February 1, 2022, saw Nirmala Sitharaman, India’s finance minister, introduce the 2022-2023 Union budget. The 92-minute speech provided by her indicated the Government’s commitment to offsetting the adverse impacts caused by the pandemic. One of the most striking features of the proposed budget was the priority provided to growth as well as to the expansion of capital and infrastructure. Continue reading to understand the sectors to look out for.
The finance minister’s proposed budget highlighted a new battery swap policy aimed at promoting electric vehicles. This will help reduce the upfront ownership costs associated with these vehicles and encourage customers to buy them. The budget also continued to focus on infrastructure and the construction of roads as it had in the past which will positively impact the CV industry with companies like Ashok Leyland being among the major beneficiaries.
The Emergency Credit Line Guarantee Scheme (or ECLGS) has been proposed to be extended up until March 2023 along with the guaranteed cover being raised by Rs 50,000 crore bringing the total to Rs 5 lakh crore. The additional Rs 50,000 crores provided will be directed towards the hospitality sector and enterprises linked to it. It is important to note, however, that this scheme remains underutilized. Public sector banks are the primary entities anticipated to partake in incremental lending while private banks aren’t likely to participate in a major way. This measure is unlikely to impact the stock market.
The government recognizes the current strain being experienced by MSMEs brought on by the pandemic owing to which they plan to modify and alter the credit guarantee fund trust for micro and small enterprises. This will be fueled by Rs 2 lakh crores being directed towards this initiative which will generate employment opportunities. Private banks haven’t made use of this scheme in a major way as the loans provided under this scheme aren’t collateralized. This proposition isn’t anticipated to impact stock prices. However, it will help with the asset quality of small business loans for public sector banks.
An increase of 17 per cent making the capital now allocated to the Ministry of Railways amount to Rs 1,37,100 crores was proposed in the budget which would positively impact several companies like L&T. The funds allocated towards defence capital outlay have also risen which will benefit companies like BEL and Bharat Forge.
The budget outlined a desire to reduce customs duty on acetic acid to 5 per cent which will have a positive impact on chemical manufacturing companies like Jubilant Ingrevia.
Diamond, Gemstone and Jewelry
With regard to the diamond, gemstone and jewelry industry, the budget sought to reduce the customs duty applicable to cut and polished diamonds as well as gemstones bringing it down from 7.5 per cent to 5 per cent. Companies operating within the gemstones and jewelry industry will benefit from this change.
The lack of increase in the tax rate applicable to cigarettes has positively impacted the market and will benefit cigarette manufacturers ranging from Godfrey Phillips to ITC.
Infrastructure / Cement
The overall capital expenditure has risen by 24.5 per cent year-on-year in FY22 which has resulted in revised estimates amounting to Rs 7,50,246 crores for FY23. The overall revised estimates have therefore risen from Rs 5,54,236 crores to Rs 6,02,711 crores. This proposed change will positively impact the infrastructure sector and will increase the order book for such companies with the cement sector being the primary beneficiary.
With the capital outlay assigned to MoRTH rising by 54.8 per cent, road infrastructure development companies like KNR Constructions and PNC Infratech will benefit.
Rs 60,000 crores have been allocated towards the construction of over 3.8 crore households in 2022-2023 under the Har Ghar, Nal Se Jal initiative which will benefit pipe manufacturing companies.
A marginal negative impact will be experienced by steel players owing to the fact that the budget proposed to revoke anti-dumping duties on certain steel products. That being said, the overarching budget will positively impact the metal industry owing to greater infrastructure spending being proposed.
Over the next three years, the 100 PM Gati Shakti Terminal will be set up which will positively impact the Indian logistics sector. With the enhanced railway connectivity provided by the same, new warehouses and logistics facilities will be established across the country. The Container Corporation of India will benefit from this initiative. Furthermore, the budget made clear the setting up of four multimodal logistics parks in FY2022-2023 which will help ramp up India’s transportation infrastructure and allow for the faster movement of goods. VRL Logistics is anticipated to be one of the key beneficiaries as they are the leading company within road logistics.
The finance minister allocated Rs 48,000 crores towards the PM Awas Yojana and indicated 80 lakh new dwellings to be set up in rural and urban areas during FY 2022-2023. This means that real estate developers will be able to launch more affordable housing projects and players like Brigade Enterprises and Sobha Ltd. will benefit from the same.
Learn more about the 2022-2023 Union Budget by taking out the time to read Angel One’s Budget Ka Matlab which is an in-depth report on the intricacies of the budget. After reading the same you will understand key highlights of the budget.