, a credit rating agency whose segments include infrastructure and manufacturing, among others.