Logistics and Warehousing Positive Key Budget announcements Geo tagging of warehouses Warehousing building incentive to farmers through village storage scheme for which Viability Gap Funding (VGF) would be provided for setting up advanced warehouses and extension of MUDRA loans to Self Help Groups to enable storage at farmer level and reduce loss. Impetus to cold storage through Kisan Rail on Public National logistics policy to be released soon (draft logis- Private Partnership (PPP) basis to reduce loss of tic policy was rolled out February 2019) perishable goods and also launch of Kisan Udaan under Ministry of Civil Aviation on national and international route to cater to remote areas and North East. Capital outlay towards the food storage and warehous- ing has increased by 1.1% to Rs 1,022 cr. Impact Efficient implementation of above schemes would enable cost reduction in warehousing space particularly in cold storage segment which is facing shortfall of about 50% of the country’s requirement as well as reduced loss of perishable goods which is as high as about 40% of the agricultural produce. The policy measures are a positive move towards the Government focus on reduction of logistic cost as a % of GDP to 9% by 2022 from present 14% 51 Analysis of Union Budget 20-21’
IT & ITeS Positive Budget proposals Impact on the industry New budget outlay for Information Technology and Space Technology has increased from Rs. 18,979 crore (RE Budget FY20) to Rs. 20,379 crore (BE FY21) Key schemes announced This will enable domestic firms to skillfully incorporate Enable private sector to build more Data Centre parks data in every step of their value chains across India Announced proposals to give a boost to private invest- Increased emphasis on implementation of emerging ments in the technology sector and benefit players op- technologies such as analytics, machine learning, robot- erating in the IT services and Software space ics, bio-informatics and artificial intelligence in delivery of services Allocated budget of Rs.6,000 crore for Bharatnet Pro- gramme which will link 100,000 gram Panchayats this year through Fibre to the Home (FTTH) connections Provide an outlay of Rs.8,000 crore over a period of five Quantum technology is opening up new frontiers in years for the National Mission on Quantum Technolo- computing, communications, cyber security with wide- gies and Applications spread applications. It is expected that lots of commer- cial applications would emerge from theoretical con- structs which are developing in this area, and the same is likely to benefit Information Technology Sector Analysis of Union Budget 20-21’ 52
FMCG Positive Budget proposals Impact on the industry Key schemes announced The allocations to agriculture and allied activities have Such measures aim to increase the income realization increased from Rs. 1.2 lakh crore (RE FY20) to Rs. 1.5 from agriculture and allied activities, giving a boost to lakh crore (BE FY21). Various measures announced for disposable income improving marketing, warehousing, increasing credit Revision in tax rates to give a boost to lower income availability individuals, especially in rural segment. Expected to spur consumption for consumer goods Income tax slab revision - reduction tax rates for lower Village Storage scheme is proposed to be run by the income levels Self Help Groups, which shall provide farmers a good holding capacity and reduce their logistics cost Increased investments in warehousing by proposing a Village Storage scheme 53 Analysis of Union Budget 20-21’
FMCG Positive Custom Duty on FMCG From To Food processing – walnuts, shelled 30% 100% Withdrawal of custom duty • Goods upto an aggregate of 10,000 metric tonnes of total imports of Milk and Cream, in powder, granules or other solid form in a financial year • Butter Ghee, Butter Oil • Maize upto an aggregate of 5 lakh metric tonnes of total imports of such goods in a financial year • Edible oils • Refined vegetable oils of edible grade, in loose or bulk form (other than palm oil) • Vegetable oils of edible grade, in loose or bulk form • Crude sunflower seed or safflower oil upto an aggregate of 1,50,000 metric tonnes of total imports of such goods in a financial year • Crude sunflower seed or safflower oil • Refined rape, colza or mustard oil upto an aggregate of 1,50,000 metric tonnes of total imports of such goods in a financial year Analysis of Union Budget 20-21’ 54
Gems and Jewelry Negative Custom Duty on Gems and Jewelry From To Gold used in the manufacture of semiconductor devices or light emitting diodes - 12.5% Rubies, emeralds, sapphires – unset and imported uncut - 0.5% Rough coloured gemstones - 0.5% Rough semi-precious stones - 0.5% Pre-forms of precious and semi-precious stones - 0.5% Rough synthetic gemstones - 0.5% Rough cubic zirconia - 0.5% Polished cubic zirconia 5% 7.5% 55 Analysis of Union Budget 20-21’
Gems and Jewelry Negative Custom Duty on Gems and Jewelry From To 11.85% Platinum or Palladium used in manufacture of- 12.5% a) All goods, including Noble Metal Compounds and Noble Metal Solutions b) Catalysts with precious metal or precious metal compounds as the active substance Spent Catalyst/Ash containing precious metal like gold from which such precious 12.5% 11.85% metal is retrieved subject to specified conditions. Budget proposals Impact on the industry Key schemes announced Introduction of custom duty on variety of gemstones and other gems and jewelry will increase prices of those Increase in customs duty on precious stones and metals materials. However, the Indian consumer’s demand is largely inelastic to changes in duty structure and hence we do not expect a large impact on the revenue of com- panies in the sector Analysis of Union Budget 20-21’ 56
Education Positive Budget proposals Impact on the industry Budget expenditure for Education has increased from 94,854 crore (RE Budget FY20) to Rs. 99,312 crore (BE FY21) Key schemes announced Steps would be taken to enable sourcing External Com- The same is expected to expand resource base for en- mercial Borrowings and Foreign Direct Investment in tities involved in providing education services thereby order to deliver higher quality education providing more financial flexibility to them Around 150 higher educational institutions will start Impact not known as there is no clarity whether these apprenticeship embedded degree/diploma courses by institutions belong to Govt. sector or private sector March 2021 The same would increase interest of students towards Proposal to start a programme whereby Urban Local engineering stream which in turn would support the de- Bodies across the country would provide internship mand for engineering courses offered by the institutes opportunities to fresh engineers for a period upto one year Providing full-fledged online education programme The same is expected to enhance student base of the through institutes which are ranked within top 100 in top 100 institutes which are largely imparting offline ed- the National Institutional Ranking Framework ucation services thereby providing additional source of income to them 57 Analysis of Union Budget 20-21’
Education Positive Budget proposals Impact on the industry Key schemes announced Introduction of Ind-SAT exam under ‘Study in India’ pro- The same is expected to increase enrolments for higher gramme to be held in Asian and African countries which education institutes that are also giving admissions to would be used for benchmarking foreign students who foreign students. More clarity would be required on receive scholarships for studying in Indian higher edu- eligibility of students for scholarship cation centres The same would create opportunity for private sector Proposal to attach a medical college to an existing dis- entities who wish to foray in medical education with trict hospital in PPP mode with viability gap funding to low investment be provided to the State by Central Govt. The same is expected to create additional sources of Special bridge courses to be designed by the Ministries income for the education institutes which would be of Health, Skill Development together with professional offering these special courses to students bodies to improve skill sets of those seeking employ- Increase in allocation would result in more funds being ment abroad which can be achieved through special made available for capex for premier educational training packages institutions that offer higher education courses Increase in allocation for Higher Education Financing Agency from Rs.2,100 crore for 2019-20 to Rs.2200 crore for 2020-21 Analysis of Union Budget 20-21’ 58
Education Positive Budget proposals Impact on the industry Key schemes announced As there is no change in the allocation, the same does No change in the allocation towards interest subsidy not provide any incremental benefit to the institutions and contribution for guarantee funds which remains at offering technical/professional education courses in the same level of Rs.1,900 crore for 2020-21 terms of higher admissions as the said scheme is mainly aimed at increasing the affordability of these courses Marginal increase in budget to Rs.3002 crore for Minis- for students try of Skill Development and Entrepreneurship While there is marginal increase in the allocation, the same does not provide major incremental benefit to the institutes running vocational courses. 59 Analysis of Union Budget 20-21’
Healthcare Positive Budget proposals Impact on the industry Budget expenditure for Healthcare has increased from 63,830 crore (RE Budget FY20) to Rs. 67,484 crore (BE FY21). The new budget allocation is inclusive of Rs. 6,400 crore for PM Jan Arogya Yojana (PMJAY) Key schemes announced Propose to empanel more hospitals under PM Jan This will enlarge focus of multi specialty hospitals, Arogya Yojana from the current 20,000. which are currently primarily predominated in metros Proposed to set up Viability Gap funding window for and other large cities. The implementation of the said setting up hospitals in the PPP mode. In the first phase, proposal especially under PPP model will definitely those Districts will be covered, where presently there encourage many hospitals to sprung in Tier-2 and Tier-3 are no Ayushman empaneled hospitals. cities. Increase in number of hospitals would benefit the formulation manufacturers in supplying the necessary drugs under Ayushman Bharat scheme. Health Cess at the rate of 5% is proposed to be imposed This initiative is expected to encourage domestic med- on the import of medical devices. This Health Cess shall ical devices manufacturers to effectively compete with be a duty of Customs. the imported products and thus grow in terms of scale of operations Analysis of Union Budget 20-21’ 60
Sugar Neutral Customs Duty on Sugar From To Sugar beet seeds 5% 30% Raw Sugar upto an aggregate of three lakh metric tonnes of total imports of such goods. Provided that the import of raw sugar in physical form is completed within sixty days from 10% Exempt the date of issue of the Tariff Rate Quota Allocation Certificate or license by Directorate General of Foreign Trade (DGFT) to the importer. Provided further that the importer shall 30% convert the raw sugar into white/ refined sugar within a period, not exceeding thirty days, from the date of filing of bill of entry or the date of entry inwards, whichever is later Molasses resulting from extraction or refining of sugar Budget Announcements Impact on the Industry Key Schemes announced - • This will be negative for the Sugar sector as the sector is already grappling with Import of raw sugar to be high inventory and domestic production. exempt • As the quantity exempted is low, it is expected to have no material impact on Import duty on beet sugar the industry raised Import duty on molasses • Impact on sugar sector will be neutral as consumption of beet in India is low. raised • This will be positive for the domestic sugar industry 61 Analysis of Union Budget 20-21’
Telecom Positive Announcement Impact Key Budget Announcements The announced will lead to increased demand for Fibre to home connections under BharatNet will be pro- telecom equipment and Optical Fibre Cables. vided to 1 lakh gram panchayats this year. Rs. 6,000 cr has been provided for the same. Analysis of Union Budget 20-21’ 62
Fertilizers Negative Budget proposals Impact on the industry Key schemes announced Government has proposed to encourage use of all kinds This shall encourage reduce incentive for purchase of of fertilizers, including the traditional organic and other chemical fertilizes and encourage more usage of organic innovative fertilizers manure to improve the soil health. Fertilizer subsidy reduced from RS. 79,998 crore (RE Does not augur well for manufacturers as it will spur FY20) to Rs. 71,309 (BE FY21) working capital requirements Custom duty withdrawal of phosphoric acid for the Augurs well for SSP and DAP manufacturers manufacture of fertilizers 63 Analysis of Union Budget 20-21’
Aviation Positive Budget Proposals Impact towards the Industry Key Budget Announcements Krishi Udaan to be launched by the Ministry of Civil This will immensely help improve value realisation Aviation on international and national routes. especially in North-East and tribal districts. Further improve the capacity utilization of airports in tier-III 100 more airports to be developed by 2024 to support cities. UDAAN Scheme It would attract significant private investment in the airports segment. It is also expected that the air fleet number shall go up from the present 600 to 1,200 during this time. We may expect significant momentum in terms of investment and employment generation by the said timeline. Analysis of Union Budget 20-21’ 64
Railways Positive Budget Proposals Key Budget Announcements : Government has proposed Rs. 100 lakh crore investment in infrastructure in next 5 years with Rs.1.7 lakh crore for transportation sector for the year FY20-21 (vis-à-vis Rs.1.59 lakh crore as per revised estimate for FY20). The transportation pool includes expenditure on railways of Rs.72,216 crore for FY21, upwards by 6% on a y-o-y bass. Major policy announcements comprise - Setting up large solar power capacity alongside rail track on land owned by Indian Railways to optimise electrifi- Rolling out additional Tejas trains cation cost Aim to achieve railway electrification of 27000 km track Speedy implementation of Mumbai Ahmedabad high speed Public Private Participation for re-development of four Bengaluru suburban transport to be completed at Stations and operation of 150 passenger trains Rs.18,600 crore with 20% equity by Government and facilitation of external assistance of 60% Impact towards the Industry Stable Budget for Railways with similar capital expenditure allocation and opening up of private investment for railway infrastructure creation. Government of India, in August 2014, had opened up few activities (comprising suburban corridor, high speed train project, railway electrification, passenger terminals etc) of Indian Railway for FDI and the budget re-emphasizes Government focus on same. 65 Analysis of Union Budget 20-21’
Renewable Energy Positive Budget proposals Impact on the Industry Key schemes announced – Kusum scheme for setting up solar pumps has been ex- Kusum scheme and large scale power capacity addition along railway tracks will push solar energy capacity tended up to 20 lac farmers and assistance to set up solar additions. It would help government move towards plants in barren land of farmers achieving its renewable energy installation targets, Large solar power capacity installation along railway generating extra resources for railways create additional tracks revenue stream for the farmers. Tax rate of 15% for new power generation companies The tax rate should not help renewable companies as currently also MAT rate is 15% and majority of renewable Proposal to replace conventional energy meters by pre- companies comes under MAT. paid smart meters in next 3 years Conversion of conventional meters to smart meters would help in improving the billing and collection Budget allocation of Rs. 22,000 crores for power sector efficiency of the distribution companies (discom). The and renewable energy move would also positively impact the cashflows of the Freedom to electricity consumer to choose electricity discoms. Further giving consumer freedom to choose supplier and rate as per their requirements. suppliers and rate would usher more competition in the power distribution sector Analysis of Union Budget 20-21’ 66
Contributors Chief Economist - Madan Sabnavis (+91-22-68374433) Media Contact - Mradul Mishra (+91-22-68374424) Economics Team Kavita Chacko Industry Insights Team Rucha Ranadive Sushant Hede Saurabh Bhalerao Ratings Team Darshini Kansara Karthik Raj Pulkit Agarwal Urvisha Jagasheth Sudeep Sanwal Nitesh Ranjan Vahishta Unwalla Aditya Acharekar Mitul Budhbhatti Rashmi Rawat Sharmila Jain Sudhir Kumar Shobhna Kanojia Vidyasagar Ratings Team Ratings Team Abhishek Khemka Rajashree Murkute Niriksha Gupta Radhika Ramabhadran Harshraj Sankhla Richa Bagaria Naresh Golani Gaurav Dixit D. Naveen Kumar Hitesh Avachat Puja Jalan Amit Chanchalani Ratnam Raju Nakka Anil More Divyesh Shah Hardik Shah 67 Analysis of Union Budget 20-21’
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