Budget 2018 and its Possible Impact on Stock Market

The future movements in the markets over the next month or so will be decided by the contents of the Budget 2018.

Lately both the major indices in India has scaled record heights, the Sensex has crossed the 36000 mark whereas the Nifty has also breached the 11000 level.The future movements in the markets over the next month or so will be decided by the contents of the Budget 2018. Although in the period leading up to the Budget utmost secrecy is observed but some information does filter through, other than that rumours and informed speculations are also what that drives the sentiments of the markets. Generally there are negative sentiments and expectations attached to the Budget thus investors usually postpone buying decisions before the Budget is tabled. Thus in the past mostly the benchmark index has fallen in the month leading up to the Budget and the markets both Sensex and Nifty have seen gains after the Budget has been delivered. This has been the trend in six out of the last nine Budgets. But the said trend has now been broken with the markets touching new heights just before the Budget 2018. Few numbers in the Budget 2018 such as that of fiscal deficit and disinvestment targets will have a major impact on the direction of the bourses. Experts believe that the days leading up to the Budget the markets will see a rally due to various anticipations and right after the Budget profit booking in the stock market may be seen. However, there will be opportunities for investment in select sectors also.

Expected Impact of Budget 2018 on Stock Market

It is largely expected that the Budget 2018 will be neutral for the stock markets thus no sharp surge or dip in Indian indices is being expected. As the said Budget is the last full budget before the Lok Sabha elections in 2019 and before multiple assembly elections in 2018 no major reforms are expected to be undertaken. Experts believe that in the near future with record FII inflows, soaring investments in mutual fund, low interest rates and a strong rupee against the dollar the outlook in the markets is expected to remain positive. Although on the day of the Budget 2018 and the 48 to 72 hours period after the same the markets are expected to remain extremely volatile. In the Budget 2018 the markets would like to see a bump up in Government’s revenues to tackle fiscal deficit but most likely the fiscal deficit target of 3.2% of the GDP would be missed by the Government. The target is most likely to be revised to 3.4% which will have a somewhat negative impact on the markets. The markets also expect the government to pursue disinvestment agenda aggressively especially that of Air India. Relief in corporate tax rates and personal income tax along with stabilization of the Goods and Services Tax (GST) and increased public spending with focus on manufacturing, job creation and rural distress are some other key expectations of investors that will have a major impact on the markets.

Possible Reasons for Rise and Fall in the Markets after the Budget 2018

The FM most likely will try and strike a balance between popularism and fiscal prudence in the Budget 2018. The Indian market is already at historical highs so experts believe that even an industry friendly budget will have only a nominal impact. On the other hand if there are some dreadful surprises in the Budget 2018 then even a crash cannot be ruled out. One of the major decisions that the markets is hoping doesn’t materialise is the introduction of long-term capital gains tax (LTCG) on shares.

Economic Survey 2018 crucial findings, projections: Mixing caution & optimism

From GDP growth estimates to climate change, Business Standard brings you all the key points raised in the Economic Survey 2018

Cautious, optimistic, or both? Either way, the Economic Survey 2018 has been described as "a must-read for all seeking to improve their understanding of the Indian economy". Pegging GDP growth for FY19 at 7-7.5 per cent, the survey also flagged various hurdles the economy and its sectors would face, including the threat from rising oil prices and climate change.

Budget 2018 : For the "first time in India's history", as stated by the survey, state-wise data on international exports was dwelt upon in the document. The data indicate a strong correlation between export performance and the standard of living in states. Further, Chief Economic Advisor Arvind Subramanian said in the Economic Survey, presented in Parliament on Monday, that the government cannot rule out a pause in its fiscal consolidation plan in the coming financial year.

Other issues, such as the health of Indian markets, the impact of oil prices on growth, climate change, and the impact of the Goods and Services Tax (GST) and other reforms, etc, were also discussed in the survey.

Here are the key details the survey presented:

1) Optimistic about growth

Writing for the Business Standard, Mihir S Sharma says that Subramanian struck an optimistic note about economic growth going forward. The survey said that in the second half of the financial year, there were "robust signs of growth". It predicted that growth for the full 2017-18 financial year would be higher than the Central Statistics Office's prediction of 6.5 per cent at 6.75 per cent year on year. Further, it projected that growth in FY19 would be between 7-7.5 per cent, having received a boost from the fading of the disruption caused by demonetisation, a recovery in global demand, and select domestic policy actions. If the survey is accurate, India will reclaim the tag of the fastest-growing large economy in the world.

However, Sharma writes that the survey has gone with an optimistic view of growth, based on certain aspects of its analysis of the ongoing financial year. The survey noted the "higher than expected" fiscal deficits, current account deficit, and inflation in 2017-18. It added that the manufacturing sector continued to struggle, with the ratio of factory exports to GDP and the manufacturing trade balance declining. The survey also noted that the agriculture sector has not witnessed an increase in real value added for the past four years.

Economic Survey 2018: Formal jobs far more than current official estimates

Ther are 220 million employees in the economy, out of which 75 million workers enjoying social security benefits

Formal jobs are much more than what the current official estimates, the Economic Survey 2018 released on Monday said.

The Survey, analysing the data from goods and services tax (GST) and newly available digitised government data, said there were a total of 220 million (22 crore) employees in the economy, out of which 75 million (7.5 crore) workers enjoying social security benefits at present.

The Survey defined formal employment in two parts — First, those receiving social security benefits from Employees’ State Insurance Corporation and Employees’ Provident Fund Organisation. Second, those receiving it from firms under the GST regime.

“From a social security perspective, formal employment amounts to 60 million (6 crore), to which we must add an estimated 15 million (1.5 crore) of government workers (excluding defence), for a total of 75 million (7.5 crore),” the survey said.

From a tax perspective, formal employment is 112 million (11.2 crore) and government employment yields a total count of 127 million (12.7 crore), it noted. “Notwithstanding the caveats regarding the specific numbers, the broad conclusion is likely to be robust: formal payrolls may be considerably greater than currently believed,” the survey said.

The Survey added that when formality was defined in terms of social security provisions like EPFO or ESIC, the formal sector payroll was found to be about 31 per cent of the non-agricultural workforce. When formality was defined in terms of being part of the GST net, such formal sector payroll share stood at 53 per cent, it said.

“Even so, it is clear that providing India’s young and burgeoning labour force with good, high-productivity jobs will remain a pressing medium-term challenge. An effective response will encompass multiple levers and strategies, and above all, creating a climate for rapid economic growth on the strength of the only two truly sustainable engines — private investment and exports,” according to the Survey.

Budget session LIVE: CEA predicts achhe din in 2019, lists govt's successes

Economic Survey 2018 is a flagship annual document of the Finance Ministry that reviews the overall state of the economy

Live Budget 2018 : The Economic Survey 2017-18, tabled in Parliament on Monday, forecasts gross domestic product growth for 2018-19 at 7-7.5 per cent, compared with a forecast of 6.75 per cent in the current fiscal year.

“A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 percent this fiscal and will rise to 7.0 to 7.5 per cent in 2018-19, thereby re-instating India as the world‘s fastest growing major economy,” an official statement said, after the tabling of the survey, adding that “the reform measures undertaken in 2017-18 can be strengthened further in 2018-19.

The survey said that due to the launch of ‘transformational’ Goods and Services Tax (GST), resolution of the long-festering Twin Balance Sheet (TBS) problem by sending the major stressed companies for resolution under the new Indian Bankruptcy Code, implementing a major recapitalization package to strengthen the public sector banks, further liberalisation of FDI and the export uplift from the global recovery, the economy began to accelerate in the second half of the year.

In a highlighted box titled “Ten New Facts on the Indian Economy”, the survey stated that there was a large increase in registered direct and indirect tax payers due to demonetization and GST respectively, and that formal non-agricultural payroll was much greater than earlier anticipated.

What is Economic Survey?

It is a flagship annual document of the Finance Ministry. It reviews the overall state of the economy in the last 12 months. In August last year, however, the government for the first time presented a mid-term economic survey.

Arvind Subramanian

States and urban and rural local governments collect low levels of direct taxes even relative to the powers they already have. Does this imply a low-equilibrium accountability-delivery trap?

• India’s states and third-tier institutions (urban and rural local governments) collect a lower share of revenue by way of direct taxes than their counterparts in other federal countries.
• If you look over the last 50-60 years of India, we have moved from "crony socialism" to "stigmatized capitalism": CEA

Arvind Subramanian

India is in the midst of simultaneous slump in investment and saving rates post GFC. Investment went up 9.1 percentage points in 4 years during mid 2000s and has declined by about 6.3 percentage points in 8 years since GFC.

Budget 2018: New bottoms-up mechanism for farm-gate marketing likely

The Budget 2018-19 may announce haats and organic hubs in 1,000 village clusters across the country.

Modelled on Harihar Haath in Jagdalpur district of Chhattisgarh, these markets will enable villagers to sell their produce directly to consumers, bypassing middlemen, thereby helping them realise a good price for their produce.

Started as a pilot project in 2017, Harihar Haath is a unique bottoms-up approach to farm marketing. It is a consortium of four farmer-producer companies, five cooperatives, and 13 women self-help groups. It has been taking great strides to create a risk-free space for farmers.

The farmers collectively purchase goods from growers and sell them at rates lower than prevailing market prices. Most of the farmers are women, drawn from self-help groups under the Mahila Kisan Sashaktikaran Pariyojana of the rural development ministry.

The state and district administrations provide them space for selling their produce. With monthly sales of over Rs 200,000 and profits of over Rs 50,000, Harihar Haath handles 250 customer footfalls per day, and sells 1.5 tonnes of produce daily.

“We want the Harihar Haath model to be replicated in many more places across the country,” an official said.

These clusters are part of the 5,000-odd ones already identified by the Mission Antodaya programme. The mission, which aims to rid 50,000 gram panchayats of poverty in 1,000 days by converging all schemes, was announced in the Budget for 2017-18 by Finance Minister Arun Jaitley.

It is a state-level initiative for rural transformation to make a difference based on measurable outcomes to the lives of 10 million households in 5,000 rural clusters. The gram panchayats chosen possess a high level of social capital and have the ability to implement rapid rural transformation for poverty elimination.

The mission encourages partnerships with a network of professionals, institutions and enterprises to accelerate the transformation of rural livelihoods. Self-help groups are enablers due to their social capital and their proven capacity for social mobilisation.

The government has started the process of ranking gram panchayats and identifying their basic needs and economic standards so that targeted interventions can be made.

The sorting of 1,000 clusters out of the 5,000 identified will help in creating additional livelihood opportunities in villages. The clusters, yet to be identified, are ones that have a strong agricultural base and where farmers will be encouraged to grow and sell produce free of pesticide and chemicals.

Women farmers and self-help groups along with farmer producer companies will form the backbone of this infrastructure.

Budget 2018: A 15-year, Rs 35.3-trillion plan to put Railways on track

The Indian Railways is working on a Rs 35.3-trillion investment plan by 2032, pushing up the capital expenditure for the ministry by around 92 per cent annually. Going by the ambitious vision, the average annual investment, including capacity addition and modernization, would touch around Rs 2.5 trillion, up from the Rs 1.31 trillion in 2017-18.

This long-term investment will also comprise the modernisation plan of ‘Vision 2030’ and also Rs 8.56-trillion investment target that former minister Suresh Prabhu had kicked off starting 2014-15. “The Indian Railways will require approximately Rs 35.3 trillion by 2032 to create the requisite capacity and modernize the system,” the ministry said in a report to the Parliamentary Standing Committee. The Railways, under Piyush Goyal, has already started the work, aiming to achieve at least 4000 km electrification per year in the coming years.

budget 2018 India : The capex for Railways during 2015-16 and 2016-17 were Rs 935.2 billion and Rs 1.21 trillion, respectively, posting a significant increase in the recent years.

As per the latest plan, railways freight share may zoom from 33 per cent now to around 47 per cent. It has also set a target of increasing the passenger kilometre to 3.3 trillion PKM in 2030, from about 1.13 trillion PKM now. While the completion of dedicated freight corridors would segregate freight and passenger traffic on high density routes, speed of freight trains will increase from 25 km per hour (kmph) to 100 kmph.

With this, train speed is expected to be increased to 160-200 kmph in order to ensure better intercity travel up to 500 km in three to four hours. “In the ten years starting from 2020 to 2030, we are targeting more than 4000 km of new lines, doubling of 10,000 km and almost 100 per cent electrification,” an official said.

Asset monetisation will be one of the key revenue sources with the share of non-fare revenue likely to go up to almost 20 per cent from the current 4 per cent range in the next 12 years. In addition, the upcoming Budget may announce overhauling of the signalling system and implementation of the European Train Control System (ETCS) technology. This could cost the Railways around Rs 600 billion to cover the entire country. Also, a Rs 1-trillion plan has been lined up for commercial development of railway stations.

Of the Rs 8.56 trillion lined up for the first five years of Vision 2030, Rs 4 trillion has already been invested. A majority of this will go towards network decongestion, including freight corridor and electrification, network expansion and safety. In fact, over the next couple of years, at least 8,000 km of old tracks will be replaced, at an estimated cost of Rs 100 billion.

Around 30 per cent of the Rs 8.56-trillion capex for five years is expected to come from budgetary, 28 per cent from debt, and about 15 per cent through internal generation. Indian Railway Finance Corporation is arranging a debt of Rs 2.5 trillion to meet the five-year investment target.

Budget 2018: Has Modi govt delivered on its promise of urban development?

BJP govt faces this situation as it heads into its last full budget before general elections in 2019

Budget 2018 India : With India’s urban population rising by 11 million annually–the equivalent of adding a Bengaluru every year–and urban voters forming a major vote base for the Bharatiya Janata Party (BJP), making money and management available for cities would appear to be a priority.

But promises of smart cities and managing growth to provide jobs and housing for the coming urban population jump from 377 million in 2011 to 600 million in 2031–with 20% of this growth expected to come from rural distress and migration–are, currently, displaying little progress.

Less than a quarter of central funds for four major national programmes for India’s urban renewal have been used, according to an IndiaSpend analysis of government data. Since urban development is a state subject, state governments implement these national schemes with central assistance playing a key role. State and urban bodies are also expected to finance a portion of the program on their own by raising funds from other sources.

A further disaggregation of central funds data from the ministry of housing and urban affairs reveals:

• Upto February 2017–the last release of data–no more than 3% of smart-city projects were completed and 12% of central funds were released;
• With two years to deadline, the Centre–as of July 2017, the last release of data–was still to release 87% of funds for urban infrastructure in 500 cities and towns;
• Upto July 2017, 95.4% of central funds sanctioned for upgrading 12 heritage cities were unused, as the programme’s November 2018 deadline approaches;
• Work on 93% of sanctioned houses–meant to meet 16% of India’s urban housing shortage–was incomplete as of January 2018. The target of housing for all: 2022;
• Little is known of how state governments are raising funds and implementing these programmes.

This is the situation facing the BJP government, as it heads into its last full budget before general elections in 2019, at a time when Prime Minister Narendra Modi has promised 100 smart cities and housing for all by 2022.

The urban sector will not just watch how much money is set aside in the 2018-19 budget but also how it is used, as the National Democratic Alliance (NDA) tries to deliver on its promises of urban development and rejuvenation ahead of upcoming assembly elections in eight states and the 2019 general elections.

Budget 2018: Betting on stock market boom? Capital gains tax may end party

Budget 2018 India : The taxman may additionally end up being a speed bump for the Indian stock marketplace, which like its opposite numbers across the world has marched to multiple statistics within the past 12 months.

Brokerages consisting of Kotak Securities say prime Minister Narendra Modi's management can also make it more difficult for traders to say exemptions on capital gains from equity investments whilst the federal budget is introduced on February 1. Modi's move in 2016 to scrap high-cost currency bills and the implementation of the brand new income tax ultimate July have harm call for and sales, forcing the authorities to borrow extra.

"The government has to find avenues for producing extra sales to bridge the fiscal deficit," Shefali Goradia, partner at Deloitte Touche Tohmatsu India LLP, stated in an interview in Mumbai. "Tweaking the lengthy-time period capital advantage wreck is a low striking fruit."

even so, the government can also turn away from doing so -- any exchange may also spook person traders, who have flocked to mutual funds due to the fact that Modi swept into electricity in 2014. the primary S&P BSE Sensex soared 28 in keeping with cent remaining yr, beating the S&P 500's 19 consistent with cent strengthen, as home budget bought a document $19 billion of stocks -- greater than double the inflow from distant places. The coins ban helped boost up the shift to monetary property, taking the sheen off gold and belongings.

belongings with cash managers reached a document Rs 23 trillion ($351 billion) in December, with fairness plans making up 38 in keeping with cent of the pie, statistics from the affiliation of Mutual budget in India display.

"long-term capital profits tax wreck has led to better participation in equity markets," said Nilesh Shah, leader executive Officer at Kotak Mahindra Asset management Co, which has $19 billion in stocks and bonds. "And it isn't always that this participation comes totally free. traders pay a securities transaction tax."

Old debate

And sceptics factor out that reputedly every budget brings speak of the return of the levy, which was changed by using a transaction fee -- applicable while shares are bought and offered -- in 2004. A remark in December 2016 through Modi that individuals who benefit from equities should pay greater taxes unsettled buyers, prompting Finance Minister Arun Jaitley to make clear then that the authorities had no such plans. Finance Ministry spokesman D S Malik declined to comment.

budget 2018: Logistics region wants FM Jaitley to raise regulatory limitations

the world also expects the Narendra Modi authorities to provide a unbroken, transparent digital platform to make sure easy movement of goods and vehicles throughout the united states of america

nowadays, the Narendra Modi-led imperative authorities has delivered in numerous measures to uplift the united states of america’s economic system. It has additionally set the level for unlocking the boom capacity for India’s logistics sector

by means of putting in a devoted logistics division beneath the Ministry of trade & enterprise and granting the arena an infrastructure fame.

Now as the government heads for its last complete finances on this phrases when Finance Minister Arun Jaitley offers Union Budge 2018 on February 1, we would sit up for seeing greater emphasis on enhancing the infrastructure.

ultimate 12 months, we saw the finance minister pronouncing an investment of approximately Rs 39.61 lakh crore in infrastructure development. that is sure to be a boon – now not handiest for express delivery players however for lots industries.

This year, we'd also count on efforts from the government to cut regulatory barriers and provide a seamless, transparent

virtual platform to make certain smooth movement of goods and motors throughout the united states of america. lastly, our price range 2018 expectation is that the finance minister could announce new schemes focused on fiscal incentives to encourage investments in special monetary zones (SEZs). those will allow the non-public quarter to consolidate and expand, and contribute to the economy greater meaningfully.

the writer is dealing with director of courier and logistics business enterprise TCI express

Budget 2018: Eyes on Arun Jaitley's announcements for rural sector

The Budget allocation for Ministry of Agriculture and allied activities has grown by 114% since 2010-11

As Finance Minister Arun Jaitley gets down to deliver his fifth annual Budget for the 2018-19 financial year, all eyes will be on his announcements for the rural sector which is going through a downturn in the last few years. Two consecutive droughts along with a sharp fall in incomes have turned agriculture unprofitable resulting in massive agitations in several parts of the country.

Budget 2018 : According to some estimates, in the 2017 Kharif season alone, an estimated Rs 360 billion has been denied to farmers for not being able to sell their produce at the state-mandated Minimum Support Price (MSP). The fall in farm incomes not only threatens to dent the ruling BJP electorally but could also raise a big question mark on the government’s promise to double incomes by 2022.

In this perspective, Business Standard looks at budgetary allocation for agriculture and allied sectors in the past few years under the UPA and first years of the NDA along with agriculture growth during these years.

The Budget allocation for Ministry of Agriculture and allied activities, which includes the departments of agriculture research and animal husbandry, has grown by 114% since 2010-11, with a big jump coming from 2016-17 after the government started adding the expenditure incurred on interest subvention on short-term crop loans under the Ministry of Agriculture.

But, the higher budgetary allocation hasn’t translated big time into farm growth, projected to drop to its lowest level in recent times in 2017-18, according to the first Advanced Estimate. Though, allocations aren’t meant to boost growth and just give the direction of the govt’s spending.

more appropriate factor in farm growth seems to be the performance of the southwest monsoon, which has been erratic in 2014 and 2015. 2016 was the first full-year of a near-normal monsoon under NDA-2.

Note: Starting from 2016-17 Budget, the central government has been adding the component of interest subvention on short-term crop loans into agriculture ministry's Budget. Earlier, it was part of the Budget of the Ministry of Finance; LPA: Long-period average.

Budget 2018: This is why Maharashtra's drought woes are likely to continue

Even after 20 years, irrigation projects worth Rs 9 billion remain incomplete and now their cost is expected to be more than Rs 50 billion

In many ways, the Lendi irrigation project close to the Andhra Pradesh-Maharashtra border continues to be a prime example of the excruciating delays that have plagued irrigation projects in India.

Conceived in 1987, this major irrigation project was to be completed in 1992. The project involved building a dam at the Lendi river to store over 6 trillion cubic metres of water before it joined the Manjira river, a tributary of the Godavari, the largest river of peninsular India. The project being executed by the Godavari Marathwada Irrigation Development Corporation Ltd was originally envisaged to be built at the cost of half a billion rupees. But in 2016, authorities further pushed the completion date to 2020 with a revised cost of Rs 14 billion. If the project is completed after 28 years of delay, it will join 16 other such irrigation projects in Maharashtra that have been hanging fire for over two decades. Many of these projects are in the severe drought-hit regions of Vidarbha and Marathwada in the state.

Budget 2018 : This shouldn’t have been much of a bother for Finance Minister Arun Jaitley, who gets set to present his government’s last full-fledged Budget on February 1, 2018. But the fact that such delayed projects dot Maharashtra would certainly rankle the finance minister. Information sourced from his ministry shows that these multi-decade delays in completing minor and major irrigation projects across Maharashtra have cost the government a lot of money over the years. Out of a total of 29 irrigation projects under construction in the state, 16 are delayed with massive time lags. These projects that should have been completed at an estimated cost of Rs 9 billion will now end up costing more than Rs 50 billion. And the fate of those expected to be commissioned in 2018 still remains unclear.

Maharashtra might be India’s richest state, yet every year the state faces debilitating droughts leading to destruction of farm livelihoods and loss of life due to the paucity of drinking water. In 2013, the state faced its worst drought ever. If that wasn’t enough, in 2015 and 2016 severe droughts again hit the state. Reports suggest that the state’s farmers sought insurance to the tune of Rs 41 billion for crop losses due to drought in 2016. That year, the agriculture sector in the state contracted by 4.6 per cent.

While Jaitley might be inclined to announce new irrigation projects for Maharashtra, the Narendra Modi administration might do well to ensure that irrigation projects scheduled to be completed this year and the ones hanging fire for more than two decades see the light of the day first, without suffering the same fate as other projects like the Lendi irrigation project. Finance ministry data show that at least six irrigation projects in the drought-hit state are scheduled to be commissioned in 2018. All these projects were conceived before 1997. Although conceived at a cost of Rs 7 billion, their revised completion cost 20 years later exceeds Rs 27 billion.