| News Announcement |
Impact Analysis |
| Budget 2019 – Piyush Goyal does away with interim budget concept |
- Unlike in previous years, the budget did not stick to just seeking a vote on account for expenses
- Instead, the government went ahead and announced a full-fledged budget with large scale reforms
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| Divestment target for 2019-20 set at Rs.90,000 crore |
- This is higher than the target of Rs.80,000 crore set for the current fiscal 2018-19, largely through via CPSE mode
- The government is expected to fall short of divestment target in the current year by nearly Rs.20,000 crore
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| Fiscal deficit target for FY19 and FY20 set at 3.4% of GDP |
- This is a spillage of 10 bps for fiscal 2019 and a spillage of 30 bps for fiscal 2020
- Fiscal spillage would mean more borrowings and that pressures yields. Hence RBI may not be keen on rate cuts
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| Budget makes the first step towards Universal Basic Income |
- A total of 12 crore marginal farmers will get Rs.6000 per annum as direct benefit transfer
- This will be effective from December 2018 and will cost the government Rs.75,000 crore per year
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| Income up to Rs.5 lakhs made tax free for individuals |
- This has been structured as a rebate of Rs.12,500 which makes the income up to Rs.5 lakhs tax free. Slabs remain same.
- Considering all the exemptions, this would mean that total income up to Rs.10 lakhs can be brought to zero tax
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| Standard deduction limit raised to Rs.50,000 from Rs.40,000 |
- This is a flat deduction from total income which was introduced in the last budget for all including pensioners
- The standard deduction had come in lieu of transport and medical allowance and this will increase the advantage
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| Budget gives generous sops for second property investments |
- Second home owners now do not need to pay tax on notional rent on second home ownership
- Under Section 54, capital gains can be reinvested in 2 properties instead of just one
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| Realty companies also get a leg up from the budget 2019 |
- Realty companies will be allowed to carry inventory for 2 years instead of 1 year without paying tax
- The special benefits for low cost housing have also been continued for one more year till March 2020
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| Fitch to review India’s sovereign rating based on post-election budget |
- Fitch has admitted that interim budget was not a real worry but the real picture may emerge after the actual budget
- Fitch had, last year, refused to upgrade India’s sovereign rating even after Moody’s had done it
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| Experts now expect the MPC to hold rates in its Feb 07th monetary meet |
- There were hopes of a likely rate cut in the Feb policy after the Fed chose to maintain status quo with dovish outlook
- However, the higher fiscal deficit guidance in the budget may impel the RBI to wait for a few months longer for rate cuts
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| There was a sharp rise in benchmark bond yields after the Union Budget |
- The bond yields reacted to the sharply higher fiscal deficit guidance for the next two years
- Higher borrowings to fund the fiscal deficit had pushed up the bond yields, although impact may be limited
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| Three PSU banks have been removed from the PCA restrictions |
- Bank of India, Bank of Maharashtra and OBC are relieved on better operating matrix in the last two quarters
- This will mean that these banks will be free to lend and also look at branch expansion and mergers seriously
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| Core sector growth weakened to just 2.6% for the month of December-18 |
- The pressure on core sector came from crude oil, refinery products and fertilizers
- Core sector accounts for 42% of the IIP growth and hence is critical for the overall GDP growth
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| Central banks push up their gold procurement to highest in 2018 |
- Central banks procured 651 tonnes of gold in 2018, which is the highest level seen in the last 50 years
- This could be indicative of reducing confidence in the traditional hard currencies as a reserve currency
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| Government refuses to extend the ecommerce deadline beyond Feb 01st |
- These guidelines were specifically aimed at global ecommerce companies to protect local traders
- Global ecommerce players cannot hold equity in vendors and also cannot have exclusive sale arrangements
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| US Fed maintains status quo on Fed rates at 2.25% – 2.50% range |
- This was necessitated after the US economy showed pressure on growth in the light of the trade war with China
- The CME Fed Watch Tool has been indicating at a likely status quo till the end of the year and a possible rate cut in 2020
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| Oil prices harden on US sanctions on Venezuela |
- US imports nearly $11 billion worth of crude from Venezuela and this could pressure the Latin American economy further
- The US and EU wants Maduro to go while China and Russia are voting on his continuance as the state head of Venezuela
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| Chanda Kochhar indicted by Srikrishna Commission on breach of rules |
- The commission directly indicted Kochhar for conflict of interest and for failing to make disclosures internally
- The board has terminated her services retrospectively and will also disgorge all her benefits since 2009
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| Ruia family barred from bidding for Essar Assets |
- Essar promoters had put in a counter bid for Rs.54,000 crore after Arcelor Mittal bid of Rs.42,000 crore had been accepted
- This is in line with the judgement of the Ahmadabad bench of NCLT which barred promoters from bidding at NCLT
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| Fitch warns of emerging market debt rising sharply post 2008 |
- The sharp rise in debt happened when debt borrowing was very cheap in the aftermath of the crisis
- However, most of the debt is dollar denominated and a strong dollar could put huge pressure on their flows
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| India emerges as the world’s second largest steel producer |
- At 106 million tonnes of output in 2018, India has finally gone past Japan in terms of steel production
- China with annual steel production of 928 MT remains as the clear leader by a margin
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