Union Budget Analysis 2015-16

Analysis of
UNION
BUDGET
2015-16
Credit Analysis & Research Ltd.
TABLE OF CONTENTS
Foreword.............................................................................................. 2
Macro Economic Backdrop................................................................ 3-5
Union Budget 2015-16.................................................................... 6-13
Railway Budget 2015-16................................................................ 14-16
Industry Allocation Sectors

Airlines......................................................17
IT and ITES.................................................39
Airports.....................................................18
Media and Entertainment.........................40
Auto Components.....................................19
Mining and Minerals.................................41
Automobiles..............................................20
Non-ferrous Metals..............................42-43
Banking and Financial Services.............21-22
Oil and Gas...........................................44-45
Cement.................................................23-24
Paper.........................................................46
Coal........................................................... 25
Pharmaceuticals........................................47
Construction.........................................26-27
Pipes..........................................................48
Consumer Durables...................................28
Ports.......................................................... 49
Education...................................................29
Power (incl renewables)............................50
Engineering and Capital Goods............30-31
Real Estate.................................................51
Fertilizers..............................................32-33
Roads and highways..................................52
FMCG....................................................34-35
Steel......................................................53-54
Gems and Jewellery..................................36
Sugar..........................................................55
Hospitals and Healthcare..........................37
Telecom.....................................................56
Hotels........................................................38
Warehousing and Logistics........................57
Impact Symbols
Positive
Negative
Neutral
+
=
Foreword
The Union Budget is a very important policy document which sets the tone for all other policies that are to be
implemented during the course of the year. It also in a way indicates the stance that may be taken by the RBI when
formulating the monetary policy and hence is quite all encompassing. Being the first policy that is announced before
the start of the Fiscal New Year, it really gives one time to assimilate the content and prepare for the year ahead.
The Budget has taken a pro-growth stance and it does appear that the government is keen to expedite the growth
process by directly contributing to investment. The creditable part of this exercise is that it has been accomplished
by being pragmatic with the level of fiscal deficit which will be at 3.9% for the year even though the glide path to 3%
is still on the agenda. The proposals do reinforce the commitment to making things happen which means that there
will be focus on easing the processes that are involved in doing business in the country.
The Budget has to also garner additional resources and in this context has decided on making changes in the indirect
tax rates so as to collect this additional revenue. There are sops given for direct taxes which will lead to a net
loss of revenue which is finally compensated by indirect tax collections. In particular, the proposal to lower the
corporate tax rate by 5% over the next four years which should be interpreted with caution as there is also a move
to rationalize the exemptions that are presently provided. Further, we are once again looking for disinvestment to
be an integral part of the fund raising effort and it remains to be seen whether it would materialize. If it does, we
can expect a boost to be given to the markets.
The analysis which has been done by our team looks at both the macro implications of the proposals as well as the
impact on various sectors. We do hope to hence provide a comprehensive view of the Budget which the reader
should find useful. This effort of CARE has been part of our tradition to provide this analysis as soon as possible after
the Budget is introduced and I would personally like to commend the team for doing an excellent job as always.
D.R. Dogra
MD & CEO
Macro-Economic Backdrop
The Economic Survey for the year 2014-15
The Survey based on developments of FY15, indicate an improvement in the macroeconomic fundamentals which is reflected
both in temporal and cross-country comparison.
Macroeconomic Performance
As indicated above, the fundamentals have shown a significant improvement. The highlights are as follows;
Acceleration in growth
Growth in FY15 settled at 7.4% , mostly driven by the industry and services sector
Declining price levels

WPI has registered moderation at 3.4%, while CPI has moderated to 6.2% up to December 2014.
Structural shifts in inflation are due to lower oil prices, deceleration in agriculture prices & wages and improved household
inflation expectations
Stagnating trade outcome

The trading environment is becoming more challenging as the buoyancy of Indian exports has declined with respect to
world growth, and as the negotiation of mega- regional trading arrangements threatens to exclude India
Improved Balance of Payments

Current account deficit (CAD) declined sharply from a record high of 4.7% of GDP in FY13 to 1.7% of GDP in FY14, which
increased marginally to 1.9% in H1 FY15
Foreign exchange reserves increase to $ 328.7 billion at end January 2015
Fiscal deficit is expected to be contained at 4.1% as mentioned in the budget estimates.
Macro-economic Indicators (%)

%
FY12
FY13
FY14
FY15
GDP growth
n.a
5.1
6.9
7.4
Inflation (WPI)
8.9
7.4
6.0
3.4*
Inflation (CPI)
8.4
10.4
9.7
6.2*
Savings rate
33.9
31.8
30.6
n.a
Investment rate
38.2
36.6
32.3
n.a
CAD (% of GDP)
4.2
4.7
1.7
1.9^
294.4
292
304.2
328.7#
Export growth
Forex Reserves ($ bn)
21.8
-1.8
4.7
4.0*
Import growth
32.3
0.3
-8.3
3.6*
Source: Economic Survey 2014-15, *up to Dec14, ^data for H1, #up to Jan15
Challenges and Proposed Strategy

Fiscal Framework
Need to adhere to the medium term target of 3%
Provide for the required fiscal space to insure against future shocks
Move towards eliminating of revenue deficit and ensure borrowing used for only capital formation
Introduction of GST and expenditure control to help in meeting these targets
Expenditure needs to be shifted from consumption towards investments
Investment Challenge
Stalled projects stand at 7% of GDP, mostly accounted for by the private sector, specially manufacturing and infrastructure
owing to changed market conditions and impeded regulatory clearances
Need for public sector investment to rise up capital formation and recreate an environment to crowd-in the private sector
Banking Challenge
Banking balance sheet suffering from double financial repression
On the liabilities side, high inflation lowered real rates of return on deposits
On the asset side, SLR and priority sector lending (PSL) requirements depressed returns to bank assets.
The survey proposes the 4Ds of policy going forward- deregulate, differentiate, diversify and disinter
Putting Public Investment on Track the Rail Route to Higher Growth

Over the years the railways has been characterised by underinvestment resulting in lack of capacity addition and network
congestion, poor services and consequent financial weakness resulting in below potential contribution to economic growth
In the long run, efforts need to be taken to make railways commercially viable and railway reforms such as adoption of
commercial practices, tariff rationalization and technology overhaul need to be adopted
Skill India to Complement Make in India

Make in India should be targeted at sectors that are capable of facilitating structural transformation in an emerging
economy, which includes characteristics such as;
Have high level of productivity
Show convergence to the technology frontier over time
Draw in resources from rest of the economy to spread the fruits of growth
Be aligned with the economys comparative advantage
Be tradable
Need to bolster the Make in India initiative by complementing it with the Skilling India initiative. This would enable a larger
section of the population to benefit from the structural transformation that such sectors will facilitate
A National Market for Agricultural Commodities

Markets in agricultural products are regulated under the APMC Act enacted by the State governments
APMCs levy multiple fees of substantial magnitude, that are non transparent and hence a source of political power
There is a need to introduce integrated single licensing system (based on the Karnataka model) which will remove the
barriers that militate against the creation of choice for farmers and against the creation of marketing infrastructure by the
private sector
4
The 14th Finance Commission

Unprecedented increase in tax devolution would confer more fiscal autonomy on the states, enhanced by the FFC induced
imperative of having to reduce the scale of other central transfers to the state
All states gain from the extra resources, although some variation between states would exist
Outlook for FY16

GDP growth likely to be in the range of 8.1% - 8.5%
o Growth to receive boost from the cumulative impact of reforms, lower oil prices, likely monetary policy easing facilitated
by lower inflation and forecast of normal monsoon
Inflation likely to remain in the range of 5% - 5.5%
CAD to be limited to 1% of GDP
Union Budget 2015-16

The first full year budget of the new government has attempted to carry forward the positive sentiments surrounding the
Indian economy by providing for a roadmap for the future. The broad measures/allocations announced, including the various
social and welfare allocations, will provide for benefits in the long term as opposed to any significant changes in the immediate
timeframe.
While recognising the various challenges faced, the budget has rightly focussed on 4 key areas agriculture, infrastructure,
manufacture and fiscal discipline, to realise it vision and trajectory for the countrys economy. The thrust laid on the
infrastructure sector, the measures announced to stimulate the Make in India programme and for the facilitation of Ease of
Doing Business sets the tone for the revival of the country.
Key Highlights
Housing for 2 crore houses in Urban areas and 4 crore houses in Rural areas
Basic facility of 24x7 power, clean drinking water, a toilet and road connectivity and providing medical services in each
village and city
Electrification of the remaining 20,000 villages including off-grid Solar Power- by 2020 and connecting un-connected
habitation (1,78,000)
Government to work towards creating a functional social security system for all Indians, specially the poor and the underprivileged
Government committed to the on-going schemes for welfare of SCs, STs and Women
To make India, the manufacturing hub of the World through Skill India and the Make in India Programmes
Development of Eastern and North Eastern regions on par with the rest of the country
Fiscal deficit target of 3% to be achieved in 3 years rather than 2 years (3.9% in FY16, 3.5% in FY17 and 3% in FY18)
Disinvestment - of loss making units as well as some strategic disinvestment
Rationalization of subsidies to cut leakages. Direct Transfer of Benefits to be extended to 10.3 crore beneficiaries (from 1
crore)
Agriculture - (i) steps take to address agricultural production and soil & water, (ii) Allocation of Rs.5,300 crore to support
micro-irrigation, watershed development etc (iii) Rs. 8.5 lakh crore of target agricultural credit during FY16 (iv) Allocation
of Rs.25,000 crore in FY16 to the corpus of Rural Infrastructure Development Fund (RIDF) set up in NABARD, Rs.15,000
crore for Long Term Rural Credit Fund, Rs.45,000 crore for Short Term Co-operative Rural Credit Refinance Fund and Rs.
15,000 crore for Short Term RRB Refinance Fund (iv) Government to work for the creation of a Unified National Agriculture
Market
Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crores, and credit guarantee
corpus of Rs.3,000 crores to be created. Priority given to SC/ST enterprises. The bank will be responsible for refinancing all
Micro-finance Institutions which are in the business of lending to small entities
Comprehensive Bankruptcy Code of global standards to be brought in FY16 towards ease of doing business
NBFCs registered with RBI and having asset size of Rs.500 crore and above may be considered for notifications as Financial
Institution in terms of the SARFAESI Act, 2002
Infrastructure (i) Sharp increase in outlays of roads and railways, (ii) National Investment and Infrastructure Fund (NIIF),
to be established with an annual flow of Rs.20,000 crores, (iii) Tax free infrastructure bonds for the projects in the rail,
road and irrigation sectors, (iv) Ports in public sector to be encouraged to become companies under the Companies Act to
attract investment and leverage the huge land resources, (v) 5 new Ultra Mega Power Projects, each of 4000 MW, in the
Plug-and-Play mode, (vi) An expert committee to examine the possibility and prepare a draft legislation where the need
for multiple prior permission can be replaced by a pre-existing regulatory mechanism
Financial Markets (i) Public Debt Management Agency (PDMA) bringing both external and domestic borrowings together
to be set up, (ii) Forward Markets commission to be merged with SEBI, (iii) Section-6 of FEMA to be amended through
Finance Bill to provide control on capital Flows, (iv) Enabling legislation, amending the Government Securities Act and the
RBI Act included in the Finance Bill, 2015
Foreign Investment (i) Permit foreign investment in Alternate Investment Funds, (ii) Distinction between foreign portfolio
investments and foreign direct investments to be done away with
Make in India (i) Tax pass through to be allowed to both category I and category II alternative investment funds,
(ii) Revival of investment and promotion of domestic manufacturing, (iii) Rationalisation of capital gains regime for the
sponsors exiting at the time of listing of the units of REITs and InvITs, (iv) General Anti Avoidance Rule (GAAR) to be deferred
by two years, (v) Basic Custom duty on certain inputs, raw materials, inter mediates and components in 22 items, reduced
to minimise the impact of duty inversion, (vi) All goods, except populated printed circuit boards for use in manufacture of
ITA bound items, exempted from SAD (vii) Proposal to reduce corporate tax from 30% to 25% over the next four years
Ease of Doing Business (i) Simplification of tax procedures, (ii) Central excise/Service tax assesses to be allowed to use
digitally signed invoices and maintain record electronically, (iii) Penalty provision in indirect taxes are being rationalised to
encourage compliance and early dispute resolution, (iv) Wealth-tax replaced with additional surcharge of 2 per cent on
super rich with a taxable income of over Rs.1 crore annually, (v) Domestic transfer pricing threshold limit increased from
Rs.5 crore to Rs.20 crore, (vi) Time limit for taking CENVAT credit on inputs and input services increased from 6 months to
1 year, (vii) Service-tax plus education cesses increased from 12.36% to 14% to facilitate transition to GST
Black Money Bill for comprehensive new law to deal with black money parked abroad to be introduced in the current
session and stringent measures announced to deal with black money, which includes 10 years rigorous imprisonment,
penalty rate of 300% etc
Budget Financial
Summary of Accounts
Rs. Cr.
Revenue Receipts
FY11
788,471
FY12
751,437
FY13
879,232
FY14 (A)
1,189,763
FY15 (RE)
1,126,294
FY16 (BE)
1,141,575
Tax revenue(net to center)
569,869
629,765
741,877
977,258
908,463
919,842
Non tax revenue
218,602
121,672
137,354
212,505
217,831
221,733
Capital Receipts
408,857
568,918
531,140
605,129
554,864
635,902
Recovery of Loans
12,420
18,850
15,060
12,497
10,886
10,753
Disinvestment of Equity in PSE's
22,846
18,088
25,890
29,368
31,350
69,500
325,414
436,211
467,356
453,550
446,922
456,405
23,556
12,448
7,201
7,292
9,705
11,173
Internal Debt (Market Borrowings)

External Borrowings (Net)
Total Receipts
1,197,328
1,304,365
1,410,372
1,559,447
1,681,158
1,777,477
Revenue Expenditure
1,040,723
1,145,785
1,243,509
1,371,772
1,488,780
1,536,047
Interest Payments
234,022
273,150
313,170
374,254
411,354
456,145
Subsidies
173,420
217,941
257,079
254,632
266,692
243,811
57,405
61,166
69,479
74,896
81,705
88,521
Pensions
Capital Expenditure
Total Expenditure
Revenue Deficit
156,605
158,580
166,858
187,675
192,378
241,430
1,197,328
1,304,365
1,410,367
1,559,447
1,681,158
1,777,477
252,252
394,348
365,896
357,048
362,486
394,472
Fiscal Deficit
373,591
515,990
490,597
502,858
512,628
555,649
Primary Deficit
139,569
242,840
177,428
128,604
101,274
99,504
Receipts
One of the challenges to the government finances emerges from the slowdown in the growth rate of the total receipts. Over
the last three years, the growth in total receipts of the Centre has moderated from 10.6% in FY14(A) to 7.8% in FY15(RE). The
same is expected to reduce further to 5.7% in FY16 (BE). There has also been a moderate shift in the composition of the overall
Receipts Budget over the last four years. While the share of revenue receipts rose from 58% in FY12 to 64% in FY15 (RE), that
of capital receipts has declined from 44% in FY12 to 35% in FY15 (RE).
In FY16(BE), there appears to be particular focus on disinvestments as a source of generating revenue as the Government is
budgeted to par take Rs. 28,500 Cr. of strategic disinvestment in addition to a target of Rs. 41,000 Cr. under disinvestment
receipts.
Gross Tax Revenue/ GDP

The ratio of Gross Tax Revenue to GDP has been stagnant at 10% over the last five years. This in turn points towards the
sluggishness in the economy and lack of growth in tax mobilisation. The growth in gross tax revenue has also been constant at
9.9% in FY15 compared to the growth levels in FY14.
Rs. Cr.
Gross Tax Revenue
Gross Domestic Product
Gross Tax Revenue (% of GDP)
FY12
FY13
FY14(A)
FY15(RE)
FY16(BE)
889,176
1,036,234
1,138,734
1,251,391
1,449,491
8,832,012
9,988,540
11,345,056
12,653,762
14,108,945
10
10
10
10
10
Tax Proposals
The Tax Reforms in the FY16 Union Budget were developed on the five main pillars of effectively circumnavigating the black
money problem, creation of employment, minimum government and maximum governance, Swachh Bharat Abhiyan and
lastly providing benefits to the individual middle class tax payer.
o As regards the first pillar on black money, the Government is to introduce a bill in the Parliament which broadly aims at
discouraging the outflow of black money from the country and also curbing the same domestically through the Benami
Transaction Bill. This bill would enable confiscation of benami property along with some other measures which will serve
as deterrents to the holding of black money in the economy.
o There was a significant thrust on job creation which is imperative to support the Make in India campaign. The introduction
of Tax Pass Through in Alternative Investment Funds is likely to foster investments and give the Small and Medium Scaled
enterprises in particular a boost.
o In order to promote the Ease of Doing Business the motivation is towards simplifying the tax regime. As a step in this
direction, the government has abolished the Wealth Tax and instead introduced a surcharge of 2% for individuals with
income of over Rs. 1 Cr. This move is expected to add Rs. 9,000 Cr. to the governments tax revenues.
o The system is also preparing towards the Goods and Services Tax (GST) which will be applicable from FY17 onwards.
In order to bring about a smooth transition, there is proposed to be an increase in the present rate of service tax plus
education cesses from 12.3% to a consolidated rate of 14%.
o Under the pillar of the Swachh Bharat Abhiyan, the proposition is to create an enabling provision to levy a Swachh
Bharat Cess at a rate of 2% or less on all or certain services. Also, the ongoing concessions on customs and duty for the
manufacturing parts of electrical vehicles are extended for another year.
o The fifth pillar focuses on the benefits extended to the middle class tax payers that includes deductions in respect of
insurance premium, additional deductions for very senior citizens & differently abled individuals, increase in limit on
deduction towards contribution to pension funds to name a few
8
o Basic rate of Corporate Tax is to be lowered from 30% to 25% in a phased manner over 4 years. In order to limit the loss of
revenue on this front, the exemptions are to be rationalized and reduced.
o The government also announced certain exemptions to Service Tax, particularly for those contributing towards the Swachh
Bharat Abhiyan viz electrical vehicles. Likewise, senior citizens are also to be exempt from service tax under the Varishta
BimaYojana.
Major Non-Tax Revenue

Overall, the non-tax revenues are projected to slow down considerably in FY16 (BE) at a growth rate of 1.8% from the 9.5%
growth recorded in FY15(RE). There is a moderation expected across all the major heads of non-tax revenue barring Dividends
and Profits. While there was a slowdown in Dividends and Profits in FY15 (RE) to Rs. 88,781 due to a lower contribution by
PSUs, the same is expected to reverse on the back of strong dividends from RBI in FY16(BE) to Rs. 100,651 Cr.
Rs. Cr.
FY11
FY12
FY13
FY14(A)
FY15(RE)
FY16(BE)
Interest Receipts
19,734
20,252
20,761
21,868
22,166
23,599
Dividends and Profits
47,992
50,608
53,761
90,435
88,781
100,651
Dividends from PSEs and other Investments
24,060
28,490
13,354
25,921
28,423
36,174
Dividends/Surplus from RBI, Nationalized Banks and

financial Institutions
23,932
22,118
40,406
64,513
60,358
64,477
Spectrum Sale
The Government in FY12 and FY13 could not meet the target to be earned through Spectrum sale. The actual figures stood
markedly lower than the budgeted estimates. However, from FY14 onwards, the actual amount has tended to more or less
meet the budgeted figure. While in FY14, the Centre earned the budgeted Rs. 40,847 Cr. through the spectrum sale, it missed
the target at Rs. 43,162 Cr. as per the revised estimates for FY15.
The Government has projected a total of Rs.42,866 Cr. to be garnered through the Spectrum sale in FY16
Rs. Cr.
Budgeted
Actual / Revised
FY12
29,648
17,401
FY13
58,217
18,902
FY14
40,847
40,847
FY15
45,471
43,162
FY16
42,866
Disinvestment
There is a major disinvestment drive in the piping in the upcoming fiscal as the Government has targeted a total of Rs 69,500 Cr.
of which Rs. 28,500 is to be collected through strategic disinvestments. However, in the past years it is seen that the Centre has
been unable to meet the budgeted disinvestment target. In FY15, the revised figures indicate that total disinvestments stood
49% lower than what was projected at the start of the year. The case was similar in FY14 as well with the actual figure being Rs.
29,367 Cr. as opposed to the budgeted amount of Rs. 55,814 Cr.
Hence, it remains to be seen if the optimistic target is realized in FY16.
Rs. Cr.
FY13
FY14
FY15
FY16
BE
BE
BE
RE
BE
Total Disinvestment
30,000
25,890
55,814
29,367
63,425
31,350
69,500
Disinvestment Receipts
30,000
25,890
40,000
16,027
43,425
26,353
41,000
14,000
3,000
15,000
28,500
Disinvestment of Government stake

in non-government Companies
Strategic Disinvestment
Others
1,814
1,814
5,000
5,000
Gross Borrowing Programme

The Gross Borrowing Programme for FY16 is virtually unchanged from that in FY15 as the Government projects to borrow Rs. 6
lkh Cr. with Rs. 1.43 lkh Cr being repayments thereby taking the net borrowing programme to Rs. 4.56 lkh cr.
Hence, liquidity in the system is expected to remain smooth without any untoward pressure in the upcoming fiscal year, much
like in FY15.
Rs. Cr.
Gross Borrowing Programme
Repayments
Internal Debt Market borrowing (NET)
FY12
FY13
FY14 (A)
FY15 (RE)
FY16(BE)
509,796
558,000
564,147
592,000
600,000
73,585
90,644
110,597
145,078
143,595
436,211
467,356
468,668
453,205
456,405
Expenditure
Total Budget expenditure is projected to increase by 5.8% in FY16 compared to that in FY15 (RE). Total plan expenditure
allocation has declined by 0.6% for FY16 (BE) over FY15 (RE), with non-plan expenditure showing an increase of 8.2%. In terms
of percentage share in total expenditure, non-plan expenditure has been estimated to increase to 74% in FY16 (BE) from 72%
in FY15 (RE). Consequently the share of plan expenditure is estimated to decline to 26% in FY16 (BE) from 28% in FY15 (RE).
Revenue expenditure accounts for most of the total expenditure, with an average share of 87.8% since FY13; while capital
expenditure accounts for around 12%. The revenue expenditure increased by 10.3% on FY14 but witnessed a decline in growth
rate to 8.5% in FY15 and is expected to increase by only 3.2% in FY16 (BE). Capital expenditure on the other hand, increased by
12.5% and 2.5% in FY14 and FY15 respectively; however, in FY16 the capital expenditure is expected to increase significantly by
25.5%, reflecting the governments focus on asset creation
Rs. Cr.
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
Non plan Expenditure
891,990
996,747
1,106,120
1,213,224
1,312,200
Interest payments
273,150
313,170
374,254
411,354
456,145
Subsidies
217,941
257,079
254,632
266,692
243,811
Pensions
Plan Expenditure
Revenue
Capital
Total Expenditure
Revenue
Capital
611,660
69,479
74,896
81,705
88,521
412,375
413,625
453,327
467,934
465,277
333,736
329,208
352,732
366,883
330,020
78,639
84,417
100,595
101,051
135,257
1,304,365
1,410,372
1,559,447
1681,158
1,777,477
1,145785
1,243,514
1,371,772
1,488,780
1,536,047
158,580
166,858
187,675
192,378
241,430
The Government has taken various initiatives on the expenditure front, which have been mentioned below;
10
Agriculture Initiatives
Allocation of Rs 5,300 crore to support micro-irrigation, watershed development and the Pradhan Mantri Krishi Sinchai
Yojana
Rs 25,000 crore has been allocated towards Rural Infrastructure Development Fund (RIDF) set up in NABARD, Rs 15,000
crore for Long Term Rural Credit Fund; Rs 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund; and
Rs15,000 crore for Short Term RRB Refinance Fund.
Rs 8.5 lakh crore of agriculture credit to be be disbursed by Banks
Infrastructure Spending
Increased outlays on both the roads and the gross budgetary support to the railways, by Rs 14,031 crore, and Rs10,050
crore respectively.
Investment in infrastructure to increase by Rs 70,000 crore in FY16, over FY15 from the Centres Funds and resources of
CPSEs
Establish a National Investment and Infrastructure Fund (NIIF), to ensure an annual flow of Rs 20,000 crore to it.
The Government also proposes to set up 5 new Ultra Mega Power Projects, each of 4000 MWs in the plug-and-play mode.
All clearances and linkages will be in place before the project is awarded by a transparent auction system
Interest Payments
Rs. Cr.
Interest Payments
Effective Interest Rate (%)
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
273,150
313,170
374,254
411,354
456,145
6.5
6.5
7.0
6.9
6.9
Interest payments account for around 23% of the total expenditure

Interest payments increased by 19.5% to Rs 374,254 crore in FY14. The increase however moderated to 9.9% in FY15 (RE).
In FY16 (BE) the interest payments are expected to increase by 10.9% to Rs 456,145 crore
The Effective interest rate defined as outstanding liabilities to interest payments appears to remain constant in FY16 at
6.9%
Subsidies
Rs. Cr.
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
Subsidies
217,941
257,079
254,632
266,692
243,811
Major Subsidies
211,319
247,493
244,717
253,913
227,388
Food Subsidy
72,822
85,000
92,000
122,676
124,419
Fertilizer Subsidy
70,013
65,613
67,339
70,967
72,969
Petroleum Subsidy
68,484
96,880
85,378
60,270
30,000
Interest Subsidies
5,049
7,270
8,137
11,147
14,903
Other Subsidies
1,573
2,316
1,778
1,632
1,520
Subsidy bill for FY15 RE stood at 2.1% of GDP and is expected to decline to 1.7% of GDP in FY16(BE)
The major contributors to this reduced levels in subsidies has been the decline in petroleum subsidy by 50.2%. Fertilizer
subsidy and food subsidy are expected to increase marginally by 2.8% and 1.4% respectively
11
Defence Expenditure
Rs. Cr.
Defence Expenditure
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
170,913
181,776
203,499
222,370
246,727
Defence Expenditure accounts for around 13% of the expenditure since FY12
Defence Expenditure increased by 9.3% in FY15 (RE) to Rs 222,370 crore and is expected to increase by 11.0% to Rs
246,727 crore in FY16 (BE)
With respect to defence services, the country has been dependent majorly on imports. The Government has already
permitted FDI in defence to encourage manufacturing of defence equipments. The government thus plans to pursue Make
in India policy to achieve greater self-sufficiency in the area of defence equipment, including aircraft
Social Programmes
Rs. Cr.
MGNREGA
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
29,213
30,274
32,993
32,992
34,699
NREGA in the past has not been too successful in producing meaningful public assets. The government aims at redesigning
the programme by providing employment for more productive, asset creation which has linkages to agriculture& allied
activities. The allocation towards this programme has been increased to Rs 34,699 crore. The government aims at improving
the quality and effectiveness of activities under MGNREGA
Other social programmes include, soon to be launched Pradhan Mantri Suraksha BimaYojna which will cover accidental
death risk of Rs 2 lakh for a premium of just Rs 12 per year
Pradhan Mantri Jeevan Jyoti BimaYojana which covers both natural and accidental death risk of Rs 2 lakhs. The premium
will be Rs 330 per year, or less than one rupee per day, for the age group 18-50.
An integrated education and livelihood scheme called NaiManzil to enable Minority Youth who do not have a formal
school-leaving certificate to obtain one and find better employment.
Further, to show-case civilization and culture of the Parsis, the Government will support an exhibition, The Everlasting
Flame. The allocation for the Ministry of Minority Affairs is estimated at Rs 3,738 crore
All India Institutes of Medical Sciences to be set up in J&K, Punjab, Tamil Nadu, Himachal Pradesh and Assam.
IIT to be set up in Karnataka and also Indian School of Mines, Dhanbad to be upgraded to a full-fledged IIT
Setting up of a Post Graduate Institute of Horticulture Research and Education in Amritsar.
IIMs will be setup in J&K and Andhra Pradesh
Three new National Institutes of Pharmaceutical Education and Research in Maharashtra, Rajasthan, and Chattisgarh and
an Institutes of Science and Education Research in Nagaland and Odisha
In terms of expenditure, there has been a clear focus on creating capital assets. While the budget has made allocations towards
social/ welfare programmes, the capital expenditure has been budgeted to grow by 25.5%, a sharp increase from the 2.5%
growth of the previous year. The Revenue expenditure on the other hand is budgeted to grow 3.2% (8.5% last year).
The various outlays announced for the agriculture sector would aid in boosting production and also develop logistical support
required by the sector. The government has emphasized the need to accelerate infrastructure development, with a need to
revive public investment. The increased outlays towards roads and railways would encourage the transportation and overall
logistics segment in India. Also, establishment of the National Investment and Infrastructure Fund and proposal for tax free
bonds would provide for the necessary fillip to financing of these projects
12
Debt
Rs. Cr.
Public Debt
Internal Debt
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
3,400,710
3,941,855
4,425,348
4,970,186
5,530,676
3,230,622
3,764,566
4,240,767
4,775,900
5,298,217
External Debt
170,088
177,289
184,581
194,286
205,460
Other Liabilities
1,116,542
1,128,747
1,244,833
1,308,668
1,391,315
Total Debt
4,517,252
5,070,601
5,670,181
6,278,854
6,894,991
45.7
45.9
46.0
46.8
46.1
Debt/ GDP (%)
Public debt for FY16 is estimated to increase by 11.3% to Rs.5, 530,676 crore lower than 12.3% growth in FY15 (RE). Of the
total public debt, the internal debt accounts for more than 95% at Rs.5,298,217 crore. The share of external debt has been
moderating gradually from 5% in FY12 to 3.9% in FY15 (RE). In FY16, the outstanding external debt stock is estimated to grow
by 5.8% to Rs.205,460 crore. The other liabilities are estimated to increase by 6.3% to Rs.1,391,315 crore in FY16(BE). The debt
to GDP ratio has been increasing gradually over the past few years. However, the same is targeted at a lower rate of 46.1% in
FY16 (RE) with an expectation of improving Gross domestic product.
Bond Markets
Overall the budget can be taken as being positive for the domestic corporate bond markets. The various measures announced
can be viewed as encouraging steps taken towards the strengthening and development of this segment of the countrys
financial sector. The tax free bonds for the rail, road and irrigation sectors aimed at providing for alternate sources of funding
for infrastructure would not only bring more papers into the bond markets it would also prompt private players to seek funding
from the bond markets. The governments move towards liberalizing capital raising would further aid liquidity and participation
in the segment.
The creation of Public Debt Management Agency (PDMA) bringing both external and domestic borrowings together and the
proposal of putting equity at par with debt would further help the markets grow. The impact/effectiveness of these measures
would however need to be studied as and when they are implemented.
13
Railway Budget 2015-16

The Railway Budget for FY16 outlines a vision of a new dimension which will transform the Indian railway system over a period of
5 years with emphasis on creation of robust railway infrastructure and improved customer services. The proposals lay emphasis
on safety, decongestion & capacity augmentation, electrification, modernization, technology up gradation and significantly
improving operating ratios.
The Railway Minister has laid down in its agenda a set of four goals which include- 1) improving customer service, 2) safety, 3)
expansion of rail capacity and 4) making Indian Rail financially self-sustainable.
To achieve the same it proposes five key drivers with focus on eleven thrust areas. The five drivers include adopting a mediumterm perspective, building partnerships, leveraging additional resources, revamping management practices, systems, and
process and retooling of human resources and setting standards for government and transparency.
Highlights:
No hike in passenger fares
The freight structure for the base class-100 has been proposed to be increased by 10%. The rates will be effective from 1st
April 2015
Plan Outlay Proposed at Rs.1, 00,011 crore, increased by 52%. The sources include- Budgetary resources Rs.40,000 crore,
Railway Share of diesel cess- Rs.1,645 crore, Market Borrowings- Rs.17,655 crore, Internal Source- Rs.17,793, PPP modeRs.5,781 crore and from various institutions- Rs.17,136.
Allocation for passenger amenities up by 67%
Proposed to increase track length by 20% from 1,14,000 km to 1,38,000 km:
Grow annual freight carrying capacity from 1 billion to 1.5 billion tonnes.
Hot buttons, coin vending machines for railway tickets within 5 minutes, e-catering to select meals from an array of choices
200 more stations to come under Adarsh Station scheme; Wi-Fi to be provided at B category stations
24X7 helplines for attending passenger problems and security related complaints
For the safety of women passengers surveillance cameras in suburban coaches
The speed of nine railway corridors will be increased to 160 and 200 kmph
77 new projects covering 9,400 km of doubling/tripling/quadrupling works proposed
A new department for keeping stations and trains clean under Swachh Rail Swachh Bharat Abhiyan to be set up
Commissioning 800 km of gauge conversion targeted in current fiscal.
14
Financial Performance
Rs. Cr.
FY12
FY13
FY14 (A)
FY15 (RE)
FY16 (BE)
Freight Earnings
69,548
85,263
93,906
106,927
121,423
Passenger Earnings
28,246
31,323
36,532
43,003
50,175
Other Coaching
2,717
3,054
3679
4028
4,612
Sundry Earnings
3,643
4,261
5,721
5,241
7,318
Suspense
Gross Traffic Receipts
% growth
Miscellaneous Receipts
(43)
(168)
(279)
50
50
104,111
123,733
139,559
159,249
183,578
10.1
18.8
12.8
14.1
15.3
2,135
2,448
3,656
4,202
4,979
106,256
126,200
143,227
163,465
188,572
Ordinary Working Expenses
74,537
84,012
97,571
108,970
119,410
Pension outgo
17,610
20,710
24,850
29,225
34,900
6,520
6,850
7,900
7,775
7,900
98,667
111,572
130,321
145,970
162,210
Total Receipts
Appropriation to DRF
Total working expenses
Other Expenses
822
1,019
1,144
1,028
1270.25
99,489
112,591
131,465
146,998
163,480
Dividend payable to General Revenues
5,630
5,323
8,009
9,174
10,811
Surplus balance
1,137
8,286
3,754
7,294
14,281
95.0
90.2
93.6
91.8
88.5
Total Expenditure
Operating Ratio %
Gross traffic receipts- The Rail Minister has targeted 15.3% growth in the gross traffic receipts to achieve Rs 1,83,578
crore for FY16 which would be mostly driven by strong 16.6% growth in passenger fare earnings to Rs 50,175 crore. Given
that there has been no change in fare rates, it may be expected that the number of passenger kms would increase during
the year. The freight earnings are also targeted to improve 13.56% to Rs 1,21,423 crore in FY16 which would be due to a
combination of higher freight rates for selected goods as well as increase in overall volumes.
Expenses- Ordinary working expenses are to increase at a lower rate of 9.2% relative to gross receipts which has helped to
increase the net surplus. Lower crude oil prices have led to moderation in fuel costs for the Railways, and the assumption
is that this trend will persist in FY16 too. The Budget has proposed working expenses of Rs 1,62,210 crore, while the
appropriation to the Pension Fund of Railway Employees and Depreciation Reserve Fund stand at Rs 34,900 crore and Rs
7,900 crore for FY16. After dividend payable at Rs 10,811 crore for FY16, the surplus is expected to be at Rs 14,281 crore
up from Rs 7,294 crore for FY15.
Operating ratio during the FY16 is expected to improve considerably and come down to 88.5% compared with 91.8% in
FY15. If this target is achieved, it would be the lowest ratio in the last 9 years.
Implications on economy and Industry

Efficiency: The measures to improve the operational efficiency to achieve the target of 88.5% operating ratio of the rail
system will leave a larger surplus amount with railways which can be used for expansion purposes.
Capital formation: The share of railway investment (as per the capital outlay of Rs.65,796 crore) in Gross fixed capital
formation (GCFC) was 1.8% in FY15. Under ceteris paribus conditions, the growth rate of GFCF could increase by 0.1%-0.2%
(7.4% to 7.5%) in FY16 based on the increase of 52% in capex envisaged in FY16. The share of railways in GFCF will increase
under these ceteris paribus conditions from 1.8% to 2.5-2.6%.
Industrial growth: The expansion by way of additional lines in the railway system will have an indirect and positive impact
on growth across various sectors such as cement, steel, Electrical equipment, Railway wagons, cables, etc. This in turn shall
positively contribute to the economic growth of the country.
15
Services sector: The use of technology by providing easy access to customers through mobile phones and other e-platforms
will provide a boost to the telecommunication and IT industries. Also provision of food and other passenger amenities is
likely to boost the overall service industry in particular the tourism industry.
Inflation: The upward revision in freight rates across various commodities is likely to have inflationary impact of about 0.40.5% in WPI inflation (assuming all other factors remain unchanged) when both the direct and indirect impact is taken into
account.
Corporate debt market: The partial funding of railways by of market borrowings of Rs.17,655 crore compared with Rs
12,046 cr in FY15, which would lead to a an increase in activity in the corporate bond market.
16
Airlines
Industry Snapshot:
As per DGCA, in November 2014, Indigo had 33.5% market share in the domestic market (in terms of passengers carried)
followed by Jet Airways which commanded 21.6% market share, while Air Indias and Spice Jets market share stood at
18.4% and 18.2%, respectively.
Domestic capacity is expected to expand by around 8-10%, somewhat higher than the projected growth in traffic. Most of
this is expected to be driven by start-up airlines such as AirAsia India and Tata-SIA.
Proposal and Impact

Budget proposals
Impact on the Industry
Key schemes announced

1) Visas on arrival to be increased from 43 to 150 Expected to lead to increased passenger flow into the country.
countries in stages.
Impact on Companies
Company
Jet Airways
Spice Jet
Impact
+
+
Comments
Expected to lead to increased passenger flow in the country.
17
Airports
Industry Snapshot:
As per the Twelfth Five-Year Plan (2012-2017), the total investment expected in the Airport sector is Rs.87,714 crore, which
is expected to augment airport infrastructure across the country.
The passenger traffic saw an unprecedented growth during Eleventh Five-Year Plan, it grew from 43 million in FY03 to 159
million in FY13, registering a CAGR of around 14%. The cargo traffic grew from 1 million tonnes in FY07 to 2.2 million tonnes
in FY13, registering a CAGR of around 8%. The total passenger traffic in the country grew by around 11% during FY15 (AprilOctober) on Y-o-Y basis, while cargo traffic expanded by around 12% during the same time.
Proposal and Impact

Budget proposals

Tourist arrival is expected to improve thus leading to non1) Visas on arrival to be increased from 43 to 150
aeronautical revenue of airports.
countries in stages.
Impact on Companies
Company
GMR Infrastructure Ltd
GVK Power & Infrastructure
Ltd
Impact
Comments
+
+
On account of increase in Visa on arrival to 150 countries, non-aeronautical

revenue of these airports is expected to have positive impact.
18
Auto Components
Industry Snapshot:
Growing income levels during the last one decade translated into strong automobile sales which in turn resulted in high
demand for the OEM segment. However, the last couple of years were challenging for the OEM segment due to strained
demand for new vehicles from the domestic as well as exports market.
The replacement segment was however marginally impacted by the economic slowdown given the huge existing vehicle
population. Moreover, the relatively faster increase in the density of roads has led to greater passenger & cargo movement
by roads vis--vis rail which too has added to replacement demand. Nonetheless, the industry witnessed difficult period
since FY12 as the OEM segment derives majority demand (approximately 80%) for the Auto Component Industry.
Duty Structure
Customs Duty (%)
Before
After
Impact
Engine & engine parts,

except the belowmentioned
Silencer, exhaust pipes &
radiators
7.5
7.5
Engine & engine parts
12
12
10
10
Drive
transmission,
steering, suspension &
braking parts
12
12
Drive transmission,
steering, suspension &
braking parts, except the
below-mentioned
Couplings & seals
10
10
Spark plug, distributors,

ignition coils & starter
motors
12
12
7.5
7.5
7.5
7.5
=
=
Spark plug, distributors,

ignition coils & starter
motors
Excise Duty (%)
Before
After
Impact
Proposal and Impact

Budget proposals

Education Cess and Secondary & Higher Education Cess on all
excisable goods has been fully exempted, which translated into
1) Excise duty has been revised to 12.5 % from 12%
excise rate of 12.36% during the previous year. Consequently, revised
2) Excise duty on ambulance chassis has been reduced
rate of 12.5% will have nominal impact on the industry.
to 12.5% from 24%
This would have a positive impact on profitability of chassis
manufacturers
Impact on Companies
Company
Bharat Forge Ltd.
Bosch Ltd.
Exide Industries Ltd.
Motherson Sumi Ltd
Sona Koyo Steering Systems Ltd.
WABCO India Ltd.
Impact
=
=
=
=
=
=
Comments
Since there were no major announcements pertaining to the industry, the

budget would have a marginal impact on component suppliers
19
Automobiles
Industry Snapshot:
Indian automobile sector witnessed one of the most turbulent phases since FY12. During the period PV and CV witnessed
significant decline in demand. Moreover, TW industry demand also moderated during the mentioned period, with
voluminous motorcycles segment getting worst affected. Automobile demand has been constrained on account of higher
ownership cost of vehicles on account of high fuel and financing costs coupled with lower propensity to spend owing
to lower job prospects, low growth in income levels and high inflation level. Although automotive demand witnessed a
marginal uptick during FY15 on account of lower base effect and pent-up demand, complete recovery of the sector is vastly
aligned to economic turnaround.
Duty Structure
Customs Duty (%)
Before
After
Impact
Passenger Cars
Old
105
105
New
100
100
=
=
Two Wheelers
Old
105
New
105
60 (75^) 60 (75^)
=
=
Commercial Vehicles
Old
10
40
New
10
40
Excise Duty (%)
Before
After
Impact
Small Cars*
12
12.5
Mid-size Cars@
24
24
Large Cars#
27
27
SUV
30
30
Buses
12
12.5
Trucks
12
12.5
Two Wheeler
12
12.5
Three Wheeler
12
12.5
Hybrid Vehicles
=
=
=
=
=
=
=
=
=
Note:
*Indicates cars which have engine capacity less than 1,500cc in case of diesel and 1,200cc in case of petrol and length less than 4 meters.
@ Indicates cars which have engine capacity less than 1,500cc in case of diesel and 1,200cc in case of petrol and length more than 4 meters.
#indicates cars having engine capacity more than 1,500cc in case of diesel cars and 1,200cc in case of petrol and length exceeding 4 meters.
Definition of SUV as per central excise department is a vehicle with engine capacity greater than 1,500cc, length exceeding 4000mm and
ground clearance 170 mm and above
^ 75% Custom duty is applicable for two-wheeler having engine capacity greater than 800cc
Proposal and Impact

Budget proposals

Education Cess and Secondary & Higher Education Cess on all
excisable goods has been fully exempted, which translated into
excise rate of 12.36% during previous year. Consequently, revised
1) Excise duty has been revised to 12.5 % from 12%
rate of 12.5% will have nominal impact on the industry.
2) Hike in agriculture credit from Rs.800,000 crore to
This would lead to improved rural liquidity, thereby push demand for
Rs.850,000 crore
Tractors and TWs.
Impact on Companies
Company
Maruti Suzuki Ltd
Ashok Leyland Ltd
Hero Motocorp Ltd
Bajaj Auto Ltd.
Impact
=
=
=
=
Comments
Since no excise duty reduction was announced like previous year, the budget would
have marginal impact on OEMs
20
Banking & Financial Services

Industry Snapshot:
Banks
During FY14, the banking sector was severely impacted due to slow credit demand, pressure on asset quality on the back
of subdued macroeconomic backdrop and elevated level of interest rates in view of inflationary pressure resulting in Mark
to Market (MTM) loss on the investments for the bank. During FY15, interest rates started softening with reduction in
inflation and comfortable liquidity in the system. With the recent rate cut by RBI, is expected to further ease the systemic
liquidity and enable banks to fund the expected credit growth in view of recovery of sectors post the reforms undertaken
by the government. Asset quality pressure continued on banks during FY15 with overall Gross NPA ratio rising to 4.2% as on
September 30, 2014 from 3.3% as on March 31, 2013. Though the banks currently remained capitalized, going forward, the
banks especially public sector banks would be required to raise additional equity in order to meet the more stringent Basel
III norms and also maintain a cushion over the regulatory minimum.
Non Banking Finance Companies (NBFCs)

NBFCs also saw moderation in rate of asset growth, rising delinquencies resulting in higher provisioning thereby impacting
profitability. However, comfortable capitalisation levels and conservative liquidity management, continues to provide
comfort to the credit profile of NBFCs inspite the impact on profitability. The revised regulatory framework released in
November, 2014 by the RBI focuses on strengthening the structural profile of the NBFC sector.
Proposal and Impact

Budget proposals

This will allow NBFCs to improve their recovery from Non
NBFCs registered with RBI and having asset size of more than
Performing Assets (NPA) and provide them a level playing
Rs.500 crore will get access to the SARFAESI Act, 2002 in line
field with banks.
with banks and HFCs
Banks would be required to raise additional capital apart from
Recapitalization of Banks Allocation of Rs.7,940 crore (P.Y.:
the budgetary allocation to fund growth and comply with
Rs.6,990 crore) for recapitalization of Public Sector Banks
stringent Basel III norms.
An autonomous Bank Board Bureau to be set up to improve
the governance of public sector bank which will also help The proposed Bureau would play a vital role in laying a
them in devising capital raising strategies an interim step roadmap for PSBs in terms of capitalisation, holding structure
towards establishing a holding and investment Company for consolidation and governance.
Banks
Foreign investments in Alternate Investment Funds (AIF)
This will help AIF in fund raising. Which in turn will increase
and tax pass through to be allowed to both category I and
investment in sectors like SMEs, infrastructure as well as fund
category II alternative investment funds to tax investors in
start-ups.
funds instead of the funds.
Governments commitment for providing housing to public is
Housing for all - 2 crore houses in Urban areas and 4 crore
a positive for the housing finance companies as well as banks
houses in Rural areas
as this will boost the demand for housing loan.
Postal department with a network of 154,000 point in villages The proposed Postal Payments Bank would help in achieving
to be converted into payment banks
financial inclusion.
This fund will help in resource raising for entities like IRFC
Establishment of National Investment and Infrastructure
and NHB and in turn boost housing finance and financing for
Fund (NIIF) with an annual flow of Rs.20,000 crore
railway projects.
21
Impact on Companies
Company
Impact
Comments
Large NBFCs (asset size >

Rs.500 crore)
Access to SARFAESI Act, 2002 will allow NBFCs to improve their recovery from Non
Performing Assets (NPA) and provide them a level playing field with banks.
Public Sector Banks
The proposed Bank Board Bureau would play a vital role in laying a roadmap for
PSBs in terms of capitalisation, holding structure consolidation and governance.
Private Sector Banks
22
Cement
Industry Snapshot:
The Indian cement industry witnessed a dismal demand growth in the past few years. The slowdown in the real estate sector,
delay in execution of various infrastructure & industrial projects and the overall economic slowdown adversely affected the
offtake of cement. In FY2014, the consumption of cement showed a tepid growth of 3.5% on a YoY basis. However, in the
first eight months of FY15, cement production has registered a growth of 8.5% on a YoY basis.
Going ahead, increasing focus by the newly-elected Government on strengthening infrastructure, promotion of low-cost
affordable housing, lowering trend of interest rates and expected revival in the overall economic growth will provide respite
to the cement demand. Moreover, fall in diesel prices and international coal prices will provide some respite to the cement
industry on the cost front.
Duty Structure
Customs Duty (%)
Before
After
Cement
OPC/PPC/PSC@
- Basic
- CVD
- Special CVD
Nil
12
4
Nil
12
4
Clinker
- Basic
- CVD
- Special CVD
10
12
4
10
12
4
Impact
Excise Duty (%)

Cement*
OPC
PPC
PSC
Before
After
Impact
12
12.5
Clinker
12
12.5
*An abatement of 30% on MRP and duty on adveloram basis plus specific duty of Rs.120 per tonne, @OPC- Ordinary Portland cement, PPCPortland pozzalana cement and PSC- Portland slag cement.
Proposal and Impact

Budget proposals

Increase in outlays on both the roads and the gross
budgetary support to the railways, by Rs.14,031
crore and Rs.10,050 crore, respectively.
Investment in infrastructure to increase by
Rs.70,000 crore in the year 2015-16, over the year
Announced measures in infrastructure and housing segments are
2014-15 from the centres funds and resources of
likely to boost the cement demand. The long-term demand growth
CPSEs.
of cement is expected remain intact.
Establishing of a National Investment and
Infrastructure Fund (NIIF) with a capital of Rs.20,000
crore.
Vision Team India which includes a roof for each
family in India, plans to build 6 crore houses across
India by 2022.
The effective rate of Clean Energy Cess, levied
on coal, lignite and peat, is being increased from
Rs.100 per tonne to Rs.200 per tonne.
Neutral to negative, as the cement companies are expected to pass
Increase in freight rates by railway freight rate
on some of the increase in cost of production to the end-users.
on cement increased by 2.7%, freight rate on coal
increased by 6.3% and freight rate on slag increased
by 2.7%.
23
Impact on Companies
Company
UltraTech Cement Ltd.
ACC Ltd.
Ambuja Cements Ltd.
The India Cements Ltd.
Impact
Comments
+
+
+
+
Various measures announced in infrastructure and housing segments will have

a positive impact on the demand which will be beneficial for the companies.
Moreover, cement companies are expected to pass on some of the increase in
cost of production to the end-users.
24
Coal
Industry Snapshot:
Indian coal Industrys domestic production/off-take was at 567/582 MT in FY2014 (period from April 1, 2013 to March
31, 2014). Against this, the demand for coal stood at 722 MT in FY14 resulting in deficit of 19.3% which was met through
imports. During April-November 2014, coal production grew by 9.4% YoY to 369 MT. However, coal imports continue to grow
by 20% to 160 MT during the same period.
After deallocation of 214 blocks out of 218 coal blocks, the GoI is in process of reallocating the coal blocks to the eligible endusers. The majority of the blocks shall be allocated on a competitive bidding basis to the power sector, which is a regulated
sector. Furthermore, non-power sectors such as steel, sponge iron and cement players have also evinced interest and are
bidding for these coal blocks. Thus, CARE believes that the imports are expected to come down in the medium term after
auction of these blocks.
Duty Structure
Customs Duty (%)
Before
After
Impact
Non-Coking Coal
2.5%
2.5%
Met coke
2.5%
5.0%
Rs.100/tonne
Rs.200/tonne
=
=
=
Clean Energy Cess
Proposal and Impact

Budget proposals

1) Clean Energy Cess is increased from Rs.100 to
Rs.200/tonne of coal to finance clean environment
initiatives.
The increase in clean energy cess of Rs.100/tonne of coal is likely to

garner Rs.55-60 billion yearly for the exchequer. The impact on the
coal Industry remains neutral as cess increase is fully pass-through
to end-consumers.
Impact on Companies
Company
Coal India Limited
Impact
Comments
Since energy cess is pass-through, the company would not be impacted.
25
Construction
Industry Snapshot:
Construction is integral to support Indias growing need for infrastructure and industrial development. In the last 10 years,
construction as a percentage of gross domestic product (GDP) has been in the range of 7.4%-8.1%. The industry witnessed
a slowdown in the last couple of years, mainly on account of slowdown in the economy, delay in project awarding and
execution due to environmental clearance hurdles, aggressive bidding by players, land acquisition issues and political
instability in some states.
As on March 31, 2014, the multiple of order backlog to the net sales of the major construction companies stood at around
2.9 times.
Duty Structure
Excise Duty (%)
Before
After
Impact
Cement Retail*
12%
12.5%
Steel
12%
12.5%
*An abatement of 30% on MRP and duty on ad valorem basis plus specific duty of Rs.120 per tonne.
Proposal and Impact

Budget proposals
1. Investment in infrastructure has been increased by 1. The continued focus of the government on infrastructure
development through increased allocation towards roads,
Rs.70,000 crore for 2015-16.
railways irrigation, power, etc, would be beneficial for the
2. The allocation in the roads sector has been increased by
construction industry. Also, focus of the government on
Rs.14,031 crore and that in railways by Rs.10,050 crore.
building houses for all will augur well for the industry.
3. Allocation of Rs.5,300 crore towards micro-irrigation,
watershed development and the Pradhan Mantri Krishi 2. Easy accessibility to funds for various infrastructure
projects through issue of tax free bonds, additional
Sinchai Yojana.
funding through road cess fund and NIIF and will prove
4. Corpus of Rs.25,000 crore allocated towards Rural
beneficial for construction industry.
Infrastructure Development Fund (RIDF) set up in
NABARD.
5. 5 new Ultra Mega Power Projects, each of 4,000 MW, in
the Plug-and-Play mode to be set up. All clearances and
linkages will be in place before the project is awarded by
a transparent auction system. This involves investment of
about Rs.100,000 crore.
6. The government plans to build two crore houses in urban
India and 4 crore houses in rural India to ensure house for
all by 2022.
7. Tax free infrastructure bonds to be launched for the
projects in the rail, road and irrigation sectors.
8. National Investment and Infrastructure Fund (NIIF), to be
established with an annual flow of Rs.20,000 crore to it
from the government. This trust is to raise debt and in
turn, invest as equity in infra finance companies like IRFC
(Indian Railway Finance Corp. Ltd) and the NHB (National
Housing Board).
9. The additional duty of Customs / Excise of Rs.4 per litre,
levied on Petrol and High Speed Diesel Oil to be converted
towards Road Cess to finance the investment in roads and
other infrastructure. An additional sum of Rs.40,000 crore
will be made available through this measure.
26
10. Public Private Partnership (PPP) mode of infrastructure 3. The initiatives of the government towards encouraging
development to be revisited and revitalised.
private participation through improving PPP model and
fast track the various regulatory approvals by setting up a
11. An expert committee to be formed to examine the
single window portal will be positive for the industry.
possibility and prepare draft legislation where the need
for multiple prior permissions can be replaced by a preexisting regulatory mechanism. E-biz portal has been
introduced, which integrates 14 regulatory permissions at
one source.
Impact on Companies
Company
Impact
Comments
Hindustan Construction Company Limited
+
+
+
+
+
+
+
Increased allocation towards various infrastructure projects is

expected to result in increased order inflow to the construction
companies.
NCC Limited
Gammon India Ltd
IVRCL
Sadbhav Engineering Ltd
Simplex Infrastructures Ltd
Patel Engineering Ltd
27
Consumer Durables
Industry Snapshot:
Consumer durables industry is highly correlated to economic scenario as the industry demand is largely dependent upon
disposable income. Urban market account for about 65% of the revenue for the consumer durable industry in India. The
rising demand from rural and semi-urban markets is likely to drive the consumer durables industry. The key growth drivers
are rising income levels, easy availability of consumer credit, various policy support from the government like relaxation
in customs duties and excise duty, awareness of brands and products, change in lifestyle, new model launches with
technological improvements and ease of shopping through various online formats.
Duty Structure
Customs Duty (%)
Before
After
Impact
Organic LED (OLED) TV panels
10
Components used (magnetron) for the manufacture of microwave oven
+
+
Proposal and Impact

Budget proposals

1) Reduction in custom duty on Organic LED (OLED) TV
The said measures likely to have marginally positive impact on
panels.
demand of OLED TV and microwave ovens.
2) Reduction in customs duty on magnetron used for
manufacture of microwave.
Impact on Companies
Company
Bajaj Electricals Ltd
Mirc Electronics Ltd
Impact
Comments
=
=
The Proposed reduction in custom duty for components used in the

manufacturing of microwave oven would reduce the input cost which
may be passed on the consumers.
28
Education
Industry Snapshot:
Education sector in India is a mix of government-operated & privately operated educational institutions and allied education
products & services providers. The sector is highly influenced by the various government schemes and policies launched
primarily to improve the quality of education and the planned expenditure by the government through several schemes
including the Sarva Shiksha Abhiyan (SSA) and Rashtriya Madhymik Shiksha Abhiyan (RMSA) to improve the quality of
education and eventually the literacy level in the country.
Governments focus on education has continued in the Union Budget 2015-16 with a budget outlay of Rs.68,968 crore with
allocation towards different schemes. An amount of Rs.22,000 crore (Rs.28,635 crore in the budget 2014-15) has been
allocated towards SSA and Rs.3,565 crore (PY: Rs.4,966 crore) for RMSA.
Duty Structure - Not Applicable

Proposal and Impact
Budget proposals

To upgrade over 80,000 secondary schools and add
or upgrade 75,000 junior/middle schools to senior
secondary level so as to ensure there is a senior
secondary school within 5 km reach
This continued focus on school education with an objective of

increasing gross enrollment ratio is expected to result in increase in
enrollment in the higher education segment. Given their significant
presence in higher education, private sector educational institutions
are likely to benefit
To set up a fully IT-based Student Financial Aid

Creation of dedicated institution/authority to provide easy access
Authority to administer and monitor Scholarship
to funds to help the deserving students would improve demand in
as well as Educational Loan Schemes, through the
higher education institutions
Pradhan Mantri Vidya Lakshmi Karyakram.
A separate Skill Development and Entrepreneurship Focus on skill development as a priority to empower and skill the
Ministry which would be launching National Skills youth would result in increased opportunities for private players
Mission
offering skill development courses.
To set up All India Institutes of Medical
Sciences(AIIMS) in 5 states, IIT in one state and to
Focus on higher education
upgrade Indian School of Mines, Dhanbad into a
full-fledged IIT.
Impact on Companies
Company
Impact
Comments
NIIT
+
+
Tree House
The government has reemphasized its focus on school education to add

and upgrade infrastructure in all segments from secondary to senior
secondary level. This is expected to result in higher inflow of orders to the
private sector players especially for companies engaged in information
and communication technology segment of education.
Aptech
29
Engineering & Capital Goods

Industry Snapshot:
The main demand drivers for engineering and capital goods include infrastructure spending by large government and
private players. Over the past few years, a large number of players had curtailed their capex owing to the general slowdown
in economy, overcapacity, strong rise in imports (~40% of capital goods in India are imported), high interest rates, delays in
statutory approvals and general execution challenges.
However, during the current financial year, the capex announcements have increased on revival in growth prospects and
on expectation of positive government policies. Translation of these developments into new orders and subsequently into
better performance for the sector would, however, take some time, as would tying up funds for these projects. CARE expects
the capex cycle to show improvement in the medium-term, with growing business confidence, decline in stalled projects
and support from government policies.
Duty Structure
Customs Duty (%)
Before
After
Impact
Excise Duty (%)
Before
After
Impact
Construction equipment
7.5%
7.5%
Construction equipment
10%
10%
Textile machinery
7.5%
7.5%
Textile machinery
10%
10%
5%
5%
Stamping and lamination
12%
12%
7.5%
7.5%
=
=
=
=
Copper winding wire
12%
12%
=
=
=
=
Stamping and lamination

Copper winding wire
Proposal and Impact

Budget proposals
1) Capex of public sector units of Rs.3.17 lakh crore in FY16
2) 5 Ultra Mega Power Projects, each with a capacity of 4,000 Mega
Watt (MW) to be awarded post all clearances
3) Tax free infrastructure bonds for projects in rails, road and
irrigation
4) Allocation of Rs.0.25 lakh crore for rural infrastructure and creation
of 6 crore rural and urban housing units by 2020
5) Revitalisation of public-private-partnership (PPP) model of
infrastructure alongwith an increase in the public investment and
higher risk assumption by the sovereign.
6) Conversion of excise duty of Rs.4 per litre on petrol and diesel,
into road cess, resulting in mobilisation of Rs.0.40 lakh crore.
7) Thrust on renewable energy with an increase in renewable energy
capacity target to 1.75 lakh MW by 2022 and electrification of 0.20
lakh villages including off-grid solar power generation by 2020.
8) Increase in defence expenditure from Rs.2.22 lakh crore for FY15
to Rs.2.27 crore in FY16.
9) Creation of National Investment and Infrastructure Fund with an
annual contribution of Rs.0.20 lakh crore, which would be used to
raise further funds from the market and invest as equity in entities
such as Indian Railway Finance Company and National Housing
Board.

This is higher by around Rs.0.80 lakh crore compared
with FY15 Revised Estimates and is likely to provide
impetus to the sluggish investment cycle.
In the medium-term this will result in increased demand
for power equipment.
This could help mobilise much needed long-term funds
for the sector which could help catalyse the growth in
the sector.
This will result in increased demand for construction
equipment.
This could provide boost to the PPP model, which has
seen low interest from the private sector over the past
few years.
The additional investible amount allocated directly to
road and other infrastructure projects could translate
into more projects being awarded on EPC basis, rather
than on the PPP basis.
In line with the governments vision to provide power
to all by 2019, the thrust on increased generation and
better connectivity could help manufacturers of power
equipment.
This will result in increased demand of capital goods.
This fund could be used to fund some key infrastructure
and housing projects.
30
Impact on Companies
Company
ABB India Ltd.
Action
Construction
Equipment Ltd.
Alstom India Ltd.
Impact
Comments
Stable
Investment in road infrastructure could see improved demand for construction
equipment.
Stable
Eimco Elecon (India) Ltd.

Elecon Engineering Company
Ltd.
=
+
=
+
=
=
=
Engineers India Ltd.
Kalpataru
Power
Transmission Ltd.
KEC International Ltd.
Increase in PSU capex could translate into higher demand for the companys
services.
=
=
=
=
=
+
Stable
Bharat Heavy Electricals Ltd.

C.R.I. Pumps Pvt. Ltd.
Larsen & Toubro Ltd.

Shanti Gears Ltd.
Siemens Ltd.
Sterlite Technologies Ltd.
Texmaco Rail & Engineering
Ltd.
Thermax Ltd.
TRF Ltd.
Voltamp Transformers Ltd.
+
=
=
+
Given its large capacity in the power equipment this could see new order flows.
Stable
Stable
Stable
Stable
Focus on capacity building and infrastructure could see higher order flow
Stable
Stable
Thrust on establishment of optical fibre cable network and rural electrification
could see higher demand for cables.
Growth in annual freight carrying capacity could translate into increased order
flow for rolling stock.
Stable
Stable
Focus on rural electrification and improvement in power quality could see higher
demand for distribution transformers.
31
Fertilizers
Industry Snapshot:
Domestic fertilizer sales volume reduced by 4% y-o-y in FY14 to 51 million metric tonnes (MMT) driven by reduction in
demand of P&K fertilizers by 10% y-o-y, while the urea consumption remained stable at 30 MMT. However, in FY15, the sales
volume for P&K fertilizer is likely to increase by 15% - 20% due to substantial reduction in channel inventory carried forward
from FY14 and increase in imports, while the urea consumption is expected to remain unchanged. The fertilizer subsidy
budget of Rs.72,900 crore for FY15 would continue to fall short against the total outlay.
The key challenges faced by fertilizer industry are skewed usage of nitrogen nutrient (urea), high cost of regasified liquefied
natural gas (RLNG) and inadequate subsidy budget leading to delays in subsidy payments.
Duty Structure
Customs Duty (%)
Before
After
Impact
Urea
5%
5%
DAP
5%
5%
MOP
5%
5%
Ammonia
5%
5%
Phosphoric Acid
5%
5%
Sulphur
5%
5%
Sulphuric acid
7.5%
5%
Rock Phosphate
2.5%
2.5%
=
=
=
=
=
=
=
=
Excise Duty (%)
Before
After
Impact
Urea
12.36%
12.50%
DAP
12.36%
12.50%
MOP
12.36%
12.50%
Ammonia
12.36%
12.50%
Phosphoric Acid
12.36%
12.50%
Sulphur
12.36%
12.50%
Sulphuric acid
12.36%
12.50%
Rock Phosphate
12.36%
12.50%
=
=
=
=
=
=
=
=
Proposal and Impact

Budget proposals
1) Overall fertilizer subsidy budget remains stable at
Rs.72,968 crore; Within overall budget, subsidy for
domestically produced urea increased by Rs.2,200
crore and for decontrolled fertilizers reduced by the
same amount
2) Support to soil health card scheme and agriculture
ministrys organic farming scheme Pradhanmantri
Krishi Vikas Yojana
3) Improved
access
to
irrigation
through
Pradhanmantri Gram Sinchai Yojana and
Pradhanmantri Krishi Sinchai Yojana with an outlay
of Rs.5,300 crore
4) Enhanced credit to the farm sector through
agriculture credit outlay of Rs.8.5 lakh crore

Fertilizer subsidy budget over the past few years have fallen short of
the actual requirements. This is expected to continue in FY16 also.
The benefit of increased subsidy allocation for urea manufacturers
is expected to offset the increase in rail freight by 10% as urea price
is not expected to change
Move towards improving the soil fertility and productivity and
balance usage of nutrients would lead farmers to use more of P&K
fertilizers suiting the soil need rather than opting for low-cost urea.
The move is expected to reduce dependence on monsoon and
would entail stable demand for fertilizers
Fertilizer demand would to get a fillip on account of easier credit

availability and may also influence farmers to use complex fertilizers.
32
Impact on Companies
Company
Impact
Comments
Indian Farmers Fertilizer Cooperative Ltd
Chambal Fertilizers & Chemicals Ltd
=
=
=
Gujarat Narmada Valley Fertilizers &

Chemicals Ltd.
The stable allocation to fertilizer subsidy budget would continue to

result in mismatch between subsidy requirement and allocation
The move towards reducing the skewed usage of nitrogen nutrient
(urea) and soil productivity would lead to increase in agriculture
yield and also to increase in demand of non-urea (P&K) fertilizers
The easier farm credit would also influence farmers for balance use
of fertilizers
Gujarat State Fertilizers & Chemicals Ltd
Rashtriya Chemicals & Fertilizers Ltd
Improved access to irrigation would lead to reduced dependence on

monsoon and stabilize demand of fertilizers
33
FMCG
Industry Snapshot:
The size of the Indian FMCG industry was estimated to be at around $37 billion in 2013. Most of the FMCG companies in
the past two years witnessed a subdued volume growth on account of elevated inflation and subdued economic growth.
However, the long-term prospects for the industry remains healthy on the back of favourable demographic profile, expected
growth from rural demand with rising penetration in these areas and improvement in GDP growth rate.
Duty Structure
Customs Duty (%)
Before
After
Impact
Fatty acids/crude palm

stearin and specified
industrial grade crude oil
used for manufacturing of
soaps
Crude glycerine for

manufacturing of soaps
Excise Duty (%)
Before
After
Impact
Mineral water and

aerated waters
containing added sugar
12
18
Non-filter cigarettes
(not exceeding 65mm)
990
(Rs./
1000
sticks)
1280
(Rs./
1000
sticks)
Non-filter
cigarettes(exceeding
65mm but not exceeding
70mm)
1995
(Rs./
1000
sticks)
2335
(Rs./
1000
sticks)
Filter cigarettes(not
exceeding 65mm)
990
(Rs./
1000
sticks)
1280
(Rs./
1000
sticks
Filter cigarettes
(exceeding 65mm but
not 70mm)
1490
(Rs./
1000
sticks)
1740
(Rs./
1000
sticks)
Filter cigarettes
(exceeding 70mm but
not 75mm)
1995
(Rs./
1000
sticks)
2335
(Rs./
1000
sticks)
Other cigarettes
2875
(Rs./
1000
sticks)
3375
(Rs./
1000
sticks)
Excise duty on cut

tobacco
Rs.60
per kg
Rs.70
per kg
34
Proposal and Impact

Budget proposals
The hike in excise duty if passed on the end-consumers could

marginally impact demand for cigarettes and other tobacco
1) Increase in excise duty on cigarettes, tobacco
products.
2) Increase in excise duty on mineral water and The increase in excise would lead to marginal decline in demand for
aerated water containing added sugar
these products.
Impact on Companies
Company
ITC Ltd, Godfrey Philips India Ltd,
VST Industries Ltd
Impact
Comments
Hike in excise duty would have a negative impact on the revenues due to
decline in volume growth for these products as well as negatively impact
margins as the hike may not be fully passed on to the end-users instantly.
35
Gems & Jewellery

Industry Snapshot:
India overtook China to become the largest consumer of gold in the world during CY14 on the back of good festival and
wedding related demand in Q4CY14. A predominant portion of gold jewellery manufactured in India was meant for domestic
consumption. However, cut and polished diamonds (CPD) and diamond jewellery segment is largely export-oriented and
has been a major contributor to the countrys Foreign Exchange Earnings (FEEs).The Government of India (GoI), has always
incentivized the industry in the past, with measures such as interest rebates, extension of credit periods (for pre-shipment
and post-shipment credit) and export duty benefits so as to make it competitive. During CY14, the total export of gems and
jewellery (G&J) industry was USD 35.1 billion (USD 35 billion during CY13).
Indian consumer demand for gold remained largely undeterred by government measures and regulations such as imposition
of 80:20 rule of linking import of gold to exports (wherein nominated banks and agencies had to set aside 20% of the total
imported quantity for exports) and gradual increase in import (custom) duty on gold to 10% in order to reduce current
account deficit (CAD) and curb inflation. The demand for gold jewellery in India increased by 8% to 662.10 tonnes during
CY14, while investment demand reduced by 50% to 180.60 tonnes; lowest in the last five years. However, during Q3FY15,
the government removed the 80:20 rule thereby liberalising gold imports which resulted in improved supply of gold in India
and consequent reduction in local price premium on gold.
Duty Structure
Customs Duty (%)
Before
After
Semi-processed, half cut or broken diamonds
2.50
2.50
Cut and polished diamonds and coloured gemstones
2.50
2.50
Gold and Silver
10
10
Gold and Silver Jewellery
15
15
Impact
=
=
=
=
Proposal and Impact

Budget proposals

1) Introduce gold monetization scheme
It can help recycle local gold reserves and thereby improve domestic
2) Develop Indian-made gold coins (which will carry the supply of gold for the G&J industry.
Ashok Chakra on its face)
Impact on Companies
Company
Asian Star Company Limited
Hari Krishna Exports Private Limited
P.C.Jewellers Limited
Khazana Jewellery Private Limited
Impact
Comments
=
=
=
=
The Union Budget 2015-16 will have a neutral impact on the G&J
industry as duty structure in the industry remains unchanged.
36
Hospitals & Healthcare

Industry Snapshot:
The Indian healthcare industry is estimated to cross Rs.5,000 bn by FY17 (refers to the period April 01 to March 31). The
Hospital and Health services segment is its largest component, comprising 70% of the industry and is expected to continue
to dominate the industry. With 69.5% of total expenditure on health being funded through private means in CY11 (Source:
WHO), it is likely to remain the single-biggest determinant of healthcare spending in the near-future.
Duty Structure
Customs Duty (%)
Healthcare equipment
Before
After
Impact
7.5
7.5
Excise Duty (%)

Healthcare Equipment
Before
After
Impact
12.36
12.5
Proposal and Impact

Budget proposals

1) All India Institutes of Medical Sciences in
This should help augment medical facilities in these underserved states.
Bihar, J&K, Punjab, Tamil Nadu, Himachal
It is expected to bring expensive medical treatments under enhanced
Pradesh and Assam
policy amount.
2) Increase in health insurance premium to
Rs.25,000 (senior citizens: Rs.30,000)
Impact on Companies
Company
Apollo Hospital Enterprise Ltd
Fortis Healthcare Ltd
Impact
+
+
Comments
Schemes announced to have a positive impact on the demand.
37
Hotels
Industry Snapshot:
On account of huge additions of inventory coinciding the overall sluggishness in the economy in the recent past, the ARR
and OR for hotels remained under pressure during FY11-13 period. However, during FY14, the occupancy rates showed
some improvement, which rose to about 58.9% from 57.8% in FY13. The average room rates, however, continued to remain
under pressure owing to the fact that majority of the new supply being of a lower positioning coupled with average rate
pressures being faced by older hotels. Also, the companies focused more on improving occupancy rather than improving
ARR in FY14.
Duty Structure
Customs Duty (%)
Hotels
Before
After
Impact
NA
NA
NA
Excise Duty (%)

Hotels
- Room service
- Foods and Beverages
Before
After
Impact
7.42
4.94
7.42
4.94
Proposal and Impact

Budget proposals

1. Tourist Visa on Arrival (TVoA) to be extended to 150
countries from existing 43 countries.
2. Proposal for development of the following heritage
sites; Elephanta Caves; old churches in Goa;
Varanasi temple town; Hampi in Karnataka, etc
Extension of TVoA to give boost to Foreign Tourist Arrivals (FTAs),

which in turn is expected to spur the Occupancy Rates (OR) for the
hoteliers. Development of heritage sites also to spur tourist arrivals
in the long run.
Impact on Companies
Company
The Indian Hotels Co. Ltd
EIH Ltd.
Hotel Leela Ventures. Ltd
Impact
+
+
+
Comments
Extension of TVoA to have a positive impact on OR of hoteliers
38
IT & ITeS
Industry Snapshot:
The Indian IT-BPM industry in aggregate is estimated at USD 146 billion in FY15, export segment of which is expected to
reach USD 98.5 billion, according to NASSCOM. IT Services exports is expected to grow at a moderate pace of 12-14% in
FY2016. This would be against 13-15% growth estimated for FY15 by NASSCOM. The lower growth estimation is attributable
to mixed set of economic data from the western markets which account for about 80% of income of Indian IT exporters and
currency headwinds. While U.S. economy has recorded notable recovery, economic fluctuation in Europe has been a cause
of concern. Meanwhile, rupee which had marginally depreciated against US dollar in the last one year, had appreciated
sharply against Euro (17%) and British Pound (7.5%) which could stress the profitability of contracts from these regions.
Duty Structure
Customs Duty (%) #
Before
After
Impact
Parts,
Components
&
accessories used in tablet
computer manufacturing
Excise Duty (%)
Before
After
Tablet computer
12.4
12.5
Components
12.4
Nil
Impact
=
+
# the above carry a Countervailing Duty (CVD) of 10% which is being exempted now.
Proposal and Impact

Budget proposals
Rs.1,000 crore for promotion of start-ups and No specific announcement for the IT services sector but for
entrepreneurs in the technology sector.
government setting aside Rs.1,000 crore for promotion of startups in the sector. This is expected to create opportunities and
Exemption of basic customs and CVD and excise
benefit technology start-ups.
duty on parts, components and accessories for use
in the manufacture of tablet computers.
For domestic component manufacturers, the decision to exempt
CVD and excise duty is a positive development. Presently, an
inverted duty structure prevails with effective tax rate on finished
product less than tax on imported components. However, the
proposal for exemption of CVD and excise is likely to boost
domestic production and reduce the dependence on imports.
Impact on Companies
Company
TCS
Infosys
Wipro
Mphasis
Impact
=
=
=
=
Comments
No specific announcement for the IT services sector.
39
Media and Entertainment

Industry Snapshot:
The Indian media and entertainment industry estimated to be at Rs.918 bn witnessed an overall growth of 11.8% in CY2013
(period from January to December 2013). Of the total market size, the share of television and print media remained the
highest at 45.1% and 27.3% respectively during CY2013. Other segments such as animation & visual effects (VFX), gaming and
digital advertising, though still at nascent stage of growth, continue to grow at healthy rates. Given the impetus introduced
by digitization, continued growth of regional media, strength in the film sector and fast-increasing new media businesses,
the industry is estimated to cross the Rs.1,000 billion mark in the near term. The benefits of Phase 1 cable digital access
system rollout, and continued Phase 2 and 3 rollout are expected to contribute significantly to strong continued growth in
the Television sector revenues, which will drive the growth of the industry.
Proposal and Impact

Budget proposals

Media & Entertainment, being predominantly a services industry
1) Service-tax increased from 12.36% to 14% to would be impacted by the rise in service tax, as it would increase
facilitate transition to GST.
the tax outgo of the companies. However, the same would largely
be passed on to the end-consumers.
Impact on Companies
Company
Zee Entertainment
Sun TV
Balaji Telefilms
Impact
Comments
=
=
=
The impact of rise in service tax to 14% would be neutral on the media companies.
40
Mining and Minerals

Industry Snapshot:
The mining and metallurgical sector remains vital to the development and economic growth of the developing countries
and India remains geologically endowed with a number of mineral resources. Currently, India produces around 87 minerals,
which include 4 fuel minerals, 10 metallic, 47 non-metallic, 3 atomic and 23 minor minerals. However, the mining sector in
India in dominated by coal comprising around 80% of the mined reserve, while the balance 20% comprises various other
minerals which includes copper, iron, lead, bauxite, zinc, gold, uranium, etc.
Although the country is more or less self reliant with respect to a number of minerals, a significant gap exists with regards
to a large number of critical minerals and metals such as coal, uranium, copper ore, etc, for which the country is partly or
largely dependent on imports. Various inefficiencies in the sector including policy lacuna, political interference, stringent
government regulations, environmental issues, lack of infrastructure and financing mechanism have hampered the growth
of the sector. Accordingly, the share of Indian mining and quarrying sector (around 2% of its GDP) vis--vis other mining
nations (around 5-6% of its GDP) has remained significantly low. Furthermore, exposure of various illegal practices being
prevalent in mining sector led to closure of a number of mines, which in turn resulted in attracting increased vigilance and
government regulations for the sector.
In this backdrop, the government in the 12th Five-Year Plan (2012-2017) is focussing on exploration, search of strategic,
scarce and deficit minerals to reduce imports. Furthermore, the Ministry of Mines has recently framed a new draft Mines
and Minerals (Development and Regulation) Bill 2011, which would replace the MMDR Act 1957 and emphasises on benefit
sharing and local area development, which would lead towards sustainable development of the sector amidst environmental
security and industrial growth.
Duty Structure
Customs Duty (%)
Before
Iron ore
After
Impact
Coking Coal
2.5
2.5
Bauxite
2.5
2.5
Manganese Ore
2.5
2.5
Chrome Ore
2.5
2.5
Limestone
=
=
=
=
=
=
Proposal and Impact

Budget proposals
1) 6.3% increase in Railway freight for carrying coal.
Neutral- Increase in the mining, royalty or freight cost for the
2) 0.8% increase in Railway freight for carrying iron domestic miners is passed on to the end-user industry. Hence, the
ore.
overall impact of increase in transportation cost stands neutral.
Impact on Companies
Company
NMDC Limited
Sesa Sterlite Limited
OMDC Limited
MOIL Limited
Impact
=
=
=
=
Comments
Increase in the mining, royalty or freight cost for the domestic miners is passed on
to the end-user industry. Hence, the overall impact of increase in transportation
cost stands neutral.
41
Non-ferrous Metals
Industry Snapshot:
The base metal industry is bearing the brunt of the downward revision in global macroeconomic outlook. Muted industrial
activity along with sluggish demand outlook from the developing economies and the persisting concerns of the slowing
Chinese economy are exerting pressure on the overall demand and subsequently the prices of these metals. However, the
changing socio-economic conditions and expected recovery of demand from the developed markets are likely to stabilize
the demand for these metals in the medium term.
CARE expects prices of all base-metals to remain volatile on the back of the ongoing macroeconomic development in the
Euro zone and other major developing countries. Chinese economic outlook and the strengthening of the US dollar vis--vis
the other major currencies in the world is also likely to have its effect on the global base metal prices.
Duty Structure
Customs Duty (%)
Before
After
Impact
Bauxite
Aluminium Scrap
Alumina
7.5
7.5
2.5
2.5
Copper Scrap
Refined Copper
2.5
2.5
2.5
2.5
Steam coal
2.5
2.5
Petroleum Coke
2.5
2.5
Calcined Petroleum Coke
2.5
2.5
=
=
=
=
=
=
=
=
=
=
=
=
=
-
Caustic Soda
Aluminium Ingots
Copper Concentrates
Zinc Concentrates
Refined Zinc
Lead Concentrates
Refined Lead
Excise Duty (%)
Before
After
Impact
Alumina
12
12
Caustic Soda
12
12
Aluminium Ingots
12
12
Copper Concentrates
12
12
Refined Copper
12
12
Zinc Concentrates
12
12
Refined Zinc
12
12
Lead Concentrates
12
12
Refined Lead
12
12
Non-Coking Coal
12
12
Petroleum Coke
12
12
Calcined Petroleum Coke
12
12
=
=
=
=
=
=
=
=
=
=
=
=
Proposal and Impact

Budget proposals
1) Reduction in Special Additional Duty (SAD) of

Customs on copper scrap, brass and aluminium
scrap from 4% to 2%
2) 6.3% increase in Railway freight for carrying coal
3) Increase in Clean Energy cess levied on coal, lignite
and peat from Rs.100 per tonne to Rs.200 per tonne
Positive - For the secondary producers. Negative For the primary

producers
Negative- Increase in railway freight is likely to marginally increase
the cost of production
Negative- This is likely to further increase the cost of production of
the Non-ferrous metals producer
42
Impact on Companies
Company
Impact
Hindalco Industries Ltd
National
Aluminium
Company Limited (NALCO)
Hindustan Zinc Ltd
Comments
Since, power cost accounts for a significant share of the overall cost of production
for non-ferrous metals, increase in the cost of coal used by captive power plants
on account of increase in freight rate and Clean Energy Cess is likely to increase the
cost of production of these players.
43
Oil and Gas

Industry Snapshot:
Indian Oil & Gas sector comprises primarily three segments, namely, Exploration & Production (upstream), Midstream and
Downstream (Refining & Marketing). The size of the oil and gas industry in terms of turnover stands at about US$ 180 billion,
contributing about 15% to the national GDP.
Prices of sensitive petroleum products (Diesel, LPG, Kerosene) are regulated by the government hence oil marketing
companies (OMCs) incur huge under-recoveries. The under-recovery during FY14 stood at Rs.1,399 billion.
Indias oil import dependency was at 85% in FY14 indicating the economys high dependence on imported crude oil. Indian
crude oil demand is expected to grow at a steady rate of 2-3%. However, domestic crude oil supply is not expected to keep
pace with rising demand, making India vulnerable to not only international crude oil prices but also to exchange rates.
Indias natural gas industry is also characterised by a supply deficit due to low domestic production and inadequate
distribution infrastructure. Domestic gas production has been on a declining trend particularly due to fall in Reliance
Industries KG-D6 production. Decline in most of the countrys ageing fields has further compounded the supply deficit.
Going forward, domestic gas supply is expected to grow at a CAGR of 6% in the next two fiscal while gas demand to grow
at a CAGR of 17% during the same period; thus, aggravating the deficit situation. India is expected to continuously rely on
expensive imported LNG to meet its energy needs. LNG imports are anticipated to grow at a CAGR of 29% during the same
period to partially meet the shortfall.
Duty Structure
Customs Duty (%)
Before
After
Impact
Crude oil
Petrol
LNG
Diesel
Naphtha#
Liquefied Butanes
2.5
2.5
2.0
+
+
+
Ethylene dichloride, Vinyl

Chloride Monomer, Styrene
Excise Duty (%)
Before
After
Impact
Rs.8.95/
litre
Rs.5.46/litre
Rs.7.96/
litre
Rs.4.26/litre
* basic excise duty has reduced, however total effective aggregate taxes remains unchanged at Rs.17.46/litre and Rs.10.26/litre for petrol and
diesel, respectively
#Special Additional Duty
Proposal and Impact

Budget proposals
Petroleum subsidy down to Rs 30,000 crore

Petroleum subsidy has been halved to Rs 30,000 crore for 2015-16 from
estimated Rs 60,270 crore in the current fiscal. However, going ahead in case
of increase in crude oil prices, under-recoveries may increase, which may
impact oil and gas PSUs.
44
Impact on Companies
Company
Refining and marketing companies - Indian
Oil Corporation Ltd (IOCL), Bharat Petroleum
Corporation Limited (BPCL), Hindustan
Petroleum Corporation Limited (HPCL), Oil and
Natural Gas Corporation Limited (ONGC), Oil
India Limited (OIL)
Various petrochemicals units like Reliance
Industries Limited (RIL), IOCL
Impact
Comments
Government subsidy for FY16 is budgeted at Rs 30,000 crore

which seems to be lower compared to estimated Rs 60,270
crore subsidies for FY15. Any increase in crude oil prices would
lead to higher under-recoveries on petroleum products and
would thus, increase subsidy burden on ONGC and OIL.
Naphtha, liquefied butane, ethylene dichloride, vinyl

chloride monomer and syrene are feedstock/intermediates
to petrochemicals. Thus, decrease in custom duty would be
positive for petrochemicals companies like RIL and IOCL.
45
Paper
Industry Snapshot:
The Indian Paper Industry has three segments: Packaging paper and boards, Printing and Writing, and Newsprint. Domestic
paper consumption is directly correlated to GDP growth, with the growth multiple estimated to be 0.9x. The Indian Paper
Industry is highly fragmented and competitive in nature. Large paper manufacturers have established their dominance
in high-value segments like copier, coated packaging & board, while smaller units cater to low value segments such as
creamwove, kraft paper, etc. Raw-material, energy and stores and spares (including chemicals) forms about 75-80% of the
total operating costs for the paper industry.
Duty Structure
Customs Duty (%)
Before
After
Impact
Finished products
Excise Duty (%)
Before
After
Impact
Paper & Paperboard
Newsprint
Wood pulp
Wastepaper
Coal
Finished products
Paper & Paperboard

- Basic
- CVD
5
6
5
6
Newsprint
Raw materials
Raw materials
Wood pulp
- Basic
- CVD
0
6
0
6
Wastepaper*
- Basic
- CVD
0
6
0
6
2.5
6
2.5
6
Steam Coal
- Basic
- CVD
* Custom duty on wastepaper is Nil
Proposal and Impact

Budget proposals

1) No major announcement
Neutral
Impact on Companies
Company
Ballarpur Industries Ltd
J K Paper Ltd
West Coast Paper Mills Ltd
International Paper APPM Ltd
Impact
Comments
=
=
=
=
No major impact from the budget.
46
Pharmaceuticals
Industry Snapshot:
The Indian pharmaceuticals industry clocked revenues of around Rs.1,660 billion in FY14, witnessing 14% growth. It has
acquired global recognition, with increasing exports of generic products to regulated markets. In a sign of improving
prospects, several Western governments have stated their intent to rely on cheaper, generic imports to reduce their bloated
health budgets. Simultaneously, improving healthcare infrastructure, increasing incidence of life-style diseases and recent
price-control regulations would lead to higher demand for pharma products in the domestic market.
Duty Structure
Customs Duty (%)
Before
Bulk drugs
After
Impact
Formulations
10
10
Medical devices
7.5
7.5
=
=
=
Excise Duty (%)

Bulk drugs
Formulations
Medical devices
Before
After
Impact
12.36
12.5
12
12
=
=
=
Proposal and Impact

Budget proposals
1) Three new National Institutes of Pharmaceutical
Education and Research (Maharashtra, Rajasthan,
and Chhattisgarh)
2) Extension of validity of form for import of lifesaving drugs to 1 year (to avail full exemption of
Basic Customs Duty)
3) No need to seek separate certificate from Excise
authority for bulk drugs used in manufacture of
specified drugs (if already obtained from Customs
authorities)

This would help in innovation and research for formulation of new
drugs.
This exemption already exists, and the extension of tenure does not
impact the pharma industry.
This is expected to simplify the process for the pharma industry.
47
Pipes
Industry Snapshot:
The Indian pipe Industry is one of the top manufacturing hubs globally with presence across all categories of pipes viz steel,
cement and plastic. Due to economic slowdown in domestic as well as global markets during last few years, demand for
pipes has remained subdued. However, CARE expects that the demand for pipes in India would remain healthy in the long
term, on the back of increasing demand arising from oil and gas, infrastructure, water supply and sanitation projects.
Duty Structure
Customs Duty (%)
Before
After
Impact
Steel pipes
10
15
Plastic pipes
10
10
Cement pipes
10
10
Polyvinyl Chloride (PVC)
7.5
7.5
High-Density Polyethylene
(HDPE)
7.5
7.5
+
=
=
=
=
High-Density Polyethylene
(HDPE)
7.5
7.5
Excise Duty (%)
Before
After
Impact
Steel pipes
12.36
12.5
Plastic pipes
12.36
12.5
Cement pipes
12.36
12.5
Polyvinyl Chloride (PVC)
12.36
12.5
High-Density
Polyethylene (HDPE)
12.36
12.5
=
=
=
=
=
High-Density
Polyethylene (HDPE)
12
12
Proposal and Impact

Budget proposals
1) Union Budget has called for each house in the

country to have basic facilities of 24-hour power
supply, clean drinking water, a toilet, and be
connected to a road by the year 2022 which will be
the 75th year of Indian independence.
2) Union Budget has allocated Rs.5,300 crore via
Pradhan Mantri Krishi Sinchayee Yojana (PMSKY)
scheme to support micro-irrigation and watershed
development in the country with a view to increase
agricultural productivity.
3) Tax-free infrastructure bonds for the projects in the
rail, road and irrigation sectors.
During the year 2011-12, out of total area under cultivation only
46.35% of the land was irrigated (Source: Center for Monitoring of
India Economy). Covering more than 50% of farmland will require
investments in pipeline infrastructure.
Also, easy accessibility of funds through issue of tax-free bonds
for irrigation should increase investment in irrigation sector which
would lead to higher demand for Ductile Iron and plastic pipes for
water supply to farms.
Impact on Companies
Company
Indian Hume Pipe Co. Ltd.
Jain Irrigation Systems Ltd.
Impact
Comments
The company primarily operates in cement pipes. Proposal in the budget to

provide sanitation facility to every household till the year 2022 is expected to
increase the demand for cement pipes.
Jain Irrigation Systems is engaged in manufacturing of micro irrigation systems,

PVC pipes, HDPE pipes and other agricultural inputs. The finance ministers
proposal to support irrigation via PMKSY scheme will create demand for its plastic
pipes and other irrigation systems.
48
Ports
Industry Snapshot:
The total volume of traffic handled by all the major Indian ports during FY14 was about 555 million tonnes as compared with
about 546 million tonnes handled in FY13, a Y-o-Y growth of about 2%.
The key challenges faced by the sector are significant differences in utilisation rates at the major ports, draft constraints and
operating inefficiencies. On the other hand, development of new minor ports has been affected by inadequate connectivity
with the hinterland and the differential royalties and revenue sharing at various ports.
As a result of allowance of the 100% FDI in the port sector, the port privatisation has gained momentum. While in the past,
most of the private initiative in ports was restricted to development of container terminals, the past couple of years have
witnessed significant investment in the minor ports, dominated by bulk capacities added in Gujarat and the eastern coast,
predominantly through PPP projects.
The Planning Commission has estimated the total traffic growth at about 14% during the 12th Five Year Plan (2012-2017).
However, given the plethora of issues surrounding the projects in the power, steel and coal sectors coupled with the
slowdown in overall economic growth, CARE expects the total annual traffic at all ports to grow at a cumulative annual
growth rate (CAGR) over of 6.2% over the period FY14-FY17, thereby reaching a level of 1,232 million tonnes by FY17.
Duty Structure NA
Proposal and Impact
Budget proposals

1) Ports in public sector will be encouraged, to
corporatise, and become companies under the
Companies Act to attract investment and leverage
the huge land resources.
2) Service-tax exemption for construction, erection,
commissioning or installation of original works
pertaining to an airport or port withdrawn.
Positive: Corporatisation of major ports is expected to make them

more efficient both financially as well as operationally in turn
increasing the competitive environment ultimately benefiting the
consumers.
Negative: The withdrawal of service tax exemption will increase the
project cost for new ports.
Overall, the budget focuses on capacity enhancement in existing
ports along with improvement in operational parameters rather
than creation of additional ports.
Impact on Companies
Company
Gujarat Pipavav Port Ltd
Adani Ports & Special
Economic Zone Ltd
Impact
Comments
Over the long run, the competition is expected to gather pace with corporatization
of major ports which shall come with the attendant benefits. This can impact the
cargo attracting capability of private players.
49
Power
Industry Snapshot:
The all-India installed capacity on January 31, 2015 was 258.7 Giga-Watts (GW).
In FY2013, the base power deficit was 8.7%, which declined to 4.2% in FY2014, while peak deficit also narrowed by 550
bps to 4.5% over the same period. During 9MFY15, base deficit has declined by 0.5% YoY to 3.9%. On the other hand, peak
power deficit has increased by 0.5% YoY to 4.7%.
The sector is still plagued by weak health of power distribution companies, fuel-related issues and transmission constraints.
Encouraging policy framework in renewable energy (RE) sector has resulted in rising share of capacity addition for RE from
5.9% (7.7 GW) in FY2007 from 12.9% (31.7 GW) in FY2014. The re-instatement of accelerated depreciation for wind has
provided a fillip to wind power capacity addition. In 9MFY15, the capacity addition was 2.1 GW v/s 1.9 GW (9MFY14).
Duty Structure
Customs Duty (%)
Clean Energy Cess
Before
After
Impact
Excise Duty (%)
Rs.100/
Tonne
Rs.200/
Tonne
Pig iron (SG Grade) used

for cast components of
wind operated electricity
generators
Before
12
After
Impact
0
Proposal and Impact

Budget proposals

Increase in clean energy cess from Rs.100/tonne to Rs.200/tonne
on production of coal is expected to raise Rs.50-60 billion for the
purpose of National Clean Electricity Fund in FY2016. The part of the
funds would be utilised for implementation of renewable projects.
Increase in clean energy cess
Impact on Companies
Company
Impact
Comments
Wind Independent Power

Producers (IPPs)
The reduction in excise duty in pig iron used for cast components of wind operated
electricity generators will reduce the costing for wind power plants (per MW cost).
5 new Ultra Mega Power Projects, each of 4,000 MW, would be implemented
with majority of clearances obtained prior to bidding (in the Plug-and-Play mode).
However, overall structuring which ensures that majority of challenges faced by
the developers of previous UMPPs are addressed, shall be critical.
Various Power IPPs (such

Tata Power Ltd., NTPC Ltd,
Reliance Power Ltd., Adani
Power Ltd.)
50
Real Estate
Industry Snapshot:
The Indian real estate industry is the second-largest employment-generating sector after agriculture; contributing about
5-6% to Indias GDP. Not only does it generate a high level of direct employment, but it also stimulates the demand in over
250 ancillary industries such as cement, steel, paint, brick, building materials, consumer durables and so on. The sector has
been witnessing demand in slow down due to high inflation, higher borrowing cost and weak economic sentiment affecting
buyers confidence.
Duty Structure
Customs Duty (%)
Before
After
Cement
OPC/PPC/PSC@
- Basic
- CVD
- Special CVD
Nil
12
4
Nil
12
4
Clinker
- Basic
- CVD
- Special CVD
10
12
4
10
12
4
Impact
Excise Duty (%)

Cement*
OPC
PPC
PSC
Before
After
Impact
12
12.5
Clinker
12
12.5
*An abatement of 30% on MRP and duty on adveloram basis plus specific duty of Rs.120 per tonne, @OPC- Ordinary Portland cement, PPCPortland pozzalana cement and PSC- Portland slag cement.
Proposal and Impact

Budget proposals

1) Rationalisation of taxes of Real Estate Investment Trusts
(REITs).
2) Housing for all by 2022.
3) Allocation of Rs.12,000 crore for Delhi-Mumbai Industrial
Corridor (DMIC).
4) Corporates taxes to reduce from 30% to 25% over a period
of 4 years starting next year with exemptions going away.
5) Increase in service tax from 12.36% to 14% on under
construction properties.
The tax rationalisation of REITs will provide another source of

funding for real estate players with assets in commercial real
estate segment. Development of DMIC will lead to increase
in real estate demand in towns along the corridor. Reduction
of corporate taxes to positively affect corporates in general.
However, increase in service tax will have a marginal negative
impact, as the buyers will have to pay more, which in turn will
impact the demand for property.
Impact on Companies
Company
DLF Ltd
Indiabulls Real Estate Ltd.
Prestige Estates Projects Ltd
Shobha Developers Ltd
Kolte Patil Developers Ltd
Godrej Properties Ltd
Impact
+
+
+
+
+
+
Comments
The developers with completed commercial properties will have an
immediate positive impact due to tax rationalization on REITs. Also,
housing for all and other infrastructure development measures will
have a positive impact for the overall real estate sector.
51
Roads & Highways

Industry Snapshot:
India has an extensive road network of 4.7 million km the second largest in the world. However, Indias road density is
only 3.7 km per 1,000 people, as compared with a global average of 6.7 km per 1,000 people. In the Twelfth Five-Year Plan
(2012-2017), the investment in the road sector is expected to be around Rs.9,150 billion with 33% of the investments to
be contributed by the private sector. Whilst there are positives articulated in the form of thrust from government to clear
the backlog of the under implementation projects, premium restructuring for few high value projects, introducing enabling
clauses for easy exit to developers and improving co-ordination among various clearing authorities, the challenges for the
government to kick-start stalled projects and attract capital from private players for new projects continued to deter new
investments. As a result, the proportion of investment from the Government [in the form of Engineering Procurement
Construction (EPC)-based contracts] is expected to be higher than envisaged in order to achieve the ambitious target of
constructing 30 km /day.
Duty Structure
Excise Duty (%)
Before
After
Impact
Cement
12.00
12.50
Steel
12.36
12.50
=
=
Proposal and Impact

Budget proposals
Key announcements
1) Allocation of the Ministry of Road Transport and
Highways for road development has been increased
by Rs.14,031 crore.
2) Conversion of existing excise duty on petrol and
diesel to the extent of Rs.4 per litre into Road Cess to
fund investment through which additional Rs.40,000
crore shall be made available for financing.
3) Setting up of National Investment and Infrastructure
Fund (NIIF) with annual outlay of Rs.20,000 crore
from Government which shall be invested in
Infrastructure Finance Companies to aid the latter in
leveraging and funds mobilisation.
4) Issuance of tax-free bonds for roads.
5) Modification in the risk sharing under Public Private
Participation (PPP) model with major risk to be
borne by sovereign.

Continued impetus and thrust on development of infrastructure is
reflected in the budget proposal with additional fiscal space proposed
to be made available for funding infrastructure investment. The key
proposal such as increase in availability of funds from sovereign
through hike in road cess apart from increase in gross budgetary
allocation, and formation of NIIF shall provide significant boost in
augmenting the capital resources.
The modifications in risk sharing in PPP combined with proposed
plug-and-play mode of awarding projects are expected to reduce
the risks associated with timely execution of projects, and witness
increased participation in PPP and Engineering Procurement
Construction (EPC) space. This shall ultimately lead to lowering of
cost of creation of infrastructure assets.
Impact on Companies
Company
Impact
Comments
L&T Infrastructure Development Pvt Ltd.
+
+
+
+
The proposed modification in risk sharing coupled with the

availability of long-term funds shall augur well for the infrastructure
players having substantial exposure in roads sector projects.
Reliance Infrastructure Ltd.

IL&FS Transportation Networks Ltd.
IRB Infrastructure Developers Ltd
52
Steel
Industry Snapshot:
For four consecutive years, India has been worlds fourth largest steel maker. With 65.19 million tonnes (MT) production,
the country remained the worlds fourth largest steel producer in the first nine months of the current year (FY14-15). Indias
crude steel capacity and production was ~95 MT and ~85 MT respectively in 2013-14.
An improvement in overall business sentiment, the governments announcements on big-ticket investment in infrastructure
and a post-monsoon pick-up in demand led India to post the fastest growth in steel production globally in October 2014. The
government is aiming at rejuvenating the steel sector and removing the hurdles in steel production by scaling up capacity to
300 MT by 2025 from the 95 MT in 2013-14. However, CARE believes, only about 21 mn tonnes of steel capacity is likely to
get added in the next 3-4 years.
The demand for steel in India is expected to increase by 3-5 per cent this year and touch a compounded annual growth rate
(CAGR) of 6 per cent after FY17. Given the governments high focus on jump starting stalled projects, followed by pushing
large flagship projects, including the freight and industrial corridors, it is expected that India will begin moving back on the
path of materials intensive growth by the end of this year.
Duty Structure
Customs Duty (%)
Metallurgical coke
Before
2.5
After
5.0
Impact
Tariff Rate (%)
Tariff rate of Basic

Customs Duty (BCD) on
iron & steel and articles
of iron or steel, falling
under Chapters 72 and
73 of the Customs Tariff
10
15
Bituminous coal
55
10
Excise Duty (%)
Before
After
Impact
Basic excise duty
12
12.5
Before
After
Impact
Proposal and Impact

Budget proposals
Negative impact on domestic steel players, who are

Increase in basic customs duty on Metallurgical coke from
dependent on imported coke
2.5% to 5.0%
Positive for domestic Metallurgical coke manufacturers
Tariff rate of Basic Customs Duty (BCD) on iron & steel and
articles of iron or steel, falling under Chapters 72 and 73 of Positive impact for domestic steel players since it will curb the
the Customs Tariff, from 10% to 15%. However the existing flow of steel imports from China & Russia
effective rates of BCD on these goods are being retained.
Special Additional Duty of Customs (SAD) on melting scrap of
iron or steel, stainless steel scrap for the purpose of melting,
Positive impact on domestic steel & aluminum players
copper scrap, brass scrap and aluminium scrap is being
reduced from 4% to 2%.
Clean energy cess on coal increased from Rs.100 per
metric tonne to Rs.200 per metric tonne to finance clean Marginal negative impact on domestic steel players
environment initiatives.
53
CVD and SAD are being fully exempted on coils (steel) for use Positive impact for steel coil manufacturers supplying to
in the manufacture of pacemakers.
pacemakers industry
Increase in basic excise duty from 12.00% to 12.50%
Marginal negative impact on domestic steel players
Impact on Companies
Company
SAIL Ltd., Tata Steel Ltd.,
JSW Steel Ltd., JSPL, Usha
Martin Limited
Impact
Comments
Increase in tariff rate of Basic Customs Duty (BCD) on iron & steel will boost the
domestic steel demand
Reduction of SAD on melting scrap of iron or steel and reduction in tariff of BCD of
bituminous coal will have positive impact
Increase in basic customs duty on Metallurgical coke is likely to result in increase
in cost of production of steel players dependent on imported coke.
54
Sugar
Industry Snapshot:
ISMA estimates the sugar production for SS 2014-15 at 26.0 million tonnes (SS 2013-14 at 24.4 million tonnes). This marks
the fifth consecutive season where Indias sugar production surpasses consumption. Owing to surplus supply, sugar prices
have remained low and in most states below the cost of production primarily attributable to the high cane prices set by State
Government resulting in sugar mills suffering losses. Export market has also not been conducive.
Duty Structure
Customs Duty (%)
Before
After
Impact
Raw Cane Sugar
25
25
Refined Sugar
25
25
=
=
Excise Duty (%)
Before
After
Impact
Raw Beet Sugar
12.4
12.5
Raw Cane Sugar
12.4
12.5
Refined Sugar
12.4
12.5
=
=
=
Proposal and Impact

Budget proposals
There were no Budget proposal which directly

impacted the sector. However, pre budget
announcement with CCEA clearing the extension of
export subsidy for raw sugar at Rs.4,000/tonne on
export of 1.4 million tonnes for sugar season SS14-15.
Export incentive of Rs.4,000/tonne (higher than subsidy of

Rs.3,371/tonne in the previous season)could bring some relief to
the industry reeling under excess supply. Given the weak global
prices, raw sugar export was viable only with this incentive. The
export could help reduce inventory and help recover the domestic
prices.
Impact on Companies
Company
K.C.P Sugars and Industries Corporation Ltd
Bajaj Hindustan Ltd
Balrampur Chini Mill Ltd
Bannari Amman Sugars Ltd
Shree Renuka Sugars
Impact
Comments
=
=
=
=
=
The export incentive for raw sugar of Rs.4,000/tonne will help

the sugar companies reduce the inventory and improve their
cash flow.
55
Telecom
Industry Snapshot:
India continued to have the second largest wireless subscriber base globally with 943.97 million wireless subscribers as
on December 31, 2014. The total telecom subscriber base also comprises an additional 27 million wireline subscribers. As
on December 31, 2014, the overall wireless tele-density was 75.43 with an urban wireless tele-density of 142.46 and rural
wireless tele-density of 45.47. The number of broadband subscribers was 85.74 million as on December 31, 2014 including
70.42 million wireless broadband subscribers.
Duty Structure
Customs Duty (%)
HDPE
(for use in manufacturing
of telecommunication
grade
optical
fiber
cables)
Before
7.5%
After
Nil
Impact
Excise Duty (%)

Mobile Phones
Before
6% with
CENVAT Credit
or 1% without
CENVAT Credit
After
12.5% with
CENVAT
Credit or
1% without
CENVAT
Credit
Impact
Proposal and Impact

Budget proposals

1) The budget proposes to reduce the rate of income tax on royalty and fees
for technical services from 25% to 10%.
2) Fibre network of 7.5 lakh kilometres in 2.5 lakh villages will be further sped
up by allowing willing states to undertake its execution on reimbursement
of cost determined by the Department of Telecommunications.
This is expected to enhance demand for such

services.
This will lead to new opportunities for telecom
equipment and infrastructure players
Impact on Companies
Company
Bharti Airtel
Reliance Communications
Idea Cellular
Bharti Infratel
Impact
Comments
+
+
+
+
Service providers will benefit from the increased expenditure on telecom services.
56
Warehousing and Logistics

Industry Snapshot:
The sector is expected to benefit from the proposed implementation of the goods and service tax (GST). A complicated tax
regime coupled with poor infrastructure has led to high logistics costs in India at around 14% of the total value of goods
against 7-8% in developed countries. GST, when implemented, will free the decisions on warehousing and distribution from
tax considerations, which, henceforth, would be based purely upon operational and logistics efficiency, thus leading to
development of various logistics hubs and overall improved efficiency in the sector.
Duty Structure
Customs Duty (%)
Service Tax
Before
12.36
After
14.00
Impact
Proposal and Impact

Budget proposals

1) Implementation of Goods and Service Tax (GST) from April 01, 2016.
2) Ports in public sector will be encouraged, to corporatize, and become
companies under the Companies Act.
3) Additional funds for Delhi Mumbai Industrial Corridor (DMIC) would be
made available by the government on requirement basis.
Expected to improve operational efficiency

and development of logistics hubs.
Expected to attract investment and leverage
the huge land resources.
This would expedite work on DMIC and hence
further improve transportation efficiency.
Impact on Companies
Company
Gati Ltd
Gateway Distriparks Ltd
Impact
Comments
=
=
No direct impact as there were no big ticket announcements related to logistics

and warehousing industry. However, increase in Service tax might have negative
implications.
57
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of information contained in this report is guaranteed. CARE Ratings is not responsible for any errors or omissions in
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Analysis of

Credit Analysis & Research Ltd.

Industry Allocation Sectors

Media and Entertainment.........................40

Mining and Minerals.................................41

Banking and Financial Services.............21-22

Oil and Gas...........................................44-45

Power (incl renewables)............................50

Engineering and Capital Goods............30-31

Roads and highways..................................52

Gems and Jewellery..................................36

Hospitals and Healthcare..........................37

Warehousing and Logistics........................57

Declining price levels

Stagnating trade outcome

Improved Balance of Payments

Macro-economic Indicators (%)

Forex Reserves ($ bn)

Challenges and Proposed Strategy

Putting Public Investment on Track the Rail Route to Higher Growth

Skill India to Complement Make in India

A National Market for Agricultural Commodities

The 14th Finance Commission

Outlook for FY16

Union Budget 2015-16

Tax revenue(net to center)

Non tax revenue

Disinvestment of Equity in PSE's

Internal Debt (Market Borrowings)

Gross Tax Revenue/ GDP

Major Non-Tax Revenue

Dividends and Profits

Dividends from PSEs and other Investments

Dividends/Surplus from RBI, Nationalized Banks and

Disinvestment of Government stake

Gross Borrowing Programme

Non plan Expenditure

Interest payments account for around 23% of the total expenditure

Debt/ GDP (%)

Railway Budget 2015-16

Ordinary Working Expenses

Dividend payable to General Revenues

Implications on economy and Industry

Proposal and Impact

Impact on the Industry

Key schemes announced

Proposal and Impact

Impact on the Industry

Key schemes announced

On account of increase in Visa on arrival to 150 countries, non-aeronautical

Engine & engine parts,

Engine & engine parts

Spark plug, distributors,

Spark plug, distributors,

Excise Duty (%)

Proposal and Impact

Impact on the Industry

Since there were no major announcements pertaining to the industry, the

Excise Duty (%)