Published on 6/02/2020 9:11:35 AM | Source: Religare Broking Ltd

Budget 2020-21 Impact on Metals & Energy Sector By Religare Broking

Posted in Post Budget Analysis| #Post Budget Analysis #Religare Broking Ltd

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Budget 2020-21 Impact on Metals & Energy Sector

Finance Minister Nirmala Sitharaman on Saturday presented the second budget of Modi government 2.0. The budget revolved around three major themes-aspirational India, economic progress and social welfare. The focus of the budget was to put the economy back on growth track, and it tried to blend it well with social development which was substantiated by a multi billion dollar package for farmers welfare, wellness and education. Budget reflects the government’s commitment to boost investment in the economy with enhanced allocations on infrastructure, promoting exports, uplifting manufacturing activities, boost for MSMEs and bank reforms. The government has done a fine balancing act by increasing expenditure in order to kick start the economy, but at the same time maintaining fiscal prudence. The budget has revised fiscal deficit at 3.8 per cent of GDP for FY20, and 3.5 per cent for FY21. Though the government has relaxed fiscal deficit target, but it was the need of the hour considering the on going slowdown in economy. From the commodity markets perspective, one major welcome initiative is the proposed setting up of International Gold Exchange in GIFT city. With India being the second largest consumer of gold, this would enable efficient price discovery of gold and allow us to stand at par with other big consuming nations like China and Hong Kong. However, instead of addressing the high cost of trading in Indian commodity markets which is leading to a drop in volumes and liquidity, budget announcement that commodity indices would be brought under the CTT umbrella is negative for the growth of commodity markets. There were certain misses and the budget fell short of market expectations to some extent as change in income tax slabs comes with a caveat, there has been no substantial relief for the auto and telecom industry and LTCG still stays. Also, the budget could have focused more on key areas that needed attention to boost growth. Nonetheless, considering the limited resources due to lower tax collections, we see this budget as balanced and inclusive for all sections of society.


Key Highlights of the Union Budget 2020-21:

Direct and Indirect taxes

* Taxpayers will now be able to avail a lower income tax rate on various slabs by foregoing certain deductions and exemptions. The new regime will be optional and those who want to stick to claiming deductions will be allowed to do so

* Concessional corporate tax rate of 15 per cent to new domestic companies engaged in the generation of electricity

* Abolishment of Dividend Distribution Tax (DDT)

* To launch new direct tax dispute settlement scheme-Vivaad se Vishwaas scheme

* Tax burden on employees due to tax on ESOPs to be deferred by five years or till they leave the company or when they sell, whichever is earliest


Banking and Financial Markets

* Deposit Insurance Coverage to increase from `Rs.1 lakh to Rs.5 Lakh’ per depositor

* Floating a new Debt-Exchange Traded Fund consisting primarily of government securities

* Certain specified categories of government securities would be opened fully for nonresident investors, apart from being available to domestic investors

* FPI limit in corporate bonds raised to 15% from 9%


Rural growth and women empowerment

* Rs.2.83 lakh crore to be allocated for the Agriculture sector

* Expansion of the PM KUSUM scheme to fund setting up stand-alone solar pumps for 20 lakh farmers; In addition, a scheme announced to enable farmers to set up solar power generation capacity on their fallow/barren lands and to sell it to the grid

* Creation of efficient warehouses

* SHGs run village storage scheme

* Integration of e-NWR with e-NAM, “Kisan Rail” and “Krishi Udaan”

* Facilitate doubling of milk processing capacity from 53.5 million MT to 108 million MT by 2025



* Infrastructure Financing of Rs.103 lakh crore announced

* National Logistics Policy to be launched soon

* Accelerated development of Highways

* 100 more airports to be set up by 2024 to support UDAN scheme

* Delhi-Mumbai Expressway and two other packages would be completed by 2023. ChennaiBengaluru Expressway would also be started


Focus on Jobs creation and Skill development

New common eligibility test for non-gazetted government jobs and public sector banks

* Special bridge courses to be designed by the Ministries of Health, and Skill Development: To fulfill the demand for teachers, nurses, para-medical staff and care-givers abroad

* Urban local bodies to provide internships for young engineers for a period of up to one year


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