reliance budget exp 08 09
TRANSCRIPT
Pre Budget Expectationsfor 2008-09
Reliance Money House, Plot No - 250 - A - 1, Baburao Pendharkar Marg,Off Annie Besant Road, Behind Doordarshan Tower, Worli, Mumbai - 400025
GDP Growth %
The Union Budget for FY2008-09 will be the fifth and final budget of the UPA
government. Although technically the policy content of the Budget has lost its
significance in recent times, it still remains an important document to assess and
evaluate the direction and progress achieved within the economy. This Budget being
the last one to be presented by Mr Chidambaram, before the country’s next election
due in May 2009 makes it special in the sense that one could see political agenda
getting dominated wherein one is likely to see the Finance Minister strike a fine
balance between political objectives and stimulating the economic health of the
country.
The Indian economy is now clearly in a consolidation phase after 3 years of sustained
growth witnessed in the GDP from 7.5% in FY05 to 9.6% in FY07. To begin with the
overall macro environment, the domestic growth and inflationary situation while still
relatively benign is beginning to reflect global tendencies. The Advance Estimates
for 2007-08 by CSO clearly indicate that a slowdown in on the cards and it has
already estimated that this year GDP will grow at a slower pace of 8.7% from 9.6%
recorded last year.
The major reason for the deceleration in GDP growth has been the Manufacturing
Sector which contributes around 25% of the GDP and which is likely to grow by 9.4%
in 2007-08 as compared to 12% recorded last year. The other big disappointment for
the GDP growth has come in from the Agriculture sector which as per the CSO is
estimated to grow by 2.6% in 2007-08 from 3.8% last year. Going ahead we believe
that GDP growth will continue to grow at 8.5% plus levels and will benefit from a
sustained growth seen in the Services segment which now accounts for roughly
55% of the GDP as compared to 50% in FY2000.
On the other hand the manufacturing sector has consolidated its presence in the
GDP by accounting for 25% of its share of GDP. Agriculture which used to previously
account for a sizeable chunk (around 24%) of the GDP in 2001 has seen its share
drop to 17% in FY08 and has seen a volatile uneven trend after its peak 10% growth
in FY2004.
We believe that going ahead in order to sustain the GDP growth it would be imperative
for the government to focus on Infrastructure, Agriculture, Public Health and Education
as these will continue to remain the foundation blocks of the Indian economy. More
importantly we expect the government to continue its support towards the Agriculture
sector since almost 60% of our population still depends on agriculture as there
livelihood.
8.57.5
9.09.6
8.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2003-04 2004-05 2005-06 2006-07 2007-08
Election FElection FElection FElection FElection Friendlriendlriendlriendlriendly Budgy Budgy Budgy Budgy Budget Liket Liket Liket Liket LikelelelelelyyyyyResearch TeamTel.: 91-22-30443301
Source : CSO
Agriculture which used to previously
account for a sizeable chunk of GDP
(around 24% in FY2001) now accounts
for 17% of GDP.
Infrastructure, Agriculture, Public
health and Education would be the key
foundation blocks of the Indian
Economy
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 2
18th February 2008
Share of Infrastructure in GDP is likely
to go up to 7.5 to 8% by the end of 11th
Five Year Plan.
Total STT Collection this year could
touch Rs. 7500 cr in FY08
New policy initiatives line the GST
rollout by FY2010 would be eagerly
awaited
On the other hand with the first year of the 11th five year plan (FY2008-2013) drawing
to a close, the government has set an ambitious target of 9% GDP during this period
which will be driven by a 4% average growth in Agri output from 1.7% average growth
recorded in the 10th five year plan. Also the Services and Manufacturing sectors are
targeted to grow by 10% and 12% respectively in the 11th five year period.
Alternatively 11th Five Year Plan (2008-2013) also envisages huge investments in
roads, power and other infrastructure projects, which is likely to result in a significant
rise in expenditure on infrastructure sectors to around 7-8% of GDP from around
4.5% currently. Similarly on social sectors like public health and education we expect
the government to significantly increase plan allocations.
More importantly the government has recorded healthy growth in direct tax collections
especially with regard to Corporate Tax which is up by 38% YOY during first 9 months
of FY08, followed by Income tax up by 45%YOY and Customs up by 18% YOY in the
same period. Also the STT (Securities Transaction Tax) which was introduced in
2004-05 has seen a sharp 86% YOY rise in tax collections aggregating Rs 6793 crs
between Apr. 2007 to Jan. 2008 indicating the fact that more investors have
participated in the India Growth story in the Indian capital markets.
In fact as far as the STT is concerned government estimates suggest that total
collection from this account itself can gross around Rs 7500 crs till Mar08. All these
developments are likely to provide the government some flexibility in reducing select
tax rates in this budget and meet its revenue deficit target under the FRBM.
While there is no doubt that 2007-08 has been a landmark year for tax collections, a
repeat performance in 2008-09 appears challenging, given the deceleration in
corporate profits a significant driver of tax buoyancy in 2007-08. There are concerns
from possible inflationary pressures from food and oil, increased fertilizer subsidies
and some enhancements to the employee guarantee proggramme which are likely
to cause additional fiscal pressure on the government. More importantly the continued
availability of funds at viable interest rates to complete ongoing projects will be very
critical as we are deep in the middle of an investment cycle almost across almost all
sectors, be it infrastructure, manufacturing, real estate, rural and urban sectors.
Therefore in terms of clear policy initiatives in this forthcoming Union Budget, we
expect the government to clearly address the above mentioned issues and make
announcements towards implementation of the common Goods & Services Tax
(GST) likely to be introduced from FY2010, possibly reduce surcharge on direct
taxes and further rationalize taxes for select sectors both in terms of inputs required
and the final end product, increase plan allocations to the Infrastructure and social
sectors like Education and Health and progressively look at reducing the revenue
deficit targeted in last years budget.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 3
18th February 2008
3.013.21
3.01
3.75 3.653.45 3.50 3.50
3.79 3.83 3.934.11 4.07
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Nov 10
th
Nov 17
th
Nov 24
th
Dec 1s
t
Dec 8t
h
Dec 15
th
Dec 22
nd
Dec 30
th
Jan 5
th
Jan 1
2th
Jan 1
9th
Jan 2
6th
Feb 2nd
Week Ended Inflation Nos ( In %)
Source : CSO
Recent market melt down has seen
fund withdrawals of $15bn in
redemptions from most emerging
markets.
Emerging markets like India have off
late been following the US market
trends
CONTRCONTRCONTRCONTRCONTROLING INFLAOLING INFLAOLING INFLAOLING INFLAOLING INFLATION - TION - TION - TION - TION - A A A A A TTTTTOP PRIORITYOP PRIORITYOP PRIORITYOP PRIORITYOP PRIORITY
During FY08, the inflation rate has been moderated and it had earlier come down to
3%, however in recent weeks it has again risen to 4.07%. Our belief is that the
government will further announce measures to reduce inflationary trends in the
economy. The recent petrol and diesel price hike is expected to raise the inflationary
trends in the economy in the short term and it remains to be seen how the government
controls this in the next 12 months.
Again as mentioned earlier by us that since this will be the last full Budget by the
Government before the 2009 General Elections, we expect greater focus and
allocations to several social initiatives like rural upliftment, employment, education,
agricultural growth and public health. Also we expect that the FM would announce
some relief packages for troubled export sensitive sectors like textiles, rubber, jewelry,
leather and IT services.
Also we expect some modifications in the subsidy schemes for the fertliser sector
and there are chances that several tax-incentives to promote investments in fertilizers
will be announced, to increase domestic capacity additions and to please the farmer
community thereby providing aids to improve agri growth in the year head.
MARKETS GOING FORWARDMARKETS GOING FORWARDMARKETS GOING FORWARDMARKETS GOING FORWARDMARKETS GOING FORWARD
After a horrendous start to 2008, most emerging market investors are now extremely
worried about the prospects for this calendar year. Forced out of their complacency
by massive fund withdrawals from the asset class (dedicated Emerging Market funds
had over $15 billion in redemptions in January, after $54 billion in inflows in 2007)
and serious price damage, most investors are wondering what happened.
Prior to January the script was very clear; irrespective of what happens in the US, the
emerging markets were economically decoupled and thus would be able to grow
through a US slowdown. Reams of research were written on how China was a more
powerful driving force for the Economists which pointed out the strong domestic
growth dynamic in many of the larger EM countries and the huge infrastructure and
capex cycle currently under way in India & China.
However, come January 08 and all this seems to have changed. The emerging
markets are now leading global equity markets on the downside, and the maximum
price impact has actually happened in India and China plays. The EM asset class is
behaving more in line with historical patterns of being a levered bet on global growth.
Investors seem to have forgotten about decoupling, in favour of the old adage of if the
US sneezes, the world catches a cold type of a scenario.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 4
18th February 2008
Most of the froth has been knocked out
of the Indian Capital Market
Valuations are now reasonable with
markets now trading at 15-16x FY09E
Indian markets look attractive from a
long term perspective
In the medium to long term, investors
would have to accept volatility as fact
of life.
We believe that the decoupling thesis has merit, although not entirely but to a
reasonable extent and that the economic performance of countries like India will
sustain. We will see some drop-off in GDP growth from 9 per cent plus to 7.5-8 per
cent, but this is unlikely to go lower. Corporate earnings should also be able to
sustain a 15-18 per cent type of trajectory. Most of the froth has been knocked off the
Indian markets, and capital raising, which was rampant, has come to a halt. The
whole concept of sum (SOTP) of the parts will also be used much more judiciously.
Speculation and outstanding positions have been dramatically reduced, and the
retail investor is once again almost totally absent in direct form.
Valuations have come down to more normal levels with the markets now trading at
15-16 times the March 2009 earnings. Again not cheap, but if we can grow earnings
at near 16-18%, when corporate earnings are declining in most other parts of the
world, it does not seem realistic.
The domestic investor base is strengthening with the insurance industry alone
expected to pump in almost $20 billion into the equity markets this year. The market
fall has not had much of an impact on this flow as of now. Mutual funds and PMS
schemes have continued to get strong fund inflows.
Hence we don’t think this is the end of the bull market, it has a much-needed correction
that will bring capital market intermediaries back down to earth. This dull and listless
phase, with the markets being range-bound, may last a while but will prepare the
foundation for a much more sustainable rally ahead in future and will extend the bull
run. Most investors recognize that India is a high-quality long-term growth story, and
this has not changed. The visibility and sustainability of our economic growth are
among the best in the EM universe.
The capital efficiency and quality of entrepreneurship are well recognized. Our problem
was the valuation and excess hype and froth, both of which are now getting corrected.
This fall will clean out most of the momentum players and bring in many longer-term
investors sitting on the sidelines.
Therefore one needs to keep the faith as the game is not over yet, we will see new
highs, though it may take some time. Therefore in conclusion we expect the markets
to remain extremely volatile before the Union Budget for 2008-09 is announced on
Feb 29th 2007. Traditionally we have observed that a pre budget rally is typically seen
across the markets before the budget, after which the markets tend to get corrected.
While sentiments on a shorter term basis would definitely get impacted by stock
market movements, the longer term India growth story continues to remain intact
and investors would have to accept short term volatility as a fact of life.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 5
18th February 2008
Pre & Post Budget Market Movments
2003-04
3000
3050
3100
3150
3200
3250
3300
3350
Feb-03 Mar-03
Pre Budget Post Budget
2004-05
5250
5350
5450
5550
5650
5750
5850
5950
6050
6150
Feb-04 Mar-04
Pre Budget Post Budget
Source : BSE
2006-07
9500
9700
9900
10100
10300
10500
10700
10900
11100
11300
11500
Feb-06 Mar-06
Pre Budget Post Budget
2005-06
6250
6350
6450
6550
6650
6750
6850
6950
Feb-05 Mar-05
Pre Budget Post Budget
04 04 05 05
06 06 07 07
We believe India’s macro economic prospects to continue remaining robust and
GDP growth is likely to grow albeit a slow pace between 8 to 8.5% during current year.
With tax collections both from direct taxes and indirect taxes being buoyant, we believe
that the Indian economy continues to remain in good health. Some of the sectors
where both topline and profit growth during Q3FY08 continued to be strong was from
sectors like Telecom, Cement, Infrastructure, Construction, Engineering, Banks and
Pharmaceuticals.
The sectors where the performance was disappointing this quarter included
Automobiles, Auto Components, Sugar, IT Services, Metals and Oil & Gas space.
However one observation on the corporate results declared so far clearly shows that
profit growth has slowed down due to high interest costs and effects of a higher
base.
Sector-wise GDP growth rates (In %)
Source : CSO
Sector 2005-06 2006-07 2007-08
1 Agriculture 5.92 3.76 2.59
2 Industry 8.02 10.63 8.63
(a) Mining & Quarrying 4.87 5.70 3.38
(b) Manufacturing 8.98 12.00 9.44
(c) Electricity, Gas, Water 4.68 5.98 7.83
3 Services 11.01 11.18 10.60
(a) Trade, hotels 11.51 11.82 12.11
(b) Financing, insurance 11.41 13.92 11.72
(c) Community services 7.21 6.89 6.97
(d) Construction 16.46 11.98 9.63
GDP at Factor Cost 9.40 9.62 8.73
FYFY
FY FY
We see India’s growth story is akin to a marathon. A marathon can appear boring to
spectators compared to a sprint (the broad stock market may appear equally unexciting
this year). However, we believe it is the ultimate sport for value buyers, and we expect
great Indian companies/entrepreneurs to emerge from nowhere (as they have over
the past few years) and become champions, and that is the best part of being a part
of the market; and we expect a few more to emerge this year. Smart Long Term
Investors should use this market crash as an opportunity to buy strong companies
with robust business models with excellent management bandwidth but more
important investors need to temper there return expectations and think long term.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 6
18th February 2008
Summary of Central Government FinancesProvisional Actual 2006/07, Budget Est. 2007/08 & Position upto Dec’07 (Rs. Crore)
2006-07 2007-08 Change For
Source : CSO, nic.in, Finance Ministry
Tax Nature 2006-07 2007-08 Full Year April - December 9 MonthsActual Budget Est Increase (%) 2006-07 2007-08 Increase(%)
Corporation 143391 168401 17.4 93851 128698 37.1Income 75792 86829 14.6 46425 66268 42.7Customs 86329 98770 14.4 63655 74455 17.0Excise 117701 130220 10.6 71816 75485 5.1Others 50111 63902 27.5 30781 44439 44.4Gross (Excl Surcharge) 473324 548122 15.8 306528 389345 27.0
Tax Collections - continue to be buoyant (Rs. Crore)
Source: CGA, Ministry of Finance
B E (Rev Actual Achieved (Budget Actual Achieved 2007-08 Apr-DecEst. Estimates) Apr-Dec (%) Estimates) Apr-Dec (%) (%) ’07 (%)
Tax Revenue 327,205 345,971 232,171 67.1 403,872 295,994 73.3 16.7 27.5
Non-Tax Revenue 76,260 77,360 48,744 63.0 82,550 59,652 72.3 6.7 22.4
Revenue Receipts 403,465 423,331 280,915 66.4 486,422 355,646 73.1 14.9 26.6
Plan Expenditure 143,762 172,730 93,901 54.4 205,100 137,163 66.9 18.7 46.1
Non-Plan Expenditure 344,430 408,907 253,791 62.1 475,421 337,090 70.9 16.3 32.8
of which Interest 139,823 146,192 92,634 63.4 158,995 111,764 70.3 8.8 20.7
Non-Interest Non-Plan Rev Exp 204,607 362,183 161,157 44.5 383,546 280,050 73.0 5.9 73.8
Non-Interest Rev Exp 348,369 144,584 255,058 176.4 174,354 114,806 65.8 20.6 -55.0
Total Rev Exp 488,192 506,767 347,692 68.6 557,900 394,856 70.8 10.1 13.6Revenue Deficit 84,727 83,436 66,777 80.0 71,478 39,210 54.9 (14.3) (41.3)
Cap. Exp. + Net Lending 67,799 74,870 28,077 37.5 122,621 79,397 64.7 63.8 182.8
Total Expenditure 555,991 581,637 375,769 64.6 680,521 474,253 69.7 17.0 26.2
Other Non-Debt capital receipts 3,840 5,978 0 43,151 41,029 95.1 621.8 -
Fiscal Deficit 148,686 152,328 94,854 62.3 150,948 77,578 51.4 (0.9) (18.2)Primary Deficit 8,863 6,136 2,220 36.2 (8,047.0) (34,186.0) 424.8 (231.1) (1,639.9)
But broadly the numbers are in line with expectations and we expect corporate earnings
to grow at a healthy clip of 18% in FY08 and 20% during FY09. The Central Statistical
Organisation (CSO) has estimated that FY08 GDP growth at 8.7%, while most of the
economist think tanks have given a range of 8% to 9%. This growth is due to the
healthy contribution by Services and Manufacturing sectors despite Agriculture
recording underperformance.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 7
18th February 2008
HIGH GDP GROWTH TO BE SUSTAINED
We believe that the sustained growth in GDP will be supported by a rapidly growing
Services segment now accounting for roughly 55% of the GDP as compared to 50%
in FY2000. On the other hand the manufacturing sector has consolidated its presence
in the GDP by accounting for 25% of its share of GDP. The only exception is Agriculture
which has seen its share drop to 18% in the overall GDP during FY08 from 24% in
2001 as per the CSO and which has seen a volatile trend.
We hence believe that a relatively larger share of services in GDP, which is growing
at a faster pace, should ensure a higher sustainable growth rate for the economy.
Other factors which have driven growth across most sectors are favorable
demographics (growing proportion of young workers), rising wages, increasing
urbanization, a housing boom, and massive infrastructure spending. Rising income
is helping to drive the consumption boom – this is evident from rapid growth in
cellular subscribers, air travel, cars, consumer durables, multiplex movie theatres,
credit cards and personal loans.
The private sector has been a major contributor to the GDP growth and we do not
expect any negative measures, which could affect the confidence of India Inc at this
point in time. We expect that, the major thrust in this budget will be on agriculture,
infrastructure, social sectors like public health and education, tax simplification &
implementation thrust towards taxpayers.
Composition of GDP (%)
FY2001
FY2008E
Source : CSO
24%
50%
26%
Se r vice s A g r icu ltu r e In d u s tr y
27%
55%
18%
Services Agriculture Industry
Sales EBITDA P A T% Change % Change % Change
Corporate Earnings Growth - NIFTY 50 Companies (Rs. Crore)
Source : CapitalineNote:Q3FY08 does not include 4 companies as their results were not declared namely: ABB, RPL, Cairn India and Glaxosmithline
All the 3 Quarters do not include the NIFTY 50 companies as some companies have been included or excluded due to the changes in the index and for other reasons.
* Is the total number of companies in a sector in Q3 FY 08# Is the total number of companies in a sector in Q3 FY 07$ Is the total number of companies in a sector in Q2 FY 08No sign denotes there are same no of companies all the 3 quarters.
Q3FY08* Q3FY07# YoY Q2FY08$ Q3FY08* Q3FY07# YoY Q2FY08$ Q3FY08* Q3FY07# YoY Q2FY08$
Atuomobiles (5) 20,110.9 18,385.4 9.4 20,490.4 2,444.3 2,323.2 5.2 2,884.5 1,973.1 1,685.6 17.1 1,940.3
Aviation(0)* & (1)# & (0)$ - 1,875.4 - - - 140.5 - - 40.0 -
Banking & Finance (5)* & (5)# &(5)$ 29,092.0 20,931.5 39.0 32,289.2 19,484.3 14,072.6 38.5 21,372.1 4,658.6 3,238.6 43.8 4,760.5
Cement (3) 5,900.4 5,201.7 13.4 6,909.4 1,774.1 1,616.6 9.7 2,037.7 993.1 1,107.8 (10.4) 1,289.4
Engineering & Capital Goods (4)* & (4)# & (5)$ 14,916.2 11,187.9 33.3 16,672.6 2,231.6 1,707.9 30.7 2,381.4 1,788.9 1,285.9 39.1 1,858.3
FMCG (2)* & (3)# & (2)$ 7,145.4 6,837.2 4.5 6,638.0 1,763.9 1,650.8 6.9 1,478.3 1,462.2 1,306.2 11.9 1,178.9
Information Technology & Media (6) 16,656.7 13,645.9 22.1 18,063.6 4,400.0 3,882.4 13.3 4,561.2 3,958.7 3,336.3 18.7 3,947.6
Metals (5)* & (4)# & (5)$ 22,782.8 19,111.3 19.2 54,423.7 6,438.7 6,056.2 6.3 10,751.3 4,106.2 3,966.2 3.5 7,703.5
Oil & gas and Petrochemicals (4)* & (6)# & (6)$ 82,937.6 97,549.7 (15.0) 101,390.7 15,174.1 16,517.3 (8.1) 18,041.5 13,358.2 9,530.6 40.2 11,421.5
Pharmaceuticals (4)* & (5)# & (5)$ 3,607.3 3,487.3 3.4 5,090.7 437.9 847.9 (48.4) 943.4 647.3 992.1 (34.8) 986.4
Power Generation (3)* & (2)# &(3)$ 12,255.7 2,727.4 349.4 2,892.3 3,306.8 285.4 1,058.6 3,191.7 2,278.8 2,584.2 (11.8) 2,433.0
Realty (1)* & (0)# & (0)$ 818.5 - - 532.5 - - 368.9 - 410.8
Telecommunications (4)* & (5)# & (4)$ 12,770.6 10,053.4 27.0 13,024.5 4,454.6 3,698.7 20.4 4,911.6 2,103.0 2,279.3 (7.7) 4,588.6
Total - Excl. banking (41)* & (44)# & (44)$ 208,883.0 192,608.5 8.4 244,370.1 59,998.6 50,335.7 19.2 69,670.2 33,620.9 29,667.1 13.3 40,578.5
Total (46)* & (49)# & (49)$ 221,653.7 202,661.9 9.4 257,394.6 64,453.2 54,034.4 19.3 74,581.8 35,723.9 31,946.4 11.8 45,167.1
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 8
18th February 2008
As mentioned earlier Infrastructure, Agriculture, Public Health and Education would
continue to remain the foundation pillars of the Indian economy in order to sustain
the present and future level of GDP growth. Our belief is that with 60% of India’s
population dependent on Agriculture, it is imperative for the government to increase
plan allocation here as the benefits of a sustained level of GDP growth have not yet
seen a majority of the population reap its benefits. The government is also looking
at imposing a 1% cess on direct taxes and 2% on direct taxes to part finance debt
relief packages to farmers.
Therefore with increased plan allocations the government is likely to ensure that
Agriculture grows annually by 3-4% so that eventually higher growth from here would
lead to a increase in rural incomes which will drive demand for goods and services
thereby also improving employment opportunities.
On the other hand, Infrastructure creation would be continue to be a thrust area for
the government. As per the CII Infrastructure spending by the end of the 11 th Five
Year Plan would have to go up to 10% of GDP involving a estimated investment of $
337.5 bn in order to sustain an average 9% GDP growth over the next 5 years.
Similarly on social sectors like public health and education we expect the government
to increase allocations. We already have a education cess of 2% and there are
expectations that this would be increased to 3-4% in this budget.
AAAAAGRICULGRICULGRICULGRICULGRICULTURE –TURE –TURE –TURE –TURE –
We believe that, agriculture would continue to be a thrust areas for the governmentconsidering the fact that –
60% population depends on Agriculture
Agriculture production has remained volatile and poses a challenge for sustainable
GDP growth
Bridging the gap between urban and rural income is important
Significant increase in consumption possible with higher disposable income from
rural India
Higher employment generation potential in rural India
INFRASTRUCTUREINFRASTRUCTUREINFRASTRUCTUREINFRASTRUCTUREINFRASTRUCTURE
Some of the key reasons why infrastructure will get a boost are –
To Increase FDI an Improved Infratructure is a must
Improved Infrastructure will a key driver in providing value addition to customers
Growing Urbanisation has made the existing infrastructure inadequate and needs
to overhauled sizeably
Agriculture growth is targeted to grow at
average 4% pa in the 11th Five Year
Plan
India’s majority population is yet agri
based with 60% population dependent
on agriculture
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 9
18th February 2008
Education is now a very important
variable to sustain and increase GDP
growth in future
Government plans to increase the
outlay on education to Rs.2,77,837 cr
in the 11th Five Year Plan from Rs.
59,181 cr in the 10th Five Year Plan
To get a knowledgeable workforce, a
healthy workforce will be essential
EDUCAEDUCAEDUCAEDUCAEDUCATIONTIONTIONTIONTION
Education has now become a very important variable for sustaining future growth of
the economy. For a country which has dreams of becoming the knowledge capital of
the world, not much has invested in our educational system. This is quite critical
considering the fact that nearly 350 mn children will require to be educated over the
next 30 years making it an average of over 10 mn every year. We believe that going
ahead Education will call for major investments from the government and it will also
require the government to encourage the private sector to invest in this sector to
upgrade existing facilities here.
Here it would be interesting to note that the government has plans to increase the
spend on the sector to Rs. 2,77,837 crores in the 11th Five Years Plan from Rs.
59,181 crores in the 10th Plan. This spend would include expenditure on elementary,
adult and higher education. Thus in conclusion as per the planning commission
total public spending plan and non-plan on education would account for 5% of GDP
by the end of 11th Five Year Plan. Additionally we believe the government is also likely
to increase its financial outlay towards increasing and enhancing the teachers faculty
capacity and capability as there is a huge shortage of this crtical resource as on date.
As per the government, it has outlined the following targets in the draft 11th five year
plan document. These include.
Reduce dropout rates of children from elementary school from 52.2% in 2003-04 to
20% by 2011-12.
Develop minimum standards of educational attainment in elementary school, and
by regular testing monitor effectiveness of education to ensure quality.
Increase literacy rate for persons of age 7 years or more to 85%.
Lower gender gap in literacy to 10 percentage points.
Increase the percentage of each cohort going to higher education from the present
10% to 15% by the end of the 11th Plan.
HEALHEALHEALHEALHEALTHTHTHTHTHTo ensure that we have a knowledgeable highly educated workforce in the Indian
economy it is essential that we need to have a healthy employee workforce to sustain
the economy growth ahead. The government, has outlined the following targets in
the draft 11th five year plan document as far as the health sector is concerned. These
include.
Reduce infant mortality rate (IMR) to 28 and maternal mortality ratio (MMR) to 1 per
1000 live births.
Reduce Total Fertility Rate to 2.1.
Provide clean drinking water for all by 2009 and ensure that there are no slip-backs
by the end of the 11th Plan.
Reduce malnutrition among children of age group 0-3 to half its present level.
Reduce anemia among women and girls by 50% by the end of the 11th Plan.
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 10
18th February 2008
TTTTTAX PRAX PRAX PRAX PRAX PROPOSALS – EXPECTOPOSALS – EXPECTOPOSALS – EXPECTOPOSALS – EXPECTOPOSALS – EXPECTAAAAATIONSTIONSTIONSTIONSTIONS
DIRECT DIRECT DIRECT DIRECT DIRECT TTTTTAXES –AXES –AXES –AXES –AXES –
Surcharge on Corporates and Personal Income Tax currently pegged at 10% may
be exempted fully
Tax Breaks likely for Infrastructure Bonds likely
Minimum Tax Exemption Limit for Individuals to be raised to Rs 2 lacs from Rs 1.5
lacs presently
Standard deduction limit likely to be raised to Rs 1.20 lacs from the present level of
Rs 1 lac under Sec 80C
Securities Transactions Tax – Likely to see a marginal increase
Increase in Highway cess by another 30 paise from the present Rs 2 per litre
charged on petrol and diesel
Dividend Distribution Tax likely to be cut to 12.5% from 15% presently.
New 1% cess on Direct Taxes and 2% cess likely to be imposed to partly fund
farmers relief packages
REITS (Real Estate Investment Trusts) to get the benefits through a tax waiver on
dividend income from such instruments.
INDIRECT INDIRECT INDIRECT INDIRECT INDIRECT TTTTTAXES –AXES –AXES –AXES –AXES –
Reduction in peak customs duty from 10% to 7.5% in this Budget which is in line
with tariffs closer to ASEAN levels.
Excise Duties to remain unchanged at 16%
Basic Framework for preparation of the Goods & Service Tax regime by 2010
Service Tax likely to be kept at 12% currently but 12 new services are likely to come
in the tax net. These could include service providers of legal draft writing
intermediaries and stamp paper vending intermediaries, all un aided non
government schools and colleges, un aided non government hospitals, amusement
parks, coin operated amusement machines and other recreation and amusement
services.
SECTSECTSECTSECTSECTORAL BIAS -ORAL BIAS -ORAL BIAS -ORAL BIAS -ORAL BIAS -We expect the following sectors to benefit from the budget process. These include
Capital Goods, Power Equipment, Construction, Cement, Real Estate, Hotels,
Retailing, Telecom, Insurance,Food processing, Fertilisers, Oil & Gas/Allied services
players.
With this budget being the last one
before the general election, the middle
class is likely to gain from some tax
cuts and concessions from the FM
Service tax likely to increase its net
over new category of services
Contd...
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 11
18th February 2008
Mid CapSector Stocks we likeAuto Ashok Leyland
Auto Ancillary Ahmednagar Forgings, Amtek Auto
Capital Goods Cummins, Kirloskar Oil, Thermax, Bharati Shipyard, Ratnamani
Education Core Projects
Pharma Elder Pharma, Indoco Remedies, Orchid Chem
Telecom Gemini Comm
Large CapSector Stocks we likeAuto M&M, Maruti
IT Infosys, Tata Consultancy, Satyam
Power Utilities NTPC
Pharma Ranbaxy
Source:Reliance Money Research
Source:Reliance Money Research
STOCKS We Like -
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 12
18th February 2008
SectorwiseExpectations
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 13
18th February 2008
AUTOMOBILECurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Neutral
Positive
Currently the Indian Automobile sector is going through a tough period. Higherinterest rates, stringent financing norms adopted by financing institutions areimpacting demand for Automobiles. But we expect moderate interest rates goingahead to again drive demand for Automobile sector. We remain positive onAutomobile sector. Rising income levels, higher replacement demand, ban onoverloading of trucks, rising infrastructure spending, strong freight rates woulddrive the demand for automobiles in India. We expect the automobile sector togrow at a CAGR of 10-12% over next 3-4 years.
Key budget expectationsIssuesExcise duty
Classif icationof excise duty
Deduction onR&D Expenses
Interest rates
S p e c i a lIncentives forLPG and CNGbased AutoManufacturers
Current Status16% Small cars24% Big cars16% Tractors24% Motor vehicle >10seater16% CVs >8T16% Motorcycles16% Bicycles
Currently classified onlength and engine capacity
150% deduction on R&Dexpenses till 2012
Interest rates for cars & Uvswent up by 300-350bps inlast 2 years
No special Incentives
Industry ExpectationUniformity of excise duty forall cars , Reduce excise onsmall cars and MUV's to 10-12% rest all shld be at 16%,Lower excise duty on hybrid/green vehicles, Cut in exciseduty on two wheelers to 12-8 %
Should be classified solelyon the basis of length andnot on the basis of enginecapacity
Should be extended till foranother 10 years from 2012
Govt should moderateinterest rates on new loansto farmers for tractors andother vehicles
Special excise duty, tax ratesfor such vehiclesmanufactured
ImpactPositive
Positive
Positive
Positive
Positive
RationaleCut in excise duty would bringprices of vehicles and in turnwould increase the demandfor auto market
It will help companies inmaking powerful small carsand help them in savingexcise costs
It will help companies indeveloping new products,more efficient products, hybridcars, environment friendly cars
Auto industry has witnessedslowdown mainly due to risinginterest rates and it would getsome relief due moderation ininterest rates, Tractor industryis also facing tough time andany moderation in interestrates on loans to farmers fortractors would revive theindustry
It would bring down the cost ofvehicle to some extent andwould increase the demandfor the products
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10EAshok Leyland 36 3.7 4.2 9.7 8.6 BUYM&M 619 44.8 49.2 13.8 12.6 BUYMaruti 813 68.7 74.6 11.8 10.9 BUY
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 14
18th February 2008
AUTO ANCILLARYCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Neutral
Positive
Auto Ancillary sector is growing steadily mainly because of lower demand fromdomestic OEMs and strong rupee appreciation which impacted exports of autoancillary players. But we believe going ahead domestic auto demand will improveand auto ancillary sector will continue to grow. We remain positive on Auto Ancillarysector. The global outsourcing opportunity available for Indian Auto componentvendors is mainly because of competent engineering skills, delivery capabilitiesand cost advantage.
Key budget expectationsIssuesExcise Duty onraw materials
Fiscal and TaxIncentives
Customs Dutyon raw material
Increasing FTAs(Free TradeAgreements)
R&D
ForeignInvestments inauto componentindustry
Import Duty onRubber
Current StatusExcise Duty on raw materialslike GP/GC sheets, HR coils,Aluminium, Copper, Nickel at16.5%
No benefits
Customs duty on rawmaterials like zinc , copper ,lead , steel , aluminium , ironcurrently at ~5%
The growing number of FTAsthat are being signed by Indiawith ASEAN countries areimpacting negatively todomesitc players
Government has set upNational testing and R&DInfrastructure project for autoR & D
Offers l imited fiscalincentives to foreign investorsNatural rubber Imported Dutyat 20%
Finished Tyres Imported at10%
Industry ExpectationExcise Duty on these keyraw materials should bringdown
Tax Holidays, creation ofspecial auto-componentparks (SAPs) and other VATbenefits
Customs Duty on thesebasic raw materials shouldbe brought down fromcurrent peak levels
Reduction in excise duty orreduce the number of FTAs
Define roadmap and givespecial emphasis to autocomponents industry
Should promote ForeignInvestment by offering fiscalincentives
Import Duty on naturalrubber needs to be at leastat par with finished Tyres at10%
ImpactPositive
Positive
Positive
Neutral
Positive
Positive
Neutral
RationaleIt would bring down the cost ofmanufacturing of autocomponents and wouldenhance competitiveness ofplayers
It will help India in emergingas a global manufacturing hublike china and other developingcountries
Lower Customs Duty on rawmaterials would make IndianAuto Component players morecompetitive
Domestic Auto Componentmanufacturers pay relativelyhigher excise duty of ~25% ascompared to players in theinternational arena who pay 1-10% Excise duty
It will promote design anddevelopment activities in Indiaand would make domesticplayers more competitive ininternational market
Countries such as Thailand,China , Malaysia, etc. offerlarge incentives to companiesfor investing in autocomponent manufacturing.India should also benchmarkits policies with suchcompeting countries topromote Auto Componentsindustry
Manufactures prefer to importfinished Tyres instead ofmanufacturing it here
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10EAhmednagar Forgings 200 30.7 38.3 6.5 5.2 BUYSource:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 15
18th February 2008
CAPITAL GOODSCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain positive on Capital Goods & Power Equipment sector. Powerhas remained as a key resource for Indian economy growth. Strong growthin economy, growth in infrastructure, industrial production would drivethe demand for capital goods sector. Government has given infrastructurestatus to power generation and distribution sector, we expect the demandfor power to remain strong and power remains one of the critical successfactors in India growth story. We expect it will drive strong demand forcapital goods and power equipments as well.
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10ECummins India 333 19.5 22.6 17.0 14.7 BUYKirloskar Oil 120 9.3 11.3 12.9 10.6 BUYThermax 662 34.8 45.6 19.0 14.5 BUYBharati Shipyard 615 56.0 85.3 11.0 7.2 BUYRatnamani Metals & Tubes 941 140.2 185.5 6.7 5.1 BUY
Source:Reliance Money Research
Key budget expectationsIssuesExcise Duty
APDRPscheme
Rajiv GandhiGraminVidyutikaranYojna (RGGVY)
Customs Duty
Infrastructurestatus to powerequipmentsuppliers
Current StatusExcise duty on raw materialsand all products supplied topower generation,transmission anddistribution is at 16%, with aSecondary and HigherEducation Cess of 1% on theaggregate of duties of excise
The current allocation offunds to the APDRP schemeis Rs 800 crs.
The current allocation offunds to the RGGVY schemeis Rs 3983 crs
Customs Duty on aluminum,copper, zinc and steel alloyshas already been reduced to5% from 7.5% in January2007
Benefits u/s 80 IA availableto util it ies engaged ingeneration, transmissionand distribution of power in arestricted manner.
Industry ExpectationTill the time a uniform GSTis implemented, a merit rateof Excise Duty @ 8% shouldbe applicable on allproducts, supplied to PowerGeneration, Transmission &Distribution projects.
In the current budget theindustry expects theallocation to increase toatleast Rs 8000 crs to realizeits full benefits.
Tax exemptions (like 80IA ofIncome Tax) given toschemes like Water Supply& Sanitation Scheme or asenvisaged for rural areadevelopment schemes,should be also offered toRGGVY scheme
The Customs Duty on theseBasic Raw Materials shouldbe brought down to 0%
Power Generation,Transmission andDistribution businessshould be added to the listof "infrastructure IndustryStatus", appearing underINCOME TAX ACT- SECTION80 IA and Service Tax Act withthis facility available forprojects commissioned till31st March 2012, so thatbenefits currently availableonly to the Utilities (Ownersof the projects) will also beprovided to all stakeholders.
ImpactPositive
Positive
Positive
Positive
Positive
Rationale It would offer some respite topower equipment manufactur-ers as raw material priceshave gone up substantially~50%
It would help the governmentto achieve its target of 15%AT&C losses from the currentnational average of 30%. TheAPDRP scheme has alsoseen very low pay back peri-ods of ~3 years
If the tax benefits are extendedto RGGVY it will result in bring-ing down the cost of thescheme to the extent of 25%,with possibly more villagescould be electrified
It would bring down the costdifferential between interna-tional and domestic marketand would benefit equipmentmanufacturers.
This will help the Govt ofIndia's Programme " Electric-ity for All at affordable cost byyear 2012".
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 16
18th February 2008
CEMENTCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain optimistic on future outlook of cement industry because of governmentfocus on infrastructure, increasing housing demand, opening of retail sector &raising capacities of corporate sectors. The future growth of the industry will bedriven by expected GDP growth of more than 8 %. One of the main concerns for theIndian cement industry is the cheap imported cement. We feel budget 2008-09would have a positive impact on the sector.
Key budget expectations
IssuesTaxes & Levies
Excise Duty oncement
VAT
Import duty
Duty on cementimport
Current StatusTotal tax and levies arearound 22% (which constitute60% or more of the ex-factoryprice)
If MRP is > Rs.190 and <Rs.250 per bag excise dutyis 12%, MRP is < Rs 190then a specific rate of exciseduty of Rs 350 per tonnes ischarged, where MRP is overRs 250 then a specific rate ofexcise duty of Rs 600 pertonnes is charged.-In absence of abatement,tax is levied on base of Trademargin & tax on tax.
VAT on cement & clinker ischarged @ 12.5%
Currently coal and pet cokeare charged with an importduty of 5%.
Withdraw of CVD & zerocustom duty
Industry ExpectationTo Rationalize the tax rate
To abatement of 55% on theexcise duty and rationalizethe ad valorem duty.
VAT on cement & clinkershould be brought in linewith similar constructionmaterial like steel to 4%.
To be completely abolished.
Restatement of CVD onImported cement to theextend of excise duty
Impact Positive
Positive
Positive
Positive
Positive
RationaleThis would help in reductionprices
It will give cement makers awindow to improve realisationand expand capacities to coupup increasing domesticdemand.
Would help to reduced cost perbag of cement, which would behelpful in propping upInfrastructure growth.
Would reduce input cost andhelp to compete with importedcement.
Provide level playing field forthe domestic producers
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 17
18th February 2008
CONSTRUCTION / INFRASTRUCTURECurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain optimistic on Construction and Infrastructure sector going forward.The incremental participation in the Construction equipment sector by thegovernment and private players has accelerated the growth at over 30 % p.a.Infrastructure development in India has taken off in a major way in the last 2 yearsand is witnessing impressive growth across various segments such as Roads,Power, Ports, Telecommunication, Railways and Airports.
The Planning Commission has proposed to increase infrastructure expenditureas a percentage of GDP from its current share of 5% to 9% by 2012. The totalinfrastructure investments planned for the next 5 years of US$ 350bn requireshuge participation from FDI and FII inflows and the Government's recent decisionof permitting FDI's up to 74% equity for road and bridge construction as a part ofinfrastructure will boost the sector largely.
Key budget expectationsIssuesIncrease therate ofinvestment
Viability GapFunding
Tax on Interestincome
Tax sops forinfra-funding
Infrastructurestatus for solarenergy projects
Tax holidaybenefit u/s 80-IA
Service tax to bewithdrawn
Current StatusCurrent level of investment isat 35% of GDP
Currently VGF is at 20% forthe urban transport systemslike metro, monorail and roadtransport system
Tax on Interest income frominvestments in infrastructurebond is at 20%
The exemption waswithdrawn by the Finance Act,2006
Solar Energy projects are notgiven the infrastructure status
Healthcare industry nothaving an infrastructurestatus
At present service tax is leviedat around 5%.
Industry ExpectationTo increase theinvestments by over $ 350billion in next five years andthe rate of investmentsshould be raised by 5%.
To raise the limit on theViability Gap funding to30%
Exemption of tax onincome from interest oninvestments ininfrastructure securitiessuch as in power androads
Reintroduction of tax sopson infra-funding undersection 10(23G)
Infrastructure status for”solar energy projects”and also want the existingpower plants to installsolar systems to the extentof 10 % of their electricitygeneration
Expect to grant'infrastructure status' to thehealthcare industry andthereby provide tax holidaybenefit u/s 80-IA
Since the constructionsector as a whole hasbeen declared as anindustry under the IDBI Act,no service tax should beapplicable to an industryas per the Act
ImpactPositive
Positive
Positive
Positive
Positive
Positive
Positive
RationaleWould encourage highereconomic growth in theinfrastructure segment at theinternational level
Would help to improve theviability of an infrastructureproject as VGF is a one-timegrant by the government with along gestation period
Would encourage investors toinvest in infrastructure
Would improve theinvestments in infrastructureand other projects
Would help the industry to givea an environment friendlysource of energy and alsoreducing the dependence onpower from other sources
Would provide a boost to thehealthcare industry which isgrossly inadequate.
Would motivate private sectorinvestments
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 18
18th February 2008
EducationCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
India is currently one of the largest markets for formal school education in theworld with an addressable population of 400-450 mn and an annual spend ofabout $35 bn. India currently has over 1 mn schools proving education from k-12to over 200mn students. Education has become prime focus for the governmentand has allocated Rs.106.71bn for Sarva Shiksha Abhiyan to improve the educationsystem, teacher training and innovative initiative in the country. The allocation forschool education for 2007-08 was Rs 14,779.29 crore (Rs 147.79 billion), while theallocation for Sarva Siksha Abhiyan in the Eleventh Plan is Rs 71,000 crore (Rs710 billion), up from the Tenth Plan outlay of Rs 17,000 crore (Rs 170 billion). Goingforward, we believe with India steadily moving towards a more knowledge basedeconomy the spending on education will increase manifold with the householdsspend on Education moving up the priority list education ought to become the topmost priority of Government, thus Education sector is likely to witness more robustgrowth in the coming years.
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10ECore Projects & Tech. Ltd 200 14.9 28.4 13.4 7.0 BUY
Key budget expectationsIssuesBudgetAllocation
Quality Issues
Technical upgradation
Current Status Allocattion for Education tobe enhanced by 34.2%fromRs.17133 crore to Rs.23142crore, of which Rs.10,671crore for SSA
Two lakh more teachers to beemployed and five lakh moreclassrooms to beconstructed.
1,396 Indian technicalinstitutes to be upgraded toachieve technical excellence.
Industry ExpectationLikely to enhanced further,Government has alreadyannounced allocation forSarva Siksha Abhiyan in theEleventh Plan is Rs 71,000crore (Rs 710 billion), upfrom the Tenth Plan outlay ofRs 17,000 crore (Rs 170billion
Likely to enhanced further
Likely to increase further
ImpactPositve
Positive
Positive
RationaleLikely to benefits playersoperating in the domesticEducation sector , withincreased budget outlay forthe sector.
Companies operating inEducation Infrastructure sectorlikely to get benefits.
Likely to benefits operating intechnical upgradation ofeducation.
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 19
18th February 2008
FMCGCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
In FY07 the Rs 75,000-crore FMCG sector grew at a healthy 10-15%, backed bygrowth in urban markets and the surge in premium products, the industry had todeal with steep inflationary pressures. Costs of key raw materials such asvegetable oils, palm oils, crude-oil derivatives, wheat and milk have shot up by asmuch as 30-40% over the past eight to ten months. This has put huge pressure onoperating margins, which in turn have led to prices of products shooting up. Soapprices, for example, which have shot up 10% over the past six months, resulted ina steep 5% decline in soap volumes last quarter. However, we believe the IndianFMCG sector is well placed deliver stronger double digit growth on the back ofthurust of the Government on pro rural policies, over 8.5% GDP growth, creationbrand awareness among rural public Etc. We remain positive towards industrypeers like - Britania, Godrej Consumer, Hindustan Unilever etc.
Key budget expectationsIssuesExcise Duty
Central SalesTax
VAT
P r o - r u r a lPolicies
Current Status16% on Soaps & detergents.
Biscuits industry is chargedwith an excise of 8% but onlyon biscuits with retail pricesabove Rs 100 per kg.
Process foods currentlycharged with central sales taxof 3%
Biscuit industry is currentlycharged with a VAT of 12.5%
Industry ExpectationRationalisation of Exciseduty.
Full exemption from excise
Exemption from the CST
Reduction in VAT to 4%
ImpactNeutral
Positive
Positive
Positive
RationaleWith raw materials costsalready escalating, a reductionin excise duty on soaps anddetergents would result involume rise that got effected bycost push price rise.
Finance Minister hadexempted the biscuit categoryfrom excise duty but only onbiscuits with retail prices underRs 100 per kg.
Drive volume growth forprocessed foods.
Biscuits (along with cigarettesand pan masala) is the onlyexception among allprocessed foods categorieson which a 12.5% VAT is levied.
Pro-rural policies, which wouldactually put more money in therural consumers’ pockets,would fuel growth in the sector
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 20
18th February 2008
HOTELSCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain positive on Industry as there exist a demand-supply mismatch whichwill result in a healthy growth in occupancies & ARR's in near future. This will helpin improving margins of the Hotel S ector. Increased propensity to spend amongyounger upper middle class & growth in tourism has resulted in optimistic outlookfor hotel industry in longer term as well.
Key budget expectations
IssuesInfrastructurestatus
Tax exemption
Service tax
Section 32-Depreciation onHotel building
Current StatusCurrently not available
Tax holiday of 5 year for two-star, three-star, four-starhotels and conventioncenters with seating capacityof not less than 3000 in NCRarea of Delhi, Faridabad,Gurgaon & Ghaziabad toseed up the infrastructureneeds for the commonwealthGames.
-Hotel industry is required topay service tax on servicesreceived from Foreign Touroperators.-On banquet both service taxon food & beverage & VAT arecharged
The depreciation on hotelsbuilding @ 10%
Industry ExpectationInfrastructure status shouldbe given to hotel industry.
To be extended to new five-star hotels coming up inother parts of the country.
The exemption to Hotelindustry from paying servicetax on services receivedfrom Foreign Tour operators.-On banquet service onlyVAT to be charged
The depreciation rate to berestored to 20%.
ImpactPositive
Positive
Positive
Positive
Rationale To spur fresh investment forcreating more capacity andboost hotel industry
Prop up the investment in thecountry.
To avoid double taxation.
Higher cash flows
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 21
18th February 2008
INFORMATION TECHNOLOGYCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Negative
Positive
On account of continuing rupee appreciation coupled with slow down worries inthe US market has taken a toll on stock prices of Indian IT companies in recenttimes. Nevertheless, we believe on the back of incremental growth coming fromnon- US geographies coupled with growth in non-financials industry verticals andthrough inorganic initiatives Indian IT sector is on track with its growth agenda forcoming years. The Indian software and services exports are expected to touchthe $40 billion mark in FY08 ($31.3 billion in FY07), according to IT trade bodyNasscom's Strategic Review 2008. Indian IT industry can exceed its aspired targetof $60 billion by 2010 in software and services exports and $73-75 billion in overallsoftware and services revenues by 2010. In the medium term, we expect IT sectorto underperform the market indices, till the time it gets more clarity on the impendingUS IT budgets coupled with trending down of rupee appreciation.
Key budget expectationsIssuesTax exemptionsfor ITcompaniesunder section10-A and 10-Bfor 10-year taxexemptionunder theSoftwareTechnologyParks of India(STPI) schemee Duty
FBT on ESOP's
Excise duty onpackagedsoftware soldover thecounter
Allocation e-governanceproject
Current StatusSec 10A/10B SoftwareExports are exempted fromtax ti l l assessment year2009-10
Fringe Benefit Tax (FBT)levied on Employee StockOption Plans, the FBTimposition will be effectivefrom April 1, 2008
Currently there is 8% exciseduty levied on packagedsoftware sold over thecounter
Increased allocation to Rs7.2 bn as against Rs 3.9 bnin the previous year forambitious e-governanceproject
Industry ExpectationContinue the STPI schemeand tax incentive undersection 10A/10B for next tenyears.
More clarity on theaccounting treatment of theFringe Benefit Tax (FBT)levied on Employee StockOption Plans.
The industry wants the levyof this excise duty to bedropped completely oncustomized software andpackaged software.
Allocation likely to enhancedin the current union budget
ImpactNegative,Governmentmightconsiderextension ofbenefits toBPOs.
Neutral,Inclusion ofotherservicesand fringebenefitsoffers byIndian ITcompaniesto itsemployeesunder FBTwould putfurtherpressure onITcompanies..
Positive
POSITVE
RationaleIn the event of non-extensionof tax benefits under STPIEffective tax rates wouldincrease by 300-400 bps to 17-18% in FY10, post expiry of theSTPI benefits, which inherentlydampen the profitability.
Neutral, as employers willrecover FBT from employees.
This is in favour of nurturing theIndian Software industry bycutting duties andsubsequently making India afavoured IT and IT relatedactivities destination as well ascurbing the piracy in software.
Domestic focused ITcompanies are likely to benefitfrom the increased allocationto e-governance project
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10EInfosys Technologies Ltd 1519 97.3 107.5 15.6 14.1 HOLDTata Consultancy Services Ltd 871 62.7 67.3 13.9 12.9 HOLDSatyam Computer Services Ltd 425 30.1 32.8 14.1 13.0 BUYSource:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 22
18th February 2008
MEDIA AND ENTERTAINMENTCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Neutral
Positive
Media and Entertainment is one of the fastest growing sectors in India. Theincreasing rate of urbanization, the penetration of television and radio industry inthe rural areas with the help of the technology and the rising levels of incomes ofthe people in India has facilitated the growth rate of Media and Entertainmentindustry in India. The Indian Media and Entertainment industry stands at the valueof around Rs 43,700-crore currently and is expected to grow at an annual growthrate of 19% to reach Rs 83,740 crore by 2010. The Indian economy is growing at afast rate and the Media and Entertainment industry is expected to benefitsignificantly from it. We expect union budget 2008-09 to have a neutral impact onthe sector, nevertheless on a longer term perspective we expect Indian mediaand entertainment sector to show strong growth prospects.
Key budget expectationsIssuesExcise Tax :Set Top Box:
BroadcastingEquipments:
Digital CinemaEquipments:
Custom Duty:Set Top Box:
BroadcastingEquipments:
Digital CinemaDevelopmentProjects:
FBT
Current Status
16.5%
16.5%
16.5%
0.0%
10.3%
7.7%
ESOPs having beenbrought under the FBT pre-view.
FBT on expenses like food,traveling, accommodationetc. was introduced last year
Industry Expectation
12.0%
Status Quo Maintained
Status Quo Maintained
5.0%
Status Quo Maintained
Status Quo Maintained
Status Quo Maintained
Status Quo Maintained
Impact
Neutral
Neutral
Neutral
Negative
Rationale
Reduction in excise duty andintroduction of 5% custom inthe set top boxes in order toboost domestic set top boxesmanufactures, will not directlyhelps any of the listedcompany, nevertheless withcheaper amiability of Set topboxes will help to increasepenetration of CAS(Conditional AccessSystem).
More clarity on the accountingtreatment of the FringeBenefit Tax (FBT) levied onEmployee Stock OptionPlans.Impact: Neutral, asemployers will recover FBTfrom employees.
FBT On Other Items LikeFood, Travelling,Accomodation Is Likely ToContiune.
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 23
18th February 2008
OIL & GAS AND ALLIED SERVICESCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain optimistic on the long term growth prospects in the Oil & gas sectormaintaining a stable outlook for both upstream (E&P) and downstream (refiningand marketing) sectors in India. The Center's plan to expand the explorationlicensing area from 44% of the Indian sedimentary basin to 80% by 2011-12 providesa positive outlook for the E&P companies.
The Government formulation of NELP has encouraged active participation fromforeign players to bid in oil and gas blocks and also through NELP- VII, it providesnewer business opportunities to both domestic as well as foreign players creatingnew developments in E&P sector. We expect this to be beneficial to the E&Pcompanies in the long term.
Key budget expectationsIssuesService Tax
Central SalesTax
Central ExciseDuty
Customs Duty
VAT Rate
Tax Holiday forh y d r o c a r b o nsector
Current StatusService Tax is at 12.36%Construction services to thePorts are exempted fromservice tax
Natural gas is currently taxedat 12.5%
The central excise duty onATF is 8%.Ad valorem component ofexcise duty on petrol anddiesel is at 6%
Currently, customs dutylevied* 5% on naphtha,* 5% on liquefied natural gas,* 4% on crude oil and coal
VAT rates is at 12.5%
The Legislature has granteda 7-year tax holiday to suchundertakings under section80-IB of the Income Tax Act1961.
Industry ExpectationExemption from service taxfor E&P activities related tooil and gas
Dredging services to thePorts be exempted
Inclusion of natural gas inthe list of 'Declared Goods'in order to provide a level-playing field among differentprimary energy sources
Rationalization of exciseduty on aviation turbine fuel(ATF) for regional jets.
Rationalization of advalorem excise duty onpetrol and diesel and to bereplaced with specific duties
Reduction of custom duty by3% on naphtha and liquefiedpropaneRationalization of the 5 %duty for liquefied natural gasThe Customs duty on crudeoil should be brought downto zero
Rationalization of VAT
The hydrocarbon sector tobe treated on a par with thepower sector, and a 10-yeartax holiday under Section80IA of the Income Tax Act tobe granted.
ImpactPositive
Positive
Positive
Positive
Positive
Positive
RationaleWould help in reducing theburden of the already-high costof exploration and alsowould encourage foreign oilgiants to participate in thefuture NELP bidding. Willreduce the development costsof the Ports and thereby makethe transaction costs of theirservices competitive
Would allow more usage ofnatural gas as it is environmentfriendly
Would help the Aviationindustry to cut down their majorcost component and thatwould in turn help theconsumers. Would allowlesser fluctuation of prices dueto changes in crude rate andwould benefit the consumers
Would benefit the powerindustry in controll ing thefluctuating price on import ofnaphtha and would encouragethem to increase the usage ofnatural gas as fuel
Would help reduce the burdenon the consumers, particularlypower and fertilizer sectors
Will encourage theentrepreneurs to undertakedevelopmental activities
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 24
18th February 2008
POWER UTILITIESCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
Government still plays a key role in the development of this sector. The privateinitiative in the sector has just taken good pace due to favorable policy initiatives.When the renovation and capacity addition across the value chains of the industryhas become a necessity, not only for the industry but for the country itself, theindustry is looking for the favorable response from the budget proposals whichwill ultimately facilitate the investment in the sector. We believe the current taxsops for resource mobilization for the sector specific NBFCs like PFC and RECwould continue in the current budget and it would also be extended to players likeNTPC and other Private power Utilities. Looking at the growing interest of theforeign institution in the sector, we feel the restrictive ECB norms would be relaxedfor the sector with strict monitoring mechanism in place. Further we trust thegrants through the APDRP scheme would go for more rationalization which inother way help in well directed unbundling of the SEBs with increased privateinitiative. We therefore possess a positive outlook on the sector both in the shortand long term.
Key budget expectationsIssuesFundMobilization
Budgetarysupport to KeySchemes
Regulatory
EquipmentSupply
Industry ExpectationThis sop would continueand would be extended tothe utilities also. Further theECB norms would berelaxed for large powerproject executors as against$20 mn cap currently.
The RGGVY scheme for the11th plan has already got ago ahead last month. So weexpect the RGGVY would getits due and improvedsupport in the currentbudget. However the GrossBudgetary support for theAPDRP scheme maywitness a cut.
CERC would be allocatedthe duty of regulating thecoal prices. The miningactivity would enjoy 10 yeartax holiday.
Indirect and Direct Taxbenefits would be extendedto the new manufacturers ofcritical power equipment.
ImpactPositive
Negative inthe short termbut neutral inthe long run
Positive
Positive
RationaleThe mobilisation ofresources for the projectexecutors and owner shouldbe facilitated for meeting theplanned capacity addition.
Rural Electrif ication sti l lneeds the right support fromthe government as theeffective electrification is stillfar from the desired.However increased privateinitiative in the T&D sectorwith l imited but focusedbudgetary support throughAPDRP scheme wouldimprove the efficiency of theT&D sector upto a satisfactorylevel. So the Budgetarysupport may cut to aconsiderable extent in theAPDRP scheme.
Encouraging the mininginitiatives by the powergenerators.
This measure wouldameliorate the currentshortage of critical powerequipments in the country.
Current StatusThe industry is gettingconcessional finance fromvarious tax saving bondsfloated by the power financingcompanies like REC andPFC. However such benefitshave not been extended to theUtilities.
The total gross budgetarysupport for the two importantschemes, APDRP (from Rs650 crore in FY07 to 800 crorein FY08) and RGGVY (FromRs 3000 crore in FY07 to Rs3983 crore in FY08) got animproved support in the lastbudget. However due tosome internal differencebetween the power andfinance ministry the APDRPscheme for the 11th plan hasgone for a detail review.
Currently there is noregulator for regulating thecoal prices. Also the coalmining by the powergenerators don't get anyfavorable tax incentives forundertaking this diverseinitiative.
The power sector has notbeen allotted infrastructurestatus. There is no such taxsops for the setting up for thecritical power equipmentmanufacturing in the country
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10ENTPC 204 10.3 12.8 19.7 15.9 BuySource:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 25
18th February 2008
PHARMACEUTICALSCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
Research & Development is the prime focus of the Pharma Industry, as it aspiringto move forward in the pharma value chain by discovering new drug moleculesand new drug delivery system. Also Indian Pharma industry, with its advantagelike low cost technical pool and prospering R&D capabilities, is well placed tograb a major chunk of global outsourcing opportunity in the contract researchand manufacturing space. Considering industry scenario, we believe Governmentwould provide fiscal benefits to R&D, which would drive long term growth forIndian Pharma. Thus, We remain positive for the sector, specifically for R&Dintensive players like - Ranbaxy, Nicholas Piramal, Sun Pharma Advance ResearchCompany etc.
Key budget expectationsIssuesIncentives forR&D
Tax holiday
Excise Duty
Customs Duty
Fringe BenefitTax
Industry ExpectationWeighted deduction to beraised to 200% of R&Dspending and also to beextended to depreciation onland and building dedicatedfor research.
To be extended to ClinicalTrials, Bio-equivalencestudies etc. that are doneoutside the R&D facility,whether in India or in anyforeign country.
Patent filling and gettingproduct approval should beallowed for weighteddeduction.
The 100% deduction shouldbe extended upto 31stMarch, 2012.
To be reduced to 8% andabatement to be raised to55%
These should be fullyexempted from CustomsDuty
Physician samples shouldbe exempted from FBT
ImpactPositive
Positive
Positive
Positive
Positive
Neutral
Rationale
This would provoke higherspending towards innovativeR&D by Indian players andcould develop India as thepreferred global destinationfor Pharma R&D andmanufacturing.
This would prop up R&Dspending in country.
This would make themedicines affordable andcould see volume growth indomestic formulations.
To make Life saving drugsaffordable. A
Current StatusWeighted deduction of 150%on R&D spending (other thanany expense on the cost ofland and building) - U/s.35(2AB)
Deduction u/s.35 (2AB) areavailable only to basic re-search carried on at the in-house R&D facility.
Also spending in obtainingregulatory approvals and fill-ing of patents abroad are al-lowed of weighted deduction.
Companies having the mainobject of R&D and approvedby the prescribed authority iseligible for 100% tax exemp-tion from earnings upto 31stMarch 2007 u/s 801B(8A).
Currently 16% on MRP withan abatement of 42.5%.
Life saving drugs currentlyattracts custom duty in therange 5-10%.
Physician samples currentlyattract FBT.
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10ERanbaxy Laboratories Ltd # 396.2 20.8 27.1 19.0 14.6 BUYElder Pharmaceuticals Ltd 390.0 45.8 57.3 8.5 6.8 BUYIndoco Remedies Ltd 266.0 53.4 65.1 5.0 4.1 BUYOrchid Chem & Pharma Ltd* 244.8 23.6 30.9 10.4 7.9 HOLD
* - Under Review# - Year Ending December
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 26
18th February 2008
RETAILCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Neutral
Positive
With the steady progress in Indian economy, improving disposable income andconsequent rising consumerism, we believe Indian Retail sector would growprogressively in future. Incidentally, the market penetration of India Retail inorganized sector is extremely low. As per industry estimates, Retail sector islikely to grow up to USD 427 billion by 2010 and the organized retail could accountup to a share of as high as 20%-22% of this market. Already, more than USD 30billion of investment is being planned by both domestic and foreign players inretail space in the coming five to seven years. Considering untapped potential &growth in retail sector, we remain positive in long term but like to be neutral inshort-term, as the sector still in the nascent stage.
Key budget expectationsIssuesIndustry status
Service tax onrenting ofi m m o v a b l eproperty
FiscalIncentives fordevelopment ofretailParks/set-up
Current StatusNot available
VAT on sales of goods andadditional12.24 % service taxon lease and rentals on im-mobile property used forcommercial purposes
There are no such initiative
Industry ExpectationTo grant industry status
Allow set off of service tax onlease rentals paid againstthe VAT liability on sale ofgoods, etc or create a newcomposition scheme
To allow 100% stamp dutyconcession and waiver ofregistration fee for purchase/ lease of land or building forretail. Relaxation of 100%FSI for designated retailprojects.
ImpactPositive
Positive
Positive
RationaleProvision of Industry status willensure retailers have greateraccess to funds, moretransparency with regard toinfrastructure, supply chain etc.Will also help retailers to dealwith issues of man power andprotests in a better way.
Would help in Standardizing taxstructure
Would help in penetration ofretail industry along withincrease in consumption andemployment opportunities inthe economy.
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 27
18th February 2008
REALTYCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
Real estate sector in India is touching new heights as the boom in property pricesare spreading all across .Realty sector has been one of the most attractive sectorsfor which has drawn huge investments from domestic and foreign investors.Thissector is estimated to touch US$ 50 billion by 2009-10 along with the estimatedplanned investment of US$ 475 billion over 2007-12 and an expected growth of 7-8% of GDP. We remain positive on this sector.we believe that this sector will continueto be in limelight and will attract huge investments in both residential andcommercial space mainly because of the robust demand and growing economy.
Key budget expectationsIssuesInterest rates
Payment ofdouble stampduty on sale ofapartments /offices.
Concess i onsfor massa f f o r d a b l ehousing
Extension of 80IB(10)
REIT dividend
REITInvestments
S E Zfor SME’s in IT
Current StatusInterest rates up by ~300-350bps in last 3 years
Stamp duty is payable twice,once during purchase of landand again on sale ofapartment/ office by oneowner to another
No Incentives
The built up area of the shopin a housing project can notexceed 5% of the aggregatebuilt up area or 2000 Sq. ftwhichever is less
Dividends from REITs arenow taxable by both theinstitution and the receiver
Not allowed to invest inhousing developmentactivities
Currently, only thosecompanies buying at least25 acres of land are allowedto set up operations in SEZswhich offer various taxincentives.
Industry ExpectationGovernment should takemeasure towards reducinghome loan interest rates &project finance interest rates
Introduction of Value addedstamp duty (VAS) whereinStamp duty once paid duringpruchase of land will beadjusted towards stampduty paid during conveyanceof apartments / offices
Should be considered asinfrastructure projects andfinance should be madeavailable easily, Exemptionon exise, VAT & Service taxon Building material,Income tax exemption for 10Years
The built up area of the shopin a housing project shouldbe revised as 5% or 2000sq. ft whichever is higher
Divivdends paid should betaxed only to the institutionnot to the receiver
Should be allowed to investin housing developmentactivities, Exemption fromcapital gains tax on sale ofassets
Small and mediumenterprises in the IT industrywant extension of STPI sopsand exemption from fringebenefit tax and service tax onoffice space and must bepermitted co-ownership ofspace at special economiczones.
ImpactPositive
Positive
Positive
Neutral
Positive
Positive
Positive
RationaleIt will make housing affordable
It will reduce the burden ofstamp duty on residentialproperty owners.
Currently India is facing acuteshortage of houses.Concnessions to masshousing would attract moreinvestment in this segment
This would enable builders toundertake construction of alarge project or townshipwhere the requirement of theproject for commercialpremises would be muchhigher.
Will ensure wide participationof investors
Among the various classes ofreal estate, the one which ismost needed in India today, ishousing. This provision willenable REITS to promote notonly commercial buildings butalso provide assistance topromote Housing.
This will encourage andenhance the growth of SME'sin IT which are expected toexpected to contributesignificantly to total softwareand services revenues by2010.
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 28
18th February 2008
TELECOM EQUIPMENTSCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Neutral
Neutral
The telecom equipment manufacturing in our country has not been taken muchseriously due to strong long standing business association of the TELCOs withthe multinationals. However with the positive influence of the semiconductor policyand the consistent R&D effort and improved service capability of the equipmentmanufacturers in the country the manufacturing base is witnessing a satisfactoryletup. However with the growing alignment of the manufacturing effort of theIndian manufacturers with the other manufacturers of the world, we believe anypositive/negative recommendation of the budget will have any significant impacton the industry. We keep our neutral view on the sector so far as the budgetproposals goes, but possess a positive biased neutral business outlook for thelong term.
Key budget expectations
IssuesInverted DutyStructure
Revision ofDEPB rates
Current StatusCertain Vital TelecomEquipments like TelecomHousing, Outdoor Enclosure,Power Controllers etc that arenot covered in the ITA-1Classification are subject tothe levy of custom duty.
A current DEPB rate does notcompensate the local taxes.
Industry ExpectationExtend the ITA-1 benefits tothese vital components andreduce the custom duties tozero. Remove the duty on thedomestic manufacturedfinished products andreimburse the CVD or ED ofthe inputs.
The DEPB rates should berevised upwards
ImpactNeutral
Positive
Rationale ITA-1 telecom equipments enjoyzero duty and these products arejust the accessories for theseproducts. So it is imperative toextend such benefits
Will effectively compensate theappreciating rupee and unsoundlocal tax structure in the country
Top PicksCompany Price EPS (Rs) PE (x) Recommendation
(Rs) FY09E FY10E FY09E FY10EGemini Comm 181.6 21.9 28.2 8.3 6.4 BUYSource:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 29
18th February 2008
TELECOM SERVICESCurrent view
EXPECTED BUDGET IMPACT
LONG TERM OUTLOOK
Positive
Positive
We remain quite optimistic on the growth of the telecom services sector. Thesector has provided its services at affordable rates despite being subjected totax at higher rates among the other industrial sectors. The industry is expectingfurther rationalization of the tax structure and procedures so as to make theservices more affordable to the general mass of the country. We believe thecurrent budget will streamline some of the tax procedures and more broaden theutilization of USO funds and maintain the emphasis of the sector in the BharatNirman Program.
Key budget expectationsIssuesUnified tax regime
H u g eaccumulation ofCenvat credit dueto limit of 20%utilization towardsInput and Inputservices in caseboth exemptedand taxableservices areprovided by theservice provider.
Service Tax onRenting ofI m m o v a b l eProperty for use inCommerce andBusiness
CENVAT credit forFuel
Levy and taxes oninternet /Broadband datacard
Current StatusNo such initiatives
As per Rule 6(3)(c) of theCenvat credit rules, theprovider of output servicesshall utilize only to anextent of an amount notexceeding 20% of theamount of service taxpayable on output service.
12.24 % service tax onlease and rentals onimmobile property used forcommercial purposes.
Not available
Internet / broadband DataCard imported, attractsBCD: Nil, CVD: 16%,Ed.Cess:2% and SpecialAddl. Duty: 4%. (Effectiveduty - 21.65%) Due to lackof clarity, operators havebeen classifying theinternet / broadband datacards in different customstariff codes
Industry ExpectationTo have a single levy onrevenue.
Should be exempted frommaintaining separateaccounts towards exemptedand taxable services andshould be allowed to availand utilize CENVAT credit tothe extent of the same usedtowards taxable outputservice.
Service tax on renting ofimmovable property for usein commerce and businessshould not be levied.
Telecom company shouldbe allowed input credit forconsumption of fuel used formaintenance and running ofnetworks
Wireless data modem/cardwith PCMCIA/USB/PCIExpress port be classifiedunder 8- digit custom tariffcode of 85 17 62 30 (Modem)and be exempted from CVD,Ed cess and SAD.
ImpactPositive
Positive
Positive
Positive
Positive
RationaleReduction of tax administrativeprocedures.
Reduction of accumulation ofCENVAT credit
Reduce the cost of service forthe end user and roll out ofaffordable services to all areasand especially to the semi-urban and rural areas.
Would lower the burden oflevies on the sector andprovide an incentive for greaterinvestment for expansion ofservice.
Would make the data cardcheaper and is thusencourage the usage ofinternet by the masses.
Source:Reliance Money Research
Pre Budget Expectations 2008-09 Please see the disclaimer on the last page 30
18th February 2008
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