BOND MARKET REMAINS VOLATILE
Government bond market witnessed high volatility on the Budget day but at close the benchmark yield on the 10-year was marginally higher at 6.42%.
In the forex market, the rupee rallied strongly and closed at 67.47 to a dollar, stronger by 39 paise as there were no negative surprises for the market. The benchmark gilt opened flat at 6.40%, softened to a low of 6.37% and hardened to a high of 6.45% as bond market players tried to decipher the government’s fiscal maths.
“The (bond) market witnessed substantial volatility owing to confusion about the net and gross borrowing figures given in the budget. However, the government’s clarification relating to further buyback of securities rather than switching of gilts, and expectations of continuing easing of rates by the RBI led to value buying at lower level led to the recovery,” said Ram Kamal Samanta, VP (treasury), SBI DFHI, one of the leading bond houses.
AIRPORTS TO EXPLOIT HUGE LAND ASSETS
Non-metros and small towns could soon have glitzy malls, hotels and convention centres on the sprawling land parcels that belong to the Airports Authority of India (AAI) but have been lying vacant for years. Finance minister Arun Jaitley’s Budget cleared the way to amend the AAI Act “to enable effective monetisation of land assets”.
“The resources, so raised, will be utilised for airport up gradation,” the FM said. He also allowed private sector participation in operating and maintaining airports in small towns, as in their metro counterparts.
The Modi government estimates that developing airports across India over the next 15 years will require an investment of Rs 2-3 lakh crore, minus the cost of land. AAI has a huge land bank of 55,687 acres across the country – collectively one-and-a-half times the size of Chandigarh.
However, the AAI Act currently allows using this land only for aviation-related activities. “(With cities expanding) AAI airports are now in the middle of most cities. The demand for use of our land is for things like malls and convention centres, which the Act does notallow at present. With the Budget talking about amending the Act, we will be able to utilise our land in a more market efficient manner. This is a very good development,” said AAI chairman Guruprasad Mohapatra.
Globally, due to efficient land use, airports are able to generate almost 40-45% of their total revenue through non-aeronautical uses. “Our non-aero revenue accounts for 20-25% of the total generation. We will be able to increase that and bring it on a par with global standards with the change,” Mohapatra said.
AUTO MAKERS ATTACH HOPES WITH BUDGET FOR A BOOST
NEW DELHI: January 2017 proved a mixed bag for the Indian automotive industry as some manufacturers reported higher sales numbers while some reported flat or lower sales. However, automakers and analysts are optimistic on budgetary announcements aimed to boost the sector.
“Focus on rural economy and infrastructure are two big positives. Continued focus on infrastructure with an outlay at Rs 3.96 lakh crore would be a positive for the commercial vehicle industry,” said Subrata Ray, Group Head, Corporate Sector Ratings, ICRA Ltd.
“The reduction of income tax for companies below Rs 50 crore is a positive, though the industry would have expected some relief on corporate tax for larger entities as well,” he added. Guillaume Sicard, President, Nissan India Operations, said the income tax rate cut by five per cent to 5 per cent for individual taxpayers earning under Rs 500,000 will create positive sentiment among first-time small car buyers.
Meanwhile the country’s largest carmaker Maruti Suzuki India opened the year by selling 144,396 units last month, up from 113,606 units sold during the corresponding month last year. Exports surged by 44.8 per cent with 10,462 units shipped out, up from 7,223 units sold abroad in January 2016. The second largest carmaker Hyundai Motor India Ltd. Too logged higher sales number with 51,834 units last month, up from 44,230 units sold in January 2016.
Similarly, Nissan Motor India’s domestic sales last month went up to 4,346 units from 2,668 sold the same month a year ago. The company’s two brands – Nissan and Datsun – together recorded 63 per cent year-on-year growth.
THRUST ON RURAL INFRASTRUCTURE
The government has put big money on the table for infrastructure, a move that will improve connectivity, push growth by creating demand for core sector output, and create jobs in the hinterland.
Infrastructure projects have been allotted Rs 3.96 lakh crore for 2017-18, up from the revised estimate of Rs 3.58 lakh crore for 2016-17. The Budget estimate for FY17 was Rs 3.48 lakh crore. NHAI, which builds highways, has got Rs 64,900 crore, an increase of 24% over the Budget for FY17. Rs 27,000 crore has been allotted to build rural roads, the same level as the previous Budget.
Indeed, the government’s rural thrust is very clear from an increase in allocation for village electrification from Rs 8,500 crore last fiscal to Rs 10,635 crore. “There is undiluted focus on rural electrification, with a clear time-bound plan to electrify the last village of India. The increased allocation to Deen Dayal Gram Jyoti Yojana will help achieve complete electrification of India,” said CLP India executive director Amarthaluru Subba Rao.
GOVT. SCRAPS SUGAR SUBSIDY
New Delhi, Feb 1 () The Centre will not provide Rs 18.50 per kg subsidy on sugar to states for selling it via ration shops from next fiscal and has allocated only Rs 200 crore in the Budget for clearing past claims.
In the Union Budget 2017-18 presented to Parliament today, the government has allocated Rs 200 crore to clear pending claims under the PDS sugar subsidy scheme, while the budget allocation is Rs 4,500 crore for this financial year.
As per the existing scheme, states purchase sugar to be supplied through the public distribution system (PDS), popularly known as ration shops, from the open market at wholesale rates and sell at a subsidised rate of Rs 13.50 per kg. The centre gives subsidy of Rs 18.50 per kg to states.
The subsidised PDS sugar is given to 40 crore beneficiaries of BPL (below poverty line) families. About 2.7 million tonnes of sugar per annum are required for PDS sale The sugar subsidy is discontinued in view of all states rolling out the Food Law, under which there is no distinction of categories of beneficiaries as BPL.
Sources had earlier said that the Food Ministry had already sounded out states that the central government may withdraw subsidy on sugar from next fiscal and they would have to bear the entire cost of sugar for selling at a cheaper rate via ration shops.
Food minister Ram Vilas Paswan had also written to Finance Minister Arun Jaitleydemanding not to discontinue the scheme entirely and proposed continuance of it for at least Antyodaya Anna Yojana (AAY) families, the poorest of the poor segment.
In the Budget, the government has allocated Rs 496 crore under the Sugar Development Fund for next fiscal to provide assistance in the form of interest to sugar mills towards working capital loans of Rs 6,337.17 crore already provided to them for clearance of cane price arrears. The government has projected sugar cess collection of Rs 3,000 crore for the next fiscal.
BUDGET DISAPPOINTING FOR PEOPLE OF HIMACHAL PRADESH
Shimla: Himachal Pradesh Chief Minister Virbhadra Singh today described the budget as “disappointing and disheartening” for the people of the state while the opposition BJP hailed the budget as “historic”, saying it aimed at boosting growth and reviving the housing sector while giving relief to income tax payers.
“It seems to be the budget of mere promises and commitments in which interests of the common man, who had high expectations from the budget, have been completely ignored, Singh said, adding that the budget has failed to come up to the expectations of the people, reeling under impact of demonetisation.
He said there was nothing for the farmers and unemployed youth in the budget and nothing much has been offered to lower and middle class as employees were expecting much relief after revision in pay scales.
Singh said it was “unfortunate” that Himachal Pradesh had been again ignored in the rail budget and no mention had been made of strategically important Bilaspur- Bhanupali-Leh rail link.
However, the chief minister welcomed the step to reduce the limit for anonymous cash donation to political parties from Rs 20,000 to Rs 2,000.
Describing the budget as “historic, courageous and balanced”, former chief minister and Leader of Opposition, Prem Kumar Dhumal said the “Finance minister has presented a growth-oriented dream budget which would go a long way in fulfilling the cherished dreams of farmers, horticulturists, youth, middle class, dalits and oppressed sections of the society.”
Terming the steps taken by the finance minister without increasing the deficit as “laudable”, Dhumal said that “it would go a long way in strengthening the economy, increasing the pace of development and reducing poverty.”
Dhumal said that cut in income tax rates for people with income upto Rs 5-lakh was very appreciable.
Asserting that the budget has many firsts to its credit, he said, “The budget 2017-18 is path breaking and one of its kind with initiatives that will have a positive bearing on people and the economy and the merger of railway budget with the union budget for the first time since independence is itself a milestone.”
“The element of introducing transparency in political funding and thereby entitling the parties to receive donations by cheques or digital mode above Rs 2,000 amount is also a revolutionary step, taken for the first time by any government,” Thakur said.
“The establishment of a national agency to conduct entrance exams for higher education and reforms in the UGC will certainly allow more autonomy to colleges,” he added.
Meanwhile, the state secretariat of the Communist Party of India (Marxist) termed the budget as an agenda for “mounting burden” on the common man, saying, “At a time when the common people in India are reeling under the disastrous impacts of demonetization, the Finance Minister has come out with a budget which riddled with contradictions would increase the sufferings of the people.”
POST OFFICES TO RENDER PASSPORT SERVICES
To increase citizens’ access to passport services, particularly in remote regions, finance minister Arun Jaitley announced that head post offices of each district would be used to render passport services.
“Our citizens in far flung regions of the country find it difficult to obtain passports and redress passport related grievances. We have decided to utilise head post offices as front offices for rendering passport services,” he said. This decision was announced on January 25 by minister of state for external affairs VK Singh and his counterpart in the telecom ministry Manoj Sinha.
Secretary (CPV) D Mulay had then said, “This is for the first time minister of external affairs will be formally giving the powers under Passport Act to the post office. It’s a unique feature where one ministry is giving the power to another ministry to act on its behalf, so in a sense postal officers will actually be exercising powers under the Passport Act.”
BUDGETARY ALLOCATION FOR ENHANCING MILK PROCESSING CAPACITY
The Dairy Processing Infrastructure Fund with Rs 8,000 crore corpus announced in the Budget would strengthen India’s numero uno position as the world’s largest milk producer.
The special fund will help set up processing capacity of an additional 500 lakh litres of milk per day in the country. In other words, it will add capacity twice that of Amul or process milk that can meet demand of 10 milk markets the size of Delhi.
In first year, the government has announced to give Rs 2,000 crore. Organised players in the country, including dairy co operatives and private players, currently have capacity to process an estimated ten crore litres (1,000 lakh litres) of milk per day. Of these, the dairy co-operatives alone had a capacity of 668 lakh litres per day as on March 2016, sources in the National Dairy Development Board (NDDB) said. Amul commands a major share with nearly 290 lakh litres processing capacity.
“Since Independence, it is for the first time that government has announced special funds for enhancing milk processing capacities. It will convert into setting up processing facility for additional 500lakh litres milk per day which means dairy farmers will have an additional income of Rs 50,000 crore per annum,” said R S Sodhi, managing director of the Gujarat Co-operative Milk Marketing Federation, the apex body that markets Amul brand products.
The dairy industry had been demanding special fund to replace the existing infrastructure that has become obsolete. “The infrastructure created during Operation Flood is 30-40 years old. We will be able to use this funds for building new plants and renovating old ones,” said Sodhi on Wednesday.