5 sectors affected by the union budget
TRANSCRIPT
Sectors
affected by the
Union Budget 5
The finance minister presents his
budget in 2 parts:
Broad Policy
Tax Proposals
Broad Policy
Policy initiatives indicate the
stance of the budget. If the
budget is allocating resources
for spending on infrastructure, a
lot of related businesses are
affected.
Tax Proposals
Similarly, when tax rates or
duties are changed, they
affect individuals or
companies accordingly. The
ability of these companies to
pass on changes in tax rates
to customers determines
their future profitability.
The Sectors
Here are some sectors that have been impacted, more often than not, by
past budgets:
Power
Real Estate
Infrastructure
Automobiles
Oil and Gas
#1 Power
Power
• Power production requires fuel. Any changes in taxes on fuel could
make or break a project.
• Similarly, excise and customs duties on power equipment also affect
the power sector.
• Free power supply to farmers in many states puts state electricity
boards at a disadvantage.
#2 Real Estate
Real Estate
• Low-cost housing and urbanization influences the real estate sector.
The budget is watched very closely for incentives offered towards this.
• Successive governments have always focused on low cost and
affordable housing for the masses and hence, have normally announced
schemes to help the sector.
#3 Infrastructure
Infrastructure
• This is perhaps the most affected sector in the budget.
• The government spending on rural and urban infrastructure leads to a
significant business for companies that build it.
• The finance minister announces allocation to rural and urban
infrastructure and to build roads, bridges, metro train and transport,
airports in the budget.
#4 Automobile
Automobile
• Excise duty on manufacturing of cars in India changes in every other
budget.
• While the duty on vehicles with smaller engines is less, it is more on
vehicles that have a powerful engine. The differentiation is also based
on the length of the vehicle (passenger vehicles). For high-end vehicles,
there is customs duty on parts imported and assembled in India.
• The consumer decision to buy or sell vehicles is influenced by taxes
announced in the budget.
#5 Oil and Gas
Oil and Gas
• Petroleum subsidies keep prices of diesel, kerosene or LPG low.
• Since fuel prices to retail customers and profitability of companies are
determined by the amount of subsidies, investors listen to the finance
minister’s budget speech for a stance on fuel pricing going ahead.
• The companies which are most impacted are the state-owned oil
marketing companies that sell diesel and LPG to consumers as well as
the upstream companies which have to bear a part of the subsidies.
• India spends about 0.6% of its GDP on fuel subsidies.
Final note
• Subsidies form a significant chunk of the Government’s expenditure.
Any cut in subsidies is good news for the relevant companies and
hence, for the investors.
• In a nutshell, the five sectors listed above affect shareholders and
consumers alike. Budget is an important event that determines future
pricing of products and services sold in these sectors.
• To learn more about the union budget, click here.
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The content/illustrations shared in the presentation is based on information available from
the past budget(s)