2019 Budget Impact Analysis: What experts across sectors say about Nirmala Sitharaman's first Budget

Budget Impact 2019 Analysis: Deval Seth, Managing Director, Giesecke & Devrient MS India, says: "Budget 2019 under the regime of Modi 2.0 is a promising agenda bracing some of the key economic challenges while accelerating the growth path for the economy. Building India into a $3 trillion economy this year may seem ambitious but is still not a farfetched dream with the kind of results India has shown on the economic front in the recent years. Technology, digitisation, and modernization will have a great role in pulling up India to a $3 trillion economy this year. For instance, as more devices get connected, the market for eSIMs is set to explode in India in areas such as connected cars, manufacturing and consumer durables. The government’s move to lower the GST rate on electric vehicles(EV) from 12% to 5% and to make EVs affordable for consumers with additional income tax deduction will bring connectivity to the vehicles and G&D sees India strongly moving forward on the eSim journey which has been adopted globally.

"On the digitisation front, the National Common Mobility Card launched by PM Modi in March and the levying TDS of 2% on cash withdrawal exceeding 1 crore are critical initiatives which will help bring a behavioral shift among people and will go a long way in fostering the digitisation agenda.

"G&D strongly believes India is at an inflection point and when we are talking about growth, we are talking connectivity and technology, however the budget did not showcase enough of key sectors like telecom and technologies like 5G. While the government showed interest in emerging technologies like AI, robotics and big data, we need to understand that India will need 5G to harness the full potential of the latter. Having said that we are very confident that the government will speed up the ground work in embracing 5G."

Budget Impact Analysis: Tarun Chugh, Managing Director & CEO, Bajaj Allianz Life, says: "The Union Budget 2019 has come across as all-inclusive, seeking to boost infrastructure and foreign investment, and at the same time giving impetus to a digital economy. The government has announced no fee on merchants on card transaction in order to encourage all merchants to accept card payments. Further 2% TDS has been proposed on cash withdrawals of above 1 cr. This move will boost digital transactions in the country. For the insurance sector, the government proposed a100% FDI for insurance intermediaries, thereby making India a more attractive destination for FDI. This is a positive move for the industry, and may help better penetration of insurance products."

Budget Impact Analysis: Garima Kapoor, Economist, Elara Capital, says: “Modi’s first full budget after being voted back to power tries to strike a healthy balance between ‘welfare for the poor’ and ‘growth’ by throwing some novel ideas to attract capital while continuing to spend for the lower strata of the economy. If the measures announced in the Budget in form of divestment of government stake below 51%, foreign currency government borrowing, liberalization of FDI in select sectors among others are indeed executed, it has the potential to unleash significant capital for funding growth towards $ 5tn.

The Budget provides a fresh narrative by recognizing that the cost and availability of capital are key constraints for India’s growth.”

Budget Impact Analysis 2019: Umesh Revankar, MD and CEO - Shriram Transport Finance Ltd, says: "Modi Government`s 2.0 budget has given thrust in Public banking sector by infusing Rs.70,000 crore. The fundamentally sound NBFCs gets fresh line of liquidity as government provides credit guarantee to PSUs funding the NBFCs. This step will provide necessary comfort to the banks. Also, the exemption of Debt Redemption Reserve (DRR) of public issues is a positive step thereby increasing the liquidity in the system. Government’s continuous focus on infrastructure with the announcement of investing Rs.100 lakh crore over the next five years will boost the transport sector. According to us, the only dampener is the increase in diesel and petrol prices.”

Budget Analysis: Gaurav Chopra, Founder & CEO, IndiaLends says the maiden Budget presented by Finance Minister Nirmala Sitharaman holds great promise for the Indian start-up Inc.

Chopra  is enthused by Government’s following decisions:

Measures to revive the NBFC sector:

Allowing Foreign Institutional and Portfolio Investors to invest in debt securities offered by non-banking financial companies (NBFC).
The decisions for provisioning a one-time six-month partial credit guarantee to PSBs for first loss up to 10% for the purchase of high-rated pooled assets of financially sound NBFCs amounting to a total of Rs 1 Lakh crore and enabling liquidity access to fundamentally sound NBFCs by ensuring funding from banks and mutual funds. These steps will help ease the liquidity in the market and will aid the smaller and mid-size NBFCs to get the much-needed credit support.

Announcement to setup a dedicated TV programme on DD exclusively for the Start-ups:

This move is welcomed by the overall start-up Inc as this dedicated programme will provide a medium to the emerging start-ups to connect directly with venture capitalists and will help understand and work on solving the issues faced by the start-ups in the country. Government’s intent and dedication to promote start-ups is clear through this move.

Providing Public Sector Banks Rs. 70,000 crore to boost capital and improve credit:

Indian banking sector has been affected with bad loans that have risen off late. This move will give banks some breathing room and help improve confidence in the market. Infusing fresh capital in PSBs is imperative for the overall growth of the NBFC ecosystem, as NBFCs depend on banks for their capital needs. This move will help get lending back on track while stimulating growth across sectors.

Budget Analysis: Mandar Agashe,Founder and Vice chairman Sarvatra Technologies, shares:

"One of the main aspects of the NDA government has been the long-term focus on financial inclusion, and digital literacy is one of the main pillars of this goal. Only through the proliferation of digitisation across regions, gender and social strata will India will able to achieve wholesome progress. More than one crore people have been made digitally literate already through several government schemes and educational programs – which is a commendable feat, but the Digital India agenda can further be driven to instill confidence within customers in payment systems to leverage the full potential of digital investments and propagate a less-cash economy.

"Moreover, the concrete implementation of the National Common Mobility Card launched by the Prime Minister will strengthen digitization by enabling people to pay multiple transport charges across various mediums like bus travel, toll taxes, parking charges and retail shopping. This endorses the cash-in cash-out points proposed by the Nandan Nikelani committee and is a brilliant step in boosting the digital infrastructure in the country. Deploying this across the country will deeply amplify the digital economy agenda.

"Lastly, the initiative of empowering women through various schemes such as MUDRA, Stand UP India and the Self Help Group (SHG) movement is a great step by the government. Every verified women’s in self-help group having a Jan Dhan Bank Account will be allowed an overdraft of 5,000 rupees as an incentive to activate their debit card or account along with one woman in every SHG made eligible for a loan up to 1 lakh which will  further inculcate a sense of financial independence through their various local modes of earning a living. This is an ingenious move to penetrate the rural markets and kick start the process of digitization, especially through the women who are very active participants in the economy in these areas creating a generational paradigm shift towards digital payments.

 "This budget will elevate the role of women and their entrepreneur spirit further encouraging them to participate in India’s growth story."

Budget Analysis: Tarun Chugh, Managing Director & CEO, Bajaj Allianz Life, says, "The Union Budget 2019 has come across as all-inclusive, seeking to boost infrastructure and foreign investment, and at the same time giving impetus to a digital economy. The government has announced no fee on merchants on card transaction in order to encourage all merchants to accept card payments. Further 2% TDS has been proposed on cash withdrawals of above 1 cr. This move will boost digital transactions in the country. For the insurance sector, the government proposed a100% FDI for insurance intermediaries, thereby making India a more attractive destination for FDI. This is a positive move for the industry, and may help better penetration of insurance products."

Budget Analysis: Vikas Dawra, Joint MD & CEO, Yes Securities says, “The overwhelmingly strong political mandate also ensures policy continuity, removes ambiguity, and boosts sentiment in the economy. The FY20 Union Budget by the new government is a testament to all of these. The measures announced will play a positive role in attracting more global investment, and much needed foreign direct investment (FDI) boost for key sectors. This, in turn, will translate into all-round growth of the economy and create a encouraging ecosystem for investors.

"The FY20 Union Budget continues to signal government’s commitment towards the revised fiscal glide path by pegging the headline deficit target at 3.3% of GDP, lower than the FY19 deficit of 3.4%. In the backdrop of slowing domestic growth momentum, the FY20 Union Budget furthers the ethos of reviving the twin growth drivers of investment and private consumption with job creation and inclusion as the common underlying theme. Through these comprehensive steps, the Finance Minister aims to take the Indian economy to a level of USD 5 trillion in the next five years from an estimated size of USD 3 trillion in FY20.”

Budget Analysis: Anik Jain, Co-founder & CEO, Symbo Insurance, said: “The insurance industry had quite a few expectations from the 2019 budget. Although Finance Minister, Nirmal Sitharaman kept silent on GST in insurance and tax incentives for insurance purchase, she made an important announcement on FDI in the insurance industry. 100% FDI ownership for insurance intermediaries is going be a game-changer as high-quality global capital and expertise flows into the Indian insurance industry. Such inflow of capital will endorse the centre’s expectations of accelerated growth of the insurance industry.

"The impact of this FDI decision will see an increase in insurance protection only if it is complemented by tax breaks both at the individual level as well at the GST level. Hopefully, the government comes up with such support in the next few months.”

Budget Analysis:  Gaurav Jalan Founder & CEO, mPokket, said, "The budget announcements made regarding start-ups and popularizing digital transactions are steps in the right direction. The potential resolution of the Angel Tax issue is a big relief as with requisite declarations both start-ups and individual angel investors will be spared from scrutiny on valuation and share premium. Moreover, by levying 2% TDS on cash withdrawals exceeding Rs. 1cr in a year from a bank account, the budget has taken concrete steps towards discouraging cash transactions and enabling widespread adoption of digital payments. We believe the government has taken meaningful steps to bolster growth of the startup ecosystem as well as promoting a cashless economy, and we are looking forward to the Indian economy growing rapidly in the next 5 years!"

Budget Analysis: Sameer Aggarwal, Founder & CEO, RevFin, said: 

NBFC sector is pivotal in fulfilling the credit demand of the country. Credit provided by NBFCs drives growth in consumption and hence the GDP. Liquidity in the NBFC sector has been constrained for several months now. The Finance Minister has tried to resolve this through three key announcements. 

The first is recapitalization of banks to the tune of Rs. 70,000 crores. As banks are a major source of funding for NBFCs, the capita infusion in banks will provide much-needed liquidity to NBFCs. 

Second, the government would provide partial loan guarantees on 10% of losses up to Rs. 1lakh crores on high-rated pooled assets. This guarantee will provide banks the required safety net to infuse liquidity into the NBFC sector.

Third, RBI will be given further authority to regulate the NBFC sector. This is crucial to make regulation more consistent and current. This will also assign clear responsibility to RBI.

Budget Analysis: Dilip Asbe, MD & CEO, National Payments Corporation of India (NPCI), said, “The Budget confirms the government’s continuous focus on digital payments and will aid to create a robust payment infrastructure in the country. Adoption of RuPay National Common Mobility card (NCMC) shall trigger the consumer behaviour change for all the transit use cases. The budget facilitates the transformation of Indian economy from Cash driven to less-cash. We believe, with all the efforts from the government and RBI, India could emerge as world leader and innovation hub for digital payments in next 5 years.”

Budget Analysis: Zarin Daruwala, India CEO, Standard Chartered on Union Budget 2019, says -

“The Budget lays down a vision for the next five years while staying rightly focussed on completion of the already initiated policy changes. It also signals the government’s commitment towards fiscal consolidation. The steps to shore up the financial sector via PSU bank recapitalisation, partial credit support to financially sound NBFCs and change in regulator for HFCs are key positives, in my view. The measures to serve the interest of various sectors - MSMEs, affordable housing and underprivileged segments like retail traders - are much needed and welcome. The announcements like further liberalisation of the foreign investment regime, issuance of sovereign Dollar bonds, deepening of long-term bond markets, rationalisation of labour laws, focus on infrastructure investment are steps in the right direction. On balance, the Budget would help boost the medium-term growth potential of the economy.”

Budget Analysis: George Alexander Muthoot, MD, Muthoot Finance, says:

“Presenting the maiden budget of Modi 2.0 government, Ms. Nirmala Sethuraman has highlighted the government`s thrust to infuse liquidity in the NBFC sector. In line with our expectations, the Debt Redemption Reserve (DRR) for public issues has been exempted. Also, the credit guarantee provided by the government will further open up the liquidity line for fundamentally sound NBFCs.

We welcome the government`s focus on Affordable Housing. The interest deduction on home loans raised by Rs 1.5 lakh to Rs 3.5 lakh and also the housing cost being fixed at Rs. 45 Lakh and below. With RBI now being the regulatory authority for Housing Finance as well, it will lead to easy regulation as all financing sectors would fall under one authority.

In order to accelerate the goal of ‘Housing for All’, the tax holiday provided to developers will boost affordable housing sector.”

Budget 2019 Reactions: 'Body blow to HNIs', says Amar Ambani of Yes Securities.  Following are his analysis: 

Increase in Public shareholding proposed from 25% to 35% potential negative for MNC and companies with high promoters holding. In many mid and small caps, it is better to have more promoter skin in the game, since India's capital market in developing phase.

Many MNCs listed on Indian bourses may consider delisting, if increase public shareholding implemented.

An overhaul of education material is much needed. It’s also a positive measure for companies in publishing space.

If increased public shareholding norm implemented, supply of paper in the market will increase. This will mean that money will be sucked out of secondary market and valuations will remain under check.

As expected, capital infusion in public sector banks has come through. Infusion of Rs. 70000 crore is a positive for PSU Banks.

High disinvestment target of Rs. 1.05 lakh crore and increase in public shareholding to squeeze liquidity from secondary market.

Excellent move to levy 2% tax on cash withdrawal of over one crore rupees in a year. Will help in a more transparent digital economy.

Cost of ownership of vehicles further go up with implementation of special duty on fuel. Negative for auto majors.

Body blow to HNIs by levying high surcharge on the rich. Effective tax rate on biggest bracket goes to 42%! 

The big surcharge tax on the high income group and possible liquidity squeezing of secondary market liquidity due to disinvestment and increased public shareholding is causing the stock market to fall today.