Equity | India

Union Budget 2014-15

July 11, 2014








Analyst
Disha R Hazari
+91-22- 6614 2693
disha@geplcapital.com
Institutional Research 1

Event
Update

Union Budget 2014-15

Observation & Analysis

Direct Tax
There has been no hike in the direct tax rates. Section 80C of the Income Tax Act initially allowed deduction of `1 lac for various
investments. The upper limits has now been increased to `1.5 lacs. Increase in the limit would not only lead to increase in investments but
will also bring down tax liability. The government has also raised the tax exemption limit which was initially at `2 lacs per annum to `2.5
lacs per annum & to `3 lacs per annum for senior citizens. Increase in the exemption limit will increase the disposable income & therefore
the spending power.


FDI in Insurance Sector
The government has raised FDI in insurance from 26% to 49% in the Union Budget 2014. FM said that the government wants to promote FDI
selectively. The increase in the FDI limit to 49% would help insurance firms to get much needed capital from overseas partners. The
proposal to raise FDI cap has been pending since 2008 when the previous UPA government came up with Insurance Laws (Amendment) Bill to
hike foreign holding in insurance joint ventures to 49% from the existing 26%. This announcement is a huge positive for the stocks in this
sector such as Max India, Aditya Birla Nuvo.


Infrastructure Sector
Asserting that lack of infrastructure will not be allowed to hit growth, government announced a slew of steps to fast-track projects mostly
in public-private-partnerships, which finds renewed focus in FMs maiden Budget. An institution to provide support to mainstreaming PPPs
(public-private-partnerships) called 3P India will be set up with a corpus of `500 crores. India has emerged as the largest PPP market in the
world with over 900 projects in various stages of development. PPPs have delivered some of the iconic infrastructure like airports, ports and
highways which are seen as models for development globally. The government plans to revive old, closed oil & gas wells. NHAI is to target
8000km of road development in FY15. It allots `30 bn for North East Highways & `5 bn for new solar power projects. 16 new port projects
are to be awarded in FY15. Hence considering the various reforms on infrastructure we maintain our positive stance on this sector.


Agriculture Sector
Agriculture being one of the important sector plays a vital role in the Indian economy. The sector has performed remarkably well. Food
grain production estimated for the current year is 263 mn tonnes compared to 255.36 million tonnes in 2012-13. Agriculture export likely to
cross USD 45 bn higher from USD 41 bn in 2012-13. The government plans to allot `1 bn for Kisan Tv on farming issues. It also plans to
finance 5 lac landless farmers through NABARD. Agricultural GDP growth for the year is estimated at 4.6% vs 4% in the last 4 years. Also
commenting on the weak monsoon the FM provided some sought of relief by commenting that there is enough of central pool grain to deal
with the weak monsoon which reduces the tension to some extent. Hence considering such various schemes for agriculture & also some
relief provided by the FM with respect to weak monsoon we are positive on the agricultural sector from a long term point of view though on
the short term might not perform that well due to weak monsoons.


Banking Sector
Proposing to provide greater autonomy to public sector banks, it would need `2.4 trillion as equity to meet Basel III norms 2018. The
government would cut its stake in state run banks by selling shares to retail investors though it would continue to have a major share of
investment in these banks. FM has also promised to encourage banks to lend to long-term infrastructure projects by allowing them
flexible structuring to avoid potential losses. More importantly, he plans to allow banks to raise long term fund to lend to infrastructure
with only minimum requirements on statutory ratios like cash reserve ratio, statutory liquidity ratio and lending to priority sector. Also to
tackle the rising NPAs in public sector banks, the government will set up six new debt recovery tribunals in Chandigarh, Bengaluru,
Ernakulum, Dehradun, Siliguri and Hyderabad.



Equity | India


Union Budget 2014-15
July 11, 2014




Institutional Research | Event Update 2


Irrigation Sector
The Narendra Modi government has maintained that irrigation and watershed management are critical for agricultural development.
Finance Minister has earmarked `1,000 crore for improving irrigation facilities under the Pradhan Mantri Krishi Sichai Yojana. The scheme,
would facilitate assured irrigation, and shield the farmers from the vagaries of monsoon. The government recognizes water is the most
critical input for agriculture. Currently, according to the Economic Survey presented by Mr Jaitley yesterday, 63 million hectares, or 45 %of
net cropped area, is irrigated.Under the Accelerated Irrigation Benefit Programme (AIBP), `64,228 crore of central loan assistance
(CLA)/grant had been released up to December 31, 2013. An irrigation potential of 8054.61 thousand hectares is estimated to have been
created by states from major/medium/minor irrigation projects under the AIBP till March 2012. Hence a boost up fot the irrigation sector
has been provided & we remain to be very positive on this sector.



Conclusion

Sectors that would be helped most by the budget are Insurance, Infrastructure, Irrigation & Agriculture. The budget was positive & showed
the Governments intent to achieve the Fiscal Deficit Target of 4.1% in FY15 & control expenditures. Fiscal Deficit Prediction is 3.6% for
FY16 & 3% for FY17.Overall the budget is quite positive for the overall economy as the FM has managed to come out with new reforms in the
sectors which lacked lusture in the past, hence we maintain our bullish view on the Indian Equity Markets too.

Equity | India


Union Budget 2014-15
July 11, 2014




Institutional Research | Event Update 3


NOTES

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Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this report:

Name : Disha R Hazari


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