Budget 2019: Modi Makes Big Promises In Election Budget, Leaves Out Details 

Prime Minister Narendra Modi addressed the nation after his government presented the interim budget. He started by highlighting that poverty is falling at record rates because of the government’s efforts.

The government's policy has improved everyone's lives in the country, said Modi, adding that everyone has been taken care of in Budget 2019.

To support the growing aspirations of the middle class, the government has taken steps to reduce the tax burden for them. This is only possible because of the better off sections of the society and when they pay taxes, he added.

Tax breaks for the middle-class income group and sop for India's small and marginal farmers keeps the status quo on the fiscal front, said Chakri Lokpriya, managing director and chief investment officer at TCG Advisory Services. "From that perspective no negatives is a positive in the current budget," he said.

Jinesh Gopani, Head of Equities at Axis Mutual Fund agreed that Union Budget 2019 was a balanced one for markets. "Not much negative on the fiscal deficit front, particularly good for the consumption story," he said.

"The marginal slip in the fiscal deficit for FY 2018-19 is par for the course, given that the rural direct benefit transfer scheme starts from Dec 2018 itself. The estimates for FY20 are also not very aggressive with an assumption of a 11.5 percent nominal GDP growth and tax buoyancy of about 1.25," said UR Bhat of Dalton Capital Advisors. Bhat said that the government has displayed "maturity and a sense of responsibility" by not going overboard while also addressing the pressing concerns of the vulnerable sections of voters.

"This strongly suggests that the NDA expects to be re-elected in the forthcoming federal elections," Bhat said.

Shares of Dr. Reddy’s Laboratories Ltd. rose as much as 2.5 percent to Rs 2,789, its highest level since March 2017, after its third quarter net profit rose 45 percent, beating analyst estimates

Key earnings highlights (Q3, YoY)

• Net profit up 45 percent at Rs 485 crore vs estimate at Rs 380 crore
• Revenue up 1 percent at Rs 3,850 crore vs estimate at Rs 3,878 crore
• Ebitda up 6 percent at Rs 815 crore vs estimate at Rs 754 crore
• Margin at 21.1 percent versus 20.2 percent vs estimate at 19.4 percent

Finance Minister Piyush Goyal says the budget has directed its focus on poorest and middle class. The government has made provisions for income support and maintaining fiscal discipline, he said.

Goyal said the agri sector moves will benefit 12.5 crore farmers.

Shashi Tharoor said that the entire exercise has turned out to be a 'damp squib'.

"We've seen one good thing that is tax exemption for the middle class. Rs 6,000 in income support for farmers boils down to Rs 500 per month. Is that supposed to enable them to live with the honour and dignity?" he questioned.

Swaraj India President Yogendra Yadavdav also expressed his disappointment with the farm relief scheme.

BJP Chief Amit Shah said that the budget has met the expectations of all groups such as farmers, labourers and the middle class.

Speaking about the Kisan Samman Nidhi scheme, Union Minister for Farmer Welfare Radha Mohan Singh said that the scheme has been put into motion since Dec. 1, 2018. "In 2018-19 financial year, for months before March, Rs 2,000 will be transferred to farmers' accounts, and in the financial year 2019-20 farmers will get Rs 6,000," he said.

Indian equity benchmarks erased of most of intraday gains.

The S&P BSE Sensex Index traded 145 points higher at 36,405, after rallying over 500 points and the NSE Nifty 50 Index gave up 10,900, after touching 10,983.

The benchmark indices were weighed down by banking shares—ICICI Bank Ltd., Axis Bank Ltd. and SBI.

The government has announced a number of expenditure measures, which will increase outlays and put pressure on its ability to meet its fiscal deficit target, according to Moody's Investor Services.

"Ongoing slippage from the government’s budgeted fiscal deficit targets over the past two years, and our expectation that the government will face challenges meeting its target again this coming fiscal year (ending March 2020) does not bode well for medium term fiscal consolidation,” Associate Managing Director of Sovereign Risk Group, Gene Fang said in a note.

“We view this continued slippage as credit negative for the sovereign." He highlighted India's high debt burden as its biggest challenge which is "not expected to diminish rapidly".

At the same time, Moody's said that policies aimed at promoting expenditure efficiency through rationalisation of government schemes and better-targeted delivery, including through direct income transfer schemes, are credit positive. However, that will only be the case if the schemes are implemented correctly.

For an interim budget, Finance Minister Piyush Goyal's budget saw quite a few policy changes and expenditure schemes.

Here are the top five announcements from his speech.

1. Proposal to scrap income tax for those earning upto Rs 5 lakh
2. Proposal to launch a pension scheme for unorganised sector workers, setting aside Rs 500 crore for it in FY20
3. A proposal to transfer Rs 6,000 to accounts of small and marginal farmers per year under the new "Kisan Samman Nidhi" scheme. Rs Rs 75,000 crore has been budgeted for this in FY20.
4. Fiscal deficit target for FY20 set at 3.4 percent, higher than the 3.3 percent target set for the current fiscal.
5. Divestment target set at Rs 80,000 crore for FY20, same as that set for the current fiscal.

Shares of M&M rallied nearly 5 percent after its last month's auto sales rose 7 percent on a yearly basis to 55,722 units. Its tractor sales rose 1 percent on a yearly basis to 22,065 units during the period.

Key Sales Highlights (Auto Division, YoY)

• Passenger vehicle sales rose 1 percent to 23,872 units.
• Utility vehicle remained flat at 22,263 units.
• Cars and vans segment rose 11 percent to 1,609 units.
• Commercial vehicle sales rose 8 percent to 22,625 units.
• Three wheeler sales rose 27 percent to 6,003 units.
• Total domestic sales up 6 percent at 52,500 units.
• Total exports jumped 22 percent to 3,222 units.

Tractor Sales Highlights (YoY)

• Domestic sales up 1 percent at 20,948 units.
• Exports up 2 percent at 1,243 units.

The government to receive Rs 74,100 crore this year and Rs 82,900 crore in next year as dividend from RBI and state-run banks in FY20. The disinvestment receipts are seen at Rs 90,000 crore in FY20

There will be no allocation of any sum to recapitalise banks in FY20.

Other key numbers

• FY20 fertilizer subsidy seen at Rs 74,990 crore versus Rs 70,080 crore in FY19
• FY20 food subsidy seen at rs 1.84 lakh crore versus rs 1.71 lakh crore in FY19
• Gross tax revenue seen at Rs 25.52 lakh crore for FY20
• FY20 petroleum subsidy seen at Rs 37,480 crore versus Rs 24,830 crore in FY19

Finance Minister Piyush Goyal in his budget speech announced a 10-point strategy to drive the economy’s growth over the next decade.

Ten Dimensions:

1. To build physical and social infrastructure for a $10-trillion economy and to provide ease of living.
2. Digital India reaching every sector of the economy.
3. Making India a pollution free nation.
4. Generating massive employment built upon the “Make In India” programme to develop grassroots level clusters.

For the rest of the six dimensions, click here

Indian equity benchmarks traded near day’s high as the investors digested Finance Minister Piyush Goyal’s Budget speech.

The S&P BSE Sensex Index rose 0.9 percent to 36,600 as of 12:55 a.m. and the NSE Nifty 50 Index rose 0.97 percent to 10,937.05.

Ten out of 11 sectoral gauges compiled by NSE rallied, led by the NSE Nifty Nifty Auto Index’s 3.7 percent advance. On the flipside, the NSE Nifty Metal index was the only sectoral loser, down nearly 3 percent.

Here are the first reactions to the Budget announced by Finance Minister Piyush Goyal:

Budget is lot less populist then expectations, says Ananth Narayan, professor at SPJIMR. He said it set the grounds for a rate cut for the RBI. It’s the smartest pre-election budget, he told BloombergQuint in an interview.

Meanwhile, Saurabh Mukherjea of Marcellus Investment says there could be a capex pull back post-election.

India’s finance ministry is budgeting for borrowings of Rs 7.04 lakh crore for the fiscal year starting April 1, people with knowledge of the proposal say, asking not to be identified as they are not authorized to speak on the matter, Bloomberg reported.

The estimate compares with a revised FY19 market borrowing of Rs 6.34 lakh crore, people said.

The government set a Rs 80,000 crore divestment target for the financial year 2019-20, same as that set for the current fiscal.

However, so far the Centre has only garnered close to Rs 33,000 crore from stake sale in Rural Electrification Corporation Ltd., Bharat Heavy Electricals Ltd. and NHPC Ltd.

With the SUUTI (Specified Undertaking of the Unit Trust of India) sales coming up, Goyal said that he is confident of meeting the current year's target.

For more live market updates, click here.

Indian equity benchmarks traded at day's high after the government pegs fiscal deficit at 3.4 percent for the next fiscal.

The S&P BSE Sensex Index rose as much as 0.7 percent to 36,506 and the NSE Nifty 50 Index rose as much as 0.6 percent to trade above 10,900.

In other news...

Shares of the truck and bus maker rose as much as 6.7 percent, after its January sales rose 9 percent on a yearly basis to 19,741 units.

Key sales highlights (YoY)

• Medium and heavy commecial truck sales rose 9 percent to 12,802 units.
• Medium and heavy commecial bus rose 1 percent to 1,892 units
• Light commercial vehicle sales rose 9 percent to 5,047 units.

Catch the live updates on January auto sales here.

The Goods and Services Tax scheme has saved consumers Rs 80,000 crore, Goyal said today.

The government further wants to reduce the GST burden on homebuyers.

GST collections so far have showed an average of Rs 97,000 crore per month. The government yesterday said that the collection for December will cross the Rs 1 lakh crore mark.

The data may be a temporary reprieve for the Narendra Modi-administration as GST collections had been falling for the past two months. The government’s finances are under stress as it races to meet its 3.3-percent fiscal deficit target.

Goyal says the government is fully committed in its fight against the black money. He said:

• Made seizures worth Rs 50,000 crore in anti-black money moves
• Anti-black money measures have brought in revenues of Rs 1.3 lakh crore
• Benami properties of Rs 6,900 crore attached
• 3.38 lakh shell companies identified, directors penalised
• 1.6 lakh new taxpayers as result of note ban in FY18
• Illegal foreign property worth Rs 1,600 crore attached

The return verification, assessment and scrutiny of tax matters will be done anonymously within the next two years, Goyal announced, with an aim to curb corruption and tax evasion.

The total tax collection in the current fiscal stands at Rs 12 lakh crore, he said, while the taxpayer base has risen to 6.85 crore.

Nearly 99 percent of all income tax refunds were accepted last year.

In order to make the process more friendly, all refund requests will now be processed within 24 hours and refunds will be passed simultaneously.

In order for to ease the procedures required for shooting films in India, the government today announced a single-window clearence for film-makers in India. The provision, which was only available to foreign film-makers so far, will apply to Indian film-makers as well.

Finance Minister Piyush Goyal while making the announcement during the Interim Budget said that since the industry is a huge employment generator, it should be given adequate simplification in rules to shoot films.

The government will also introduce an anti-camcorder provisions in the Cinematography Act to combat piracy.

Rahul Puri, managing director of Mukta Arts welcomed the government's move to extend single-window clearance to Indian filmmakers.

"Single-window clearance has been the industry's demand for a very long time. We welcome such a move as a lot of permissions are required currently and the process is very bureaucratic and time consuming," he said.

"If this move could be extended for multiplex licenses, it would be very beneficial to the industry."

• 34 crore Jan Dhan Bank accounts created in last five years.
• Mobile data consumption has grown 50x in last 5 years
• Cost of telecom data and voice calls in India lowest in the world
• Aim to create 1 lakh digital villages in next 5 years
• Solar power production has grown 10x in last 5 years
• Allocation to north eastern areas increased 21 percent to Rs 58,166 crore in FY20.

FM says the government has managed to harnessed the strength of the youth through self-employment schemes including the Mudra Yojana, Startup India and Standup India.

Under Mudra Yojana, 15.56 crore loans have been dispersed amounting to Rs 17.23 lakh crore, Goyal says.

Backdrop

The three-year-old scheme provides refinance for loans up to Rs 10 lakh given out by banks and non-bank lenders.

Loans worth Rs 2.54 lakh crore were classified as Mudra loans in 2017-18, according to the scheme’s annual report. This is an increase of 41 percent over the Rs 1.80 lakh crore of loans sanctioned in this category. For 2018-19, a target of Rs 3 lakh crore has been set. Refinance to commercial banks increased from Rs 1,886.73 crore in 2016-17 to Rs 4,405.73 crore in 2017-18, according to the annual report.

However, there are two concerns regarding this scheme. The first is that banks are reclassifying existing loans as Mudra loans, thereby not increasing the flow of credit. The second concern remains that of asset quality. However, so far, bad loan ratios have remained in check. According to the latest annual report, the non-performing assets ratio in the portfolio currently stands at 5.38 percent.

FM says stand ready to make further defence allocation if necessary.

Budget impact:

Shares of defence equipment maker held on to gains as government allocated Rs 3 lakh crore for defence budget.

The government had expanded the ambit of the Ujjwala Yojana -- a scheme to safe guard the health of the women of the nation -- from 5 crore connections to 8 crore connections int he last union budget. Under this, the government has already completed 6 crore connections and expects the remaining 2 crore connections to come through by next year, Goyal said.

Shares of M&M and Escorts rally over 2 percent after the government allocates Rs 75,000 crore for small and marginal farmers.

The Finance Minister's decision on fishery sector will have a great impact, Ramakanth Akula, CEO at waterbase said.

"At present farmers face a lot of issue due to natural calamities and competition from international markets. Lower interest rate will help the farmers and make them more competitive in the international market," Akula said.

Shares of food processing companies rose after the government announced two percent interest subvention for farmers in animal husbandry and fisheries.

The period of 2008-14 will be remembered as the period of aggressive credit growth and as per RBI, the primary reason for the spurt in non performing assets, Goyal said at the Parliament.

Our government had the strength to ask the Reserve Bank of India to look into the real condition of banks' asset quality and rectify the problem of bad loans, he said.

A number of measures have been implemented to rectify these problems, he said, speaking about the recognition of bad loans and the Insolvency and Bankruptcy Code passed around two years ago.

"The IBC has institutionalised a resolution friendly mechanism which is helping in recovery of non-performing loans while preserving the underlying businesses and jobs"

Finance Minister says India has achieved over 98 percent rural sanitation coverage. He said about 5.45 lakh villages have been declared open-defecation free.

Other Key Highlights

• Will add two lakh education seats with roll out of additional reservation.
• FY19 food subsidy spend was Rs 1.7 lakh crore.
• Constructed 1.53 crore houses so far.
• FY20 PM Gram Sadak Yojana spend seen at Rs 19,000 crore.

The government revised fiscal deficit estimate for FY19 to 3.4 percent of the GDP compared with the budget estimate of 3.3 percent.

The Big Numbers

• FY19 budget gap at 3.4 percent of GDP versus 3.3 percent
• India attracted $239 billion FDI in last five years.

Besides a high growth rate, the government contained a double-digit inflation rate and restored fiscal balance, Goyal said.

The average rate of inflation between 2009-14 was a "back-breaking 10.1 percent", he said. Compared to this, the Modi government has brought down average inflation to 4.6 percent which is lower than the inflation during the tenure of any other government.

Finance Minister Piyush Goyal begins his budget speech amid the usual ruckus in the Lok Sabha.

“I am deeply conscious of the absence of Arun Jaitley,” Goyal started the speech wishing the Jaitley of speedy recovery.

Goyal says the Modi government has reversed policy paralysis gripping nation. “ We have prepared the base for stronger growth. Moving towards are dream of new India by 2022.”

The last five budgets have been dedicated to the farmers, the government's sixth budget will also be for the farmers, it will empower them, said Radha Mohan Singh, union minister of Agriculture and Farmers' Welfare.

While, Minister of State for Railways Manoj Sinha told ANI that he is certain that the government has budgeted an increase in railway spending.

Lok Sabha Member Mallikarjun Kharge warned that the government will try to introduce populist schemes in the interim budget with general elections in mind, ANI reported.

The Congress leader said that "Budgets they've presented so far haven’t really benefited general public. Only ‘Jumlas’ will come out today. They've only four months when will they implement the schemes?"

Indian equity benchmarks held on to early gains. The Sensex is up 0.35 percent at 36,386 and the NSE Nifty 50 Index advanced 0.32 percent to 10,866.

Mid- and small-cap shares were witnessing buying interest as the S&P BSE MidCap Index and the S&P BSE SmallCap Index outperformed. The overall market breadth was positive as 1,100 shares were advancing while 800 were declining on the BSE.

Manufacturing PMI in India increased to 53.9 in January from 53.2 in December of 2018. Manufacturing PMI in India is reported by Markit Economics.

Shares of the country's largest carmaker rose as much as 3.9 percent, the most in over two months, after its sales rose 0.2 percent in January.

Key Sales Highlights (YoY)

• Mini segment up 0.3 percent at 33,408 units.
• Compact segment down 3.5 percent to 65,523 units.
• Mid-size segment down 42 percent to 2,934 units.
• Total domestic sales up 1.1 percent to 1.42 lakh units.
• Exports down 11 percent to 9,571 units.

Catch the live updates on January auto sales here.

Priyanka Kishore, India head of South-East Asia Economics at Oxford Economics is going to watch out for the government's revenue estimations for fiscal 2019-20.

“That's what they did in the last budget -- pretty optimistic math, and like most analysts including me pointed out, GST collections are not really coming through,” she told BloombergQuint.

Mark Matthews, Head of Asia research at Bank Julius Baer doubts "anyone is going to be talking about this (budget) a month from now," he told BloombergQuint, unless the government panics and announces something "spectacularly populist".

Here's what Saurabh Mukherjea of Marcellus expects from Budget:

• Expect government to announce disinvestment target of Rs 80,000 crore.
• Expect amount around half a percent of GDP to be announced for Universal Basic Income.
• Don't think finance minister has room to claw back Long Term Capital Gains Tax.

Indian equity benchmarks extended gains after wiping away the month’s losses in a single session.

The S&P BSE Sensex rose 0.2 percent to 36,336 and the NSE Nifty 50 Index advanced 0.2 percent to 10,855. Seventeen of 19 sector gauges compiled by BSE gained led by the S&P BSE Auto Index's 1 percent jump. The S&P BSE Metal Index was top loser, down 3.6 percent.

Meanwhile, the rupee opened flat at 71.10 per dollar after completing the worst performance among Asian currencies in January as fiscal concerns weign ahead of the budget.

Stock Movers

• Vedanta Ltd. slumped as much as 18 percent, the most in eight years, after a slew of analysts downgraded the stock on corporate governance concerns.

For more live market updates, click here.

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Indian equity markets are entering the budget session trade with a degree of confidence, rallying over 2 percent from the lows in the last three days.

To be clear, the sharp drop from 10,930 levels to below 10,600 on the Nifty in the weeks preceding the union budget probably priced in any fears of a fiscal slippage of 10 to 20 basis points on account of sops to boost the farm or rural economy.

Read the full story here

In other news...

Vedanta Ltd. sparked corporate governance concerns after buying an interest in South African miner Anglo American Plc from the Indian group’s controlling shareholder and billionaire Anil Agarwal’s family trust.

Cairn India Holdings, fully owned subsidiary of Vedanta, paid Volcan Investments, which is also the group’s parent, $200 million, or Rs 1,431 crore, for an interest in Anglo American in December, according to a note to its earnings filing. The company will invest Rs 2,000 crore more in the miner, 19 percent owned by Agarwal, in the next 20 months.

Read more.

When Piyush Goyal presents the final budget of the Narendra Modi-led administration today, the immediate focus will be on fiscal deficit, the government’s planned borrowings and any large spends or schemes directed at the rural economy.

But it’s the budget fine print that tells you more about the true state of government finances and whether it can make good on its plans. Each year, the relative importance of individual data points changes based on the economic context.

Here are some of the things we are watching this year.

• How Modi’s Marquee Schemes Fared
• What Budget 2019 Can Do To Raise India’s Plummeting Quality Of School Education
• Modi’s Legislative Agenda: Mere Packaging Or A Sincere Effort?
• How Even A Well-Meant Policy Can Make Small Businesses Suffer
• Budget 2019 Must Tackle Missed Skill Development Targets Even As Ministry’s Funds Go Unutilised
• What Budget 2019 Needs To Do To Boost India’s Flailing Higher Education Institutions
• This Village Shows All That Is Wrong With India’s Agriculture

Total expenditure—which includes revenue and capital expenditure by the government—is expected to be lower than last year’s estimates.

“We expect a cut in capital expenditure by Rs 50,000 crore and postponing Rs 30,000 crore of revenue expenditure to the next year,” SBI said, adding that total expenses are likely to come in at Rs 26.6 lakh crore for the current financial year. Axis expects a Rs 45,000 crore cut in total expenditure, mostly through capital expenditure.

The government's revenue, or what it earns over a financial year through direct and indirect taxes along with other investments, is expected to fall short of estimates for financial year 2018-19.

Total revenue receipts for FY19 will come around Rs 16.66 lakh crore against the budget estimates of Rs 17.26 lakh crore, State Bank of India said in a report ahead of the budget. This is largely because tax collections from the two-year old goods and services tax system have been lower than expected, according to reports by Axis Bank and Kotak Economic Research.

Axis Bank's economists expects Rs 17.31 lakh crore revenue for this financial year and Rs 19.65 lakh crore for financial year 2019-2020.

The Narendra Modi government will present its last budget—a vote on account—tomorrow, highlighting at least its income and expense plan until a new government is formed, or at most some steps to relieve India’s farm distress.

Here are the key numbers to watch out for:

• Total receipts
• Capital expenditure
• Fiscal deficit
• Gross borrowing
• Divestment target

Indian Prime Minister Narendra Modi has a last-ditch attempt to win voters with possible populist spending measures in today’s budget, risking his debt targets in the process.

Piyush Goyal, who is standing in as finance minister while Arun Jaitley takes medical leave, is due to the deliver the budget speech from 11 a.m. on Feb. 1 in New Delhi.

A pre-election budget usually covers the period until a new government takes office, and isn’t typically used to make major announcements, such as tax changes that would carry over into the next administration. But there’s no law that prevents Modi from making significant announcements this week.

While an interim budget usually highlights the basic expenses and revenues of the government until a new one is formed, there’s no law that prevents Modi from making significant announcements this week.