Beruflich Dokumente
Kultur Dokumente
Interim Budget
2019-20
Kotak Securities
Private Client Research
Interim Budget 2019-20 February 2019
Nearly 0.6% of GDP is being spent on direct transfer to farmers and tax breaks to middle class.
This bodes well for consumption driven stocks and rural centric companies. The thrust on
housing and relief provided to builders is positive for real estate companies. Banks would be a
able to raise savings deposits as the limit for deducting TDS on interest earned has been raised
from Rs.10,000 to Rs.40,000. Higher allocation to defense, railways, housing and urban infra
to benefit companies associated with these projects.
The Gross borrowing program for FY19RE seems manageable but that of FY20BE (Rs.7 trillion)
is slightly higher than what the bond market was expecting. This could put upward pressure
on Bond Yields and in turn impact equity markets.
The Vision for the next Decade has been nicely drafted and presented. It talks about Economy
becoming USD 5 Trillion in the next five years and USD 10 Trillion in the next eight years thereafter.
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Interim Budget 2019-20 February 2019
Within Direct Tax Revenue the higher base of individual tax payers will lead to 22.8% jump in
Income Tax Revenue in FY19RE and 13.3% rise in FY20BE. Corporate Tax Revenue is projected
to rise by 17.5% in FY19RE and 13.3% in FY20BE. In Indirect tax collection GST collection target
for FY19 has been cut by Rs.1 lakh cr. On the Revised Estimate of FY19 the government is
building in 18.2% growth from GST collection in FY20BE. The Divestment target of Rs.900 bn
in FY20BE looks very high considering this year’s achievement till date.
Break-up of Revenues
(Rs bn) FY17 FY18 FY19 FY20 % chg % chg
Actual Actual RE BE FY19 FY20
Direct taxes 8,539 10,074 12,053 13,859 19.7% 15.0%
Corporation tax 4,849 5,712 6,710 7,600 17.5% 13.3%
Income tax 3,646 4,308 5,290 6,200 22.8% 17.2%
Other taxes 43 54 53 59 -0.8% 11.3%
Indirect taxes 8,620 9,117 10,428 11,662 14.4% 11.8%
Central GST 4,426 6,439 7,612 45.5% 18.2%
Customs duty 2,254 1,290 1,300 1,454 0.8% 11.8%
Excise duty 3,821 2,588 2,596 2,596 0.3% 0.0%
Service tax 2,545 812 93
Source: Annual Budget 2019-20
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Interim Budget 2019-20 February 2019
7,600
20% 10,000
13859
12000 18%
6,710
18%
12053
8,000
5,712
14% 15%
10074
4,849
8000 12% 6,000
4,532
8539
4,289
3,947
7458
9%
6989
4,000
6418
6,200
7%
5,290
4000 6%
4,308
3,646
2,000
2,876
2,657
2,429
0 0% -
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY14 FY15 FY16 FY17 FY18 FY19 FY20
RE BE RE BE
10000 50%
10428
4,000
5459
4000 20%
4971
14% 2,000
2000 10% 12%10%
5% 6%
-
0 0%
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
FY14 FY15 FY16 FY17 FY18 FY19 FY20
RE BE
RE BE
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Interim Budget 2019-20 February 2019
The higher growth in revenue expenditure in FY20BE is due to 91.2% increase in Agriculture
and farmers’ welfare. The key reason for higher agri outlay is due to proposal of Rs.750 bn for
PM-KISAN scheme for small and marginal farmers in the interim budget. Further, interest
payments is also estimated to grow at higher pace of 13.2% in FY20BE on increased
borrowings. The Finance Minister estimated 11.7% growth in subsidy in FY20BE with oil
subsidy estimated to grow by 51% yoy due to rollover of FY19 subsidy burden when
government cut the petrol and diesel prices in October 2018. The food subsidy is estimated to
increase by 7.5% in FY20BE mainly due to rise in minimum support price for wheat and rice.
Break-up of Expenses
(Rs bn) FY17 FY18 FY19 FY20 % chg % chg
Actual Actual RE BE FY19 FY20
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Interim Budget 2019-20 February 2019
8000 Gross Fiscal Deficit (GFD) (LHS) GFD/GDP (%) (RHS) 5.0
0 2.0
FY14 FY15 FY16 FY17 FY18 FY19RE FY20BE
Government schemes
Pradhan Kisaan Samman Nidhi: Farmers to receive Rs.6,000 annually (three equal
instalments) directly into their bank accounts. Around 120 mn small and marginal farmers
owning up to two hectares of land will be eligible for this scheme. This program will be funded
by the Central Government. The program would be made effective from 1st December 2018
and the first instalment for the period up to 31st March 2019 would be paid in this quarter. This
program will entail an annual expenditure of Rs.200 bn in FY19 and Rs.750 bn in FY20.
Rashtriya Gokul Mission: The government has provided additional support to Animal
Husbandry and Fisheries sector and has increased the allocation for Rashtriya Gokul Mission
to Rs.7.5 bn in FY19RE.
Kisan Credit Card scheme (KCC) to Animal Husbandry and Fisheries farmers: The interest
subvention benefit has been extended to Animal Husbandry and Fisheries farmers through
Kisan Credit Card scheme (KCC). The government will provide the benefit of 2% interest
subvention to the farmers pursuing the activities of animal husbandry and fisheries, who avail
loan through Kisan Credit Card. Further, in case of timely repayment of loan, farmers will also
get an additional 3% interest subvention.
New Pension Scheme: The New Pension Scheme (NPS) has been liberalized. Keeping the
contribution of the employee at 10%, the government has increased its contribution by 4%
making it 14%. Maximum ceiling of the bonus given to the laborers has been increased from
Rs.3,500 pm to Rs.7,000 pm and the maximum ceiling of the pay has been increased from
Rs.10,000 pm to Rs.21,000 pm. The ceiling of payment of gratuity has been enhanced from Rs.
1 mn to Rs. 2 mn.
Pradhan Mantri Shram-Yogi Maandhan: The government proposes to launch a mega pension
yojana namely 'Pradhan Mantri Shram-Yogi Maandhan' for the unorganised sector workers
(420 mn workers in the unorganised sector) with monthly income up to Rs.15,000. This
pension yojana shall provide them an assured monthly pension of Rs.3,000 from the age of 60
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Interim Budget 2019-20 February 2019
years on a monthly contribution of a small affordable amount during their working age. It is
expected that at least 100 mn labourers and workers in the unorganized sector will avail the
benefit of 'Pradhan Mantri Shram-Yogi Maandhan' within next five years making it one of the
largest pension schemes of the world. A sum of Rs.5 bn has been allocated for the Scheme.
Additional funds will be provided as needed. The scheme will be implemented from FY19.
Pradhan Mantri Jan Aushadhi Kendras: Lakhs of poor and middle class people are benefiting
from reduction in the prices of essential medicines, cardiac stents and knee implants and
availability of medicines at affordable prices.
MGNREGA: To provide food grains at affordable prices to the poor and middle classes, about
Rs1.7 trillion were spent in the year FY19. Rs600 bn is being allocated for MGNREGA in
FY20BE. Additional amount would be provided if required.
Pradhan Mantri Gram Sadak Yojana: Under the Pradhan Mantri Gram Sadak Yojana,
construction of rural roads has been tripled. About 1.58 mn habitations out of a total of 1.78
mn habitations have already been connected with pucca roads and work is going on to
complete the rest. Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated Rs190 bn
in FY20BE as against Rs155 bn in FY19RE.
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Interim Budget 2019-20 February 2019
Tax details
The tax collections increased significantly from Rs. 6.38 trillion in 2013-14 to almost Rs.12
trillion this year. The number of returns filed have also increased from 37.9 mn to 68.5 mn
showing 80% growth in tax base.
Individual taxpayers having net taxable income up to Rs.5 lakhs will get full tax rebate and
therefore will not be required to pay any income tax. Also, individuals having higher gross
income and availing deductions on investments in provident funds, specified savings,
insurance etc., interest on home loan up to Rs.2 lakh, interest on education loans, National
Pension Scheme contributions, etc can avail the rebate and may not be required to pay the
tax.
This will provide tax benefit of Rs.185 bn to an estimated 30 mn middle class taxpayers
For salaried persons, Standard Deduction is being raised from the current Rs 40,000 to Rs.
50,000
Currently, income tax on notional rent is payable if one has more than one self-occupied
house. Income tax on notional rent on a second self-occupied house is proposed to be
exempted.
TDS threshold on interest earned on bank/post office deposits is being raised from Rs
10,000 to Rs 40,000 which will benefit small depositors and nonworking spouses. The TDS
threshold for deduction of tax on rent is proposed to be increased from Rs. 1,80,000 to Rs.
2,40,000
The benefit of rollover of capital gains under section 54 of the Income Tax Act will be
increased from investment in one residential house to two residential houses for a tax
payer having capital gains up to Rs 20 mn. This benefit can be availed once in a life time.
The period of exemption from levy of tax on notional rent, on unsold inventories, has been
increased from one year to two years, from the end of the year in which the project is
completed.
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Interim Budget 2019-20 February 2019
Physical & Social Infra: Building next generation infrastructure in all sectors comprising
roads, railways, seaports, airports and inland waterways.
Digital India reaching every corner of the country: Digital Infrastructure and digital
economy of 2030. Our youth will lead us in this endeavor by creating innumerable startups
and jobs.
Clean & Green India: An India that drives electric vehicles, with renewables becoming major
source of energy, bringing down import dependence and increasing energy security for our
people.
Rural Industrialization: Expanding rural industrialization using modern industrial
technologies, based on the ‘Make In India’ approach, using grassroot MSMEs and startups
across the country.
Clean Rivers: Safe drinking water to all Indians and efficient use of water in irrigation using
micro-irrigation techniques.
Oceans & Coastline: Long coastline can be pivotal for the economy, using the strength of
the blue economy and SagarMala.
Space: India becoming a launchpad of the world and placing an Indian astronaut in space
by 2022.
Self-sufficiency in Food Production: Improving agricultural productivity with an emphasis
on organic food.
Health: Healthy India and comprehensive wellness system for all
Minimum Government Maximum Governance: With proactive, responsible, friendly
bureaucracy & electronic governance.
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RATING SCALE (KOTAK SECURITIES – PRIVATE CLIENT RESEARCH)
Definitions of ratings
BUY – We expect the stock to deliver more than 15% returns over the next 12 months
ADD – We expect the stock to deliver 5% - 15% returns over the next 12 months
REDUCE – We expect the stock to deliver -5% - +5% returns over the next 12 months
SELL – We expect the stock to deliver < -5% returns over the next 12 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for
information purposes only.
SUBSCRIBE – We advise investor to subscribe to the IPO.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there
is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing,
an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.
NA – Not Available or Not Applicable. The information is not available for display or is not applicable
NM – Not Meaningful. The information is not meaningful and is therefore excluded.
NOTE – Our target prices are with a 12-month perspective. Returns stated in the rating scale are our internal benchmark.
Sanjeev Zarbade Ruchir Khare Jatin Damania Cyndrella Carvalho Ledo Padinjarathala
Cap. Goods & Cons. Durables Cap. Goods & Cons. Durables Metals & Mining, Midcap Pharmaceuticals Research Associate
sanjeev.zarbade@kotak.com ruchir.khare@kotak.com jatin.damania@kotak.com cyndrella.carvalho@kotak.com ledo.padinjarathala@kotak.com
+91 22 6218 6424 +91 22 6218 6431 +91 22 6218 6440 +91 22 6218 6426 +91 22 6218 7021
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