Budget 2022: Will there be more farm loan waivers or enhance in 80C limit in taxation? Here are expectations from 12 sectors

Prabhudas Lilladher expects a populist budget given state elections with five state elections lined up in the coming months, UP and Punjab being the major ones.

There are expectations of some populist measures by the government in the FY22-23 budget focusing on the middle and the lower class of the country.

The brokerage firm expects higher allocation to the MNREGA, PM-Kisan scheme and farm loan waivers to please the rural people and higher standard deduction for personal tax for the middle class.

We have collated a list of expectations from top 12 sectors from Budget 2022:

Automobiles

a) Measures to boost consumption especially for the 2W segment by improving the rural economy

b) Rationalization of the tax and duty structure like 18% GST on all the auto components to minimize spurious and counterfeit products in after market. Currently, GST is 28% on some parts.

c) Increasing RODTEP benefits from current 1%. This will aid in exports.

d) Execution of scrappage policy and infrastructure spending to drive the CV demand

Cement

a) Increased allocation to the infrastructure sector and the Housing for All scheme would support demand for cement.

b) Housing projects under Housing for All scheme are nearing its guided timeline of 2022 (set by Union Govt in 2016), any extension in timelines or additional sops to Housing sector would drive additional demand for the sector

Metals

a) Higher allocation under infrastructure and Housing for All scheme would support demand for long steel

b) Likely reduction in import duty on steel by 250bps due to sharp rise in prices which could be sentimentally negative. However, the impact would be limited as half of the imports originate from FTA countries that enjoy zero duty.

NBFCs

a) To allow refinance benefit to NBFCs (Just like HFCs by NHB) and setting up a dedicated refinance window for NBFCs to ensure continuous liquidity support.

b) On an ongoing basis banks’ lending to NBFCs to be classified as priority sector loans upto a certain limit to enhance PSL targets.

c) NBFCs to be allowed an on tap facility for NCDs issuance to the retail market by making the process easy and cost efficient.

d) To set up a SPV with initial capital infusion by the government to further provide funding to SMEs.

e) To allow deposit-taking NBFCs to accept recurring deposits to further deepen the financial inclusions and promote savings habits in rural areas.

Banking

a) Various reforms are undertaken by the government including recognition, resolution, and recapitalization resulted in a progressive decline in nonperforming assets (NPAs) and subsequent rise in profit, hence in the current year government is unlikely to announce capital infusion for PSBs.

To raise funds, Bank would approach the Market & sell non-core assets.

b) GOI’s scheme especially for the Infrastructure & healthcare sectors, will help improve loan growth as banks continue to carry high liquidity

c) As housing continues to drive the retail loan growth, GOI can enhance the limit of 80C, 24, 80EEA (i.e. Housing loan interest & principal payments), which will boost housing & housing loan creating demand and help growth in real estate

sector

d) More clarity on emerging technologies like cryptocurrency, blockchain, fintech, amongst others

e) Compliance relief for MSMEs in terms of loans, taxation & auditing is one of the major contributors to employment, GDP, and financial inclusion.

Capital Goods

a) Higher allocation is expected towards sectors such as defence, renewable energy, and infrastructure projects.

b) Incentives towards localization of defense products and renewable sector.

c) With increasing focus on clean energy we expect fiscal support or policy measures to boost clean energy adoption.

d) Detailed list of public assets (roads, railways, expressway, power plant etc) to be monetized under flagship National Monetization Pipeline (Rs1.6trn worth of asset to be monetized in FY23).

Aviation

a) 100% FDI in aviation

b) Bring ATF under GST/ Reduction in taxes

c) Reduction of taxes and levies on airport charges, parking and landing, navigation charges etc.

d) Continued allowance for UDAN – regional connectivity scheme

FMCG

a) Increase in excise duty on cigarettes by 5%

Consumer Durables

a) Individual Tax rate cut can increase disposable income and boost consumer durables demand

b) Increase in customs duty on components to promote the development of component ecosystem

Chemicals

a) RoDTEP scheme (Remission of Duties and Taxes on Export Products) to be extended to chemicals sector exports/ exports under advance license.

b) Ocean freight subsidy to mitigate severe freight cost pressures and enable global competitiveness of chemical exporters. Exporters have been impacted significantly given the surge in cost and availability of containers.

c) Reduction in customs duty in imported inputs, as Indian manufacturers have been adversely impacted by high input costs due to supply shortages and high global liquidity.

d) In line with the need to encourage innovation and Make in India, weighted deduction for R&D expenditure to be reinstated at 200% vs. current 100%

[under section 35 2(AB) of The Income Tax Act].

Agro chemicals

a) Increase in the Subsidy allocation of urea and complex

b) Nutrient Based subsidy (NBS) and bringing Urea into the NBS

mechanism/price decontrol of urea

c) Lowering of import duties on Fertilizers raw materials

d) Allocating higher funds to agriculture; and prioritization of MSP’s

e) Higher allocation in Pradhan mantri Fasal Bima Yojana (PMFBY)

f) Increase in the MNREGA outlay and agri credit

g) Increase in the corpus of micro irrigation Fund under NABARD to achieve the

goal of ‘per drop more crop’

h) Possible credit guarantee scheme

Oil & Gas

a) Update on natural gas pipeline unbundling and monetization of the same.

b) Budget provision for LPG and kerosene for FY23.

c) Changes in excise duty rates of petrol and diesel.

d) Timeline to bring natural gas under GST.

Healthcare

a) Promote local manufacturing of APIs /KSMs to reduce dependence on China. This will enhance more investments in capacity expansion and thereby sales for API companies

b) Higher incentives to promote R&D investments. This will allow the company to step up R&D investments in complex generics

c) Increase outlay for healthcare infrastructure like more critical care units, testing centers in Tier 2 & 3 cities. This will enhance demand for medicines 

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)