BUDGET 2020

Expectations Belied
Broadly, there seems to be a benign acceptance by the government, of the self-inflicted liquidity and a subdued global economic scenario. An
expected Stimulus package did not come the way for the capital market, and the government did NOT take it upon itself to spend its way out of the
slowdown. The larger theme was to attract foreign savings at the cost of the Indian savers, and try getting the Indian consumer to spend while
disincentivizing savings. Scenario on how we expect things to play out in the segments of our portfolio where we have allocated capital.

The Investment Economy

Capital allocated to this segment is marginally up over the last year. But there was a mention of the creation of a company, which would leverage
INR 22,000 crore of equity and increase allocation to the sector. The minister also made references to monetizing 12 road assets of NHAI to finance
newer road projects. This would be in continuation should the Government meet with initial success. Correlated to this was perhaps the biggest deal
that would attract foreign savings in India. The biggest beneficiary of the abolishment of DDT has been the foreign portfolio participant. The interest
in this segment is unlikely to wane given large interest by foreign participants in yield generating assets.

The Saving Economy

The biggest loser in this budget. The new tax regime, if Individuals opt for the same, incentivizes consumption and takes money out of the savings
economy. This makes the domestic investment cycle extremely reliant on foreign capital. The largest impact if the middle class adapts to the new tax
regime will be all the savings instruments that are a part of tax exemptions. Insurance is a huge industry which would spend a sleepless weekend on
figuring out a new workflow model. HFCs and Real Estate in certain segments have also been caught on slippery ground in the middle of the new
tax regime.

The DDT is disadvantageous to Indian promoters, as it taxes dividends now at the highest tax slab of 42.5%.

The Agri Business

Lower allocation to subsidy point to a direction of partial decontrol of the sector. Directionally this has been the expectation for a long time. Lower
subsidy allocation may be in this direction.
Overall from 7.4% growth and 4.5% inflation over the last 6 years, we’re looking at 6% growth and 4% inflation, nominal growth assumption of 10%.
The disinvestment targets which include LIC are ambitious, but then it is all dependent on a single transaction.

Key Fiscal Metrics

INR lac crs FY20 BE FY20 RE FY21 BE

Total Expenditure 33.2 34.1 37.1
Allocated in Budget 27.8 27.0 30.4
Internal and Extra Budgetary resources 5.4 7.1 6.7

Revenue Expenditure 24.4 23.5 26.3

- Interest payment 6.6 6.3 7.1
- Farmers welfare 2.3 2.0 2.3
Capital Expenditure 8.8 10.6 10.8

Total Receipts 27.9 27.0 30.4

Revenue Receipts 19.6 18.5 20.2
Capital Receipts 8.2 8.5 10.2

Sources of tax receipts

Corporate tax growth 14% -8% 12%
Personal tax growth 8% 18% 14%
Customs duty growth 20% 6% 10%

Non-tax receipts
Dividend + Profits 1.6 2.0 1.6
Divestment 1.1 0.7 2.1

Net debt raise 7.0 7.7 8.0

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