A WINDFALL FOR RURAL

AND AGRICULTURE.
PEANUTS FOR THE SALARIED.
PRESENTING THE BUDGET E-BOOK.

Budget Spends
on Rural
2013-14
2014-15
2015-16

SHARP
ANALYSIS.
SHARPER
MINDS.
37,330
Crores

2013
2014

33,150
Crores

2014
2015

30,645
Crores

Budget Spends
on Health

2015
2016

Budget Spends on
Primary Education

2013-14
2014-15
2015-16

26,855
23,700 Crores
Crores

74,478 Crores
82,202 Crores
79,526 Crores

ASSOCIATE SPONSORS:

2013
2014

2014
2015

2015
2016

74,478 Crores
82,202 Crores
79,526 Crores

OVERVIEW
BUDGET SNAPSHOT

As widely expected, Budget 2016 had an overwhelming thrust on the rural sector which has been badly hit by
the double whammy of twin droughts and unseasonal rains. Also, the Finance Minister chose to tread the path of
fiscal discipline by sticking to the fiscal deficit targets of 3.9 percent for FY16 and 3.5 percent for the
coming year.

However, it was a mixed bag, which among other things was expecting a higher bank recapitalisation figure than
the scheduled Rs 25,000 crore for FY17, and a greater push for infra spending to boost the investment cycle.
Also, the proposal to tax dividends above Rs 10 lakh in the hands of the investor and increase in securities
transaction tax for options trades have come as dampeners.

A slight relief was the absence of the dreaded increase in tenure for long term capital gains tax.

Given the constraints arising out of the impending implementation of the Seventh Pay Commission
Report and One Rank One Pension, expectations from the Budget were anyway low. In that sense, the
Budget was pretty much on expected lines.

BUDGET AT GLANCE
The salaried class would have reason to feel
disappointed with the Budget, given that there
was barely anything in it for them.

For those with annual income below Rs 5 lakh, the

rebate under section 87A has been increased to
Rs 5000 from Rs 2000. Also, the exemption limit
for payment towards rent has been raised to Rs
60,000 from Rs 24,000. But the catch here is that
only those who do not get house rent allowance
6and do not own a house will be eligible for the
higher limit.

The higher allocation for the rural sector and farming was required considering that rural recovery is key to
overall GDP growth. Yet, it remains to be seen whether these measures in themselves can help revive rural
demand anytime soon.

The farming sector has been allocated around Rs 36,000 crore, while spending on irrigation has been
trebled to around Rs 17,000 crore. Around Rs 5,500 crore has been earmarked for the crop insurance
scheme, and Rs 19,000 crore for rural roads.

In addition, close to Rs 87,000 crore has been allocated for rural development and around Rs 2.87 lakh
crore has been proposed as grants for rural bodies in FY17.

OVERVIEW
BUDGET SNAPSHOT
The Budget proposes to spend another Rs 1.51 lakh crore on the social sector including education and
health care.

Analysts have been maintaining that a rebound in the property sector is key to demand recovery in
rural India, and that is not going to happen in a hurry.

Even while sticking to the fiscal deficit target of 3.5 percent for FY17, the FM has tried to do his bit for
infrastructure spending. A total of Rs 97,000 crore--including Pradhan Mantri Gram Sadak Yojana-has been earmarked for roads in FY17.

MARKET
SNAPSHOT
NIFTY

SENSEX

MARKET
SNAPSHOT
After a tumultuous ride, the market ended lower on Union Budget day. See-sawing around 849
points, the Sensex swings were quite heady for investors throughout the day. As Finance Minister
Arun Jaitley read out his Budget proposals for FY17, investors knee jerk reaction eroded almost 660
points from the benchmark indices. However, that did not last long and the biggest culprits ITC and
SBI erased losses to pick pace in the market.

A lower-than-expected recapitalisation of Rs 25000 crore hurt PSU banks especially SBI while ITC
was reacting to excise duty of 15 percent on tobacco products. Both the stocks recovered and ended
with 1-2 percent gains. At remaining hours of trade, ONGC, Infosys and Maruti dragged market. ONGC
slumped 10 percent, Infosys fell over 3 percent while the auto car maker lost 5 percent at closing.

The Sensex ended down 152.30 points or 0.7 percent at 23002, and the Nifty slipped 42.70 points or
0.6 percent at 6987.05. Samir Arora, Founder & Fund Manager at Helios Capital says the biggest
disappointment is the recapitalisation of Rs 25,000 crore for public sector banks. Arora says that it is
like trying to say (we) dont believe in the issue. What also hurt market sentiment today was
increase in securities transaction tax (STT).

Rate of STT in options is proposed to be increased from 0.017 percent to 0.05 percent. Ramesh
Damani, Member, BSE that the Finance Minister has chosen wisely by imposing STT and dividend
distribution tax instead of tinkering with long-term capital gains tax and has also kept sales tax
stable. Post Budget, Citi maintains a positive view on India, with a 27200 December 2016 Sensex
target. However, it says Budget is unlikely to fire the market or the mood. It says rating agencies and
RBI should like the decisive call on fiscal consolidation.

MARKET
SNAPSHOT
Meanwhile, Standard & Poor's retained its sovereign rating on India despite the government sticking
to its fiscal deficit target in Budget as it waited for further improvement in public finances. S&P said it
would wait for the government to improve its net debt and fiscal consolidation and does not expect
to change India's BBB- rating with a 'stable' outlook until next year. Jaitley said that the government
will be able to meet its FY16 fiscal deficit target at 3.9 percent of GDP and reiterated its commitment
to containing fiscal deficit at 3.5 percent of GDP in FY17.

Auto, capital goods and IT stocks were under selling pressure throughout the day. Auto stocks
reacted negatively to FMs proposal for a 1-4 percent infrastructure cess on cars across categories.
There will be a cess of 1 percent on small petrol and CNG cars, 2.5 percent on diesel cars of certain
capacity and 4 percent on other higher engine capacity vehicles and SUVs. Also, tax will be collected
at source of 1 percent on purchase of luxury cars exceeding value of Rs 10 lakh. IDBI Bank jumped 5
percent, as the government will also consider option of reducing its stake to below 50 percent. Oil
marketing companies rallied while ONGC fell 10 percent as the FM did not make any proposal for a
re-imposition of 5 percent customs duty on crude. But aviation stocks tumbled on a hike in excise
duty on aviation turbine fuel to 14 percent from 8 percent. Foreign institutional investors net sold Rs
2,018 crore worth of equity shares today while domestic institutional investors bought Rs 1,445 crore
worth of shares today, as per provisional data available on exchanges. About 1087 shares advanced,
1395 shares declined, and 157 shares were unchanged.

15 KEY HIGHLIGHTS FROM

THE UNION BUDGET 2016-17
1. To stick to the fiscal roadmap; FY17 fiscal deficit target retained at 3.5%
2. Around Rs 36,000 crore to be allotted to agriculture and farmer welfare
3. Provision of Rs 15,000 crore to reduce burden of loan repayment on farmers
4. Rs 5500 crore to be provided towards crop insurance scheme
5. Around Rs 88,000 crore to be allotted to rural sector
6. Rs 38,500 crore to be allotted to rural employment guarantee scheme
7. Every village in the country to have electricity by May 1, 2018
8. Social sector, including healthcare and education to get Rs 1.51 lakh crore
9. Total investment in the road sector, including highways and village roads to be Rs 97,000 crore
10. Krishi Kalyan Cess, @ 0.5% on all taxable services, effective 1 June 2016
11. Limit of deduction of rent paid under section 80GG to be raised to Rs 60,000 per annum from Rs 24,000
12. New manufacturing companies incorporated on or after 1.3.2016 to be given an option to be taxed at 25%
+ surcharge and cess provided they do not claim profit linked or investment linked deductions
13. 100% deduction of profits for 3 out of 5 years for startups setup during April, 2016 to March, 2019.
14. Deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17
for first time home buyers, where house cost does not exceed Rs 50 lakh.
15. Domestic taxpayers can declare undisclosed income by paying tax at 30%, and surcharge at 7.5% and
penalty at 7.5%, which is a total of 45% of the undisclosed income

AGRICULTURE
ANNOUNCEMENT :
- 'Pradhan Mantri Krishi Sinchai Yojana to be implemented in mission mode
- Implementation of 89 irrigation projects under AIBP, which are languishing for a long time, will be fast tracked
- A dedicated Long Term Irrigation Fund will be created in NABARD with an initial corpus of about Rs 20,000
crore
- 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the
next three years
- Unified Agricultural Marketing ePlatform to provide a common e-market platform for wholesale markets

IMPACT :
Battered by a multi-year slowdown, thanks to two back-to-back drought years and unseasonal rains, the farm
sector is crying out for help. The government's Rs 36,000 crore agriculture package will help lift the farm economy -- on which more than half of India's population still lives -- from its rut.

RURAL SECTOR
ANNOUNCEMENT :
- A sum of Rs 38,500 crore allocated for MGNREGS
- 100% village electrification by 1st May, 2018
- A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional household within the
next 3 years
- National Land Record Modernisation Programme has been revamped

RURAL SECTOR
IMPACT :
The broader rural economy, which is in part driven by the farm sector, too has been ailing. For most part of the last
decade, the rural economy was India's strongest growth engine. A mega Rs 88,000 crore push will hopefully help
kickstart it again.

SOCIAL SECTOR
INCLUDING HEALTHCARE
ANNOUNCEMENT :
- Total allocation for social sector including education and healthcare at Rs 1.51 lakh crore.
- New health protection scheme will provide health cover up to Rs 1 lakh per family. For senior citizens, an additional top-up package up to Rs 30,000 will be provided.
- National Dialysis Services Programme to be started under National Health Mission through PPP mode

IMPACT :
A greater allocation for the social sector will have ripple effects across the economy, and boost healthcare and
pharma sectors. By improving health security, it will also be long-term beneficial for the economy's dynamism.

EDUCATION, SKILLS AND

JOB CREATION
ANNOUNCEMENT :
- 62 new Navodaya Vidyalayas will be opened
- Sarva Shiksha Abhiyan to increasing focus on quality of education
- Higher Education Financing Agency to be set-up with initial capital base of Rs 1000 crore

IMPACT :
Will boost employment opportunities over the long term and help improve the economy's competitiveness.

INFRASTRUCTURE
ANNOUNCEMENT :
- Total investment in the road sector, including PMGSY allocation, would be Rs 97,000 crore during 2016-17.
- Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment

IMPACT :
An increased focus on infrastructure helps create more economic activity -- the multiplier effect. This adds to the
GDP growth rate.

OIL AND GAS

ANNOUNCEMENT :
- To provide calibrated marketing freedom in order to incentivise gas production from deep-water, ultra
deep-water and high pressure-high temperature areas.

IMPACT :
Will give a new lease of life to exploration activities in the gas sector, which has recently battled regulatory overhang and the global commodity rout.

FINANCIAL SECTOR
ANNOUNCEMENT :
- Allocation of Rs 25,000 crore towards recapitalisation of Public Sector Banks.
- General Insurance Companies owned by the government to be listed in the stock exchanges.
- Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.
- Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC
and permit non institutional investors to invest in Securitization Receipts.
- Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.
- Increasing members and benches of the Securities Appellate Tribunal.
- Securities transaction tax (STT) on options increased from 0.017 percent to 0.05 percent.

FINANCIAL SECTOR
IMPACT :
More fund infusion, easier investment norms, greater transparency and stricter recovery norms will help shake up
the country's struggling financial sector. Laws to curb Ponzi schemes will help the poor from getting fleeced.
Higher STT to be a negative.

DIRECT TAX
ANNOUNCEMENT :
- Raise the ceiling of tax rebate under section 87A from Rs 2000 to Rs 5000 to lessen tax burden on individuals
with income upto Rs 5 lakh.
- Increase the limit of deduction of rent paid under section 80GG from Rs 24000 per annum to Rs 60000, to
provide relief to those who live in rented houses.

IMPACT :
More money in the hands of taxpayer will boost consumption.

MAKE IN INDIA
ANNOUNCEMENT :
- Changes in customs and excise duty rates on certain inputs to reduce costs and improve competitiveness of
domestic industry in sectors like Information technology hardware, capital goods, defence production, textiles,
mineral fuels & mineral oils, chemicals & petrochemicals, paper, paperboard & newsprint, Maintenance repair and
overhauling [MRO] of aircrafts and ship repair.

IMPACT :
Will boost manufacturing in the country and help improve the economy's competitiveness.

REAL ESTATE
ANNOUNCEMENT :
- 100 percent deduction for profits to an undertaking in housing project for flats upto 30 sq. metres in four metro
cities and 60 sq. metres in other cities, approved during June 2016 to March 2019 and completed in three years.
- Deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17 for
first time home buyers, where house cost does not exceed Rs 50 lakh.
- Distribution made out of income of SPV to the REITs and INVITs having specified shareholding will not be
subjected to Dividend Distribution Tax, in respect of dividend distributed after the specified date.

REAL ESTATE
IMPACT :
Will help kickstart the real estate sector and boost affordable housing. DDT exemption to boost the REIT market.

AUTO
ANNOUNCEMENT :
- An infrastructure cess, of 1 percent on small petrol, LPG, CNG cars, 2.5 percent on diesel cars of certain capacity
and 4 percent on other higher engine capacity vehicles and SUVs.

IMPACT :
Will result in cars getting costlier. A negative for the sector.

CONSUMER SECTOR
ANNOUNCEMENT :
- A 0.5 percent Krishi Kalyan Cess on all services

IMPACT :
Will result in all services getting marginally costlier. May have a slight impact on consumption.

SEE WHAT OUR

EXPERTS HAVE TO SAY

EXPERTS
UDAY KOTAK

Executive Vice Chairman and Managing Director, Kotak Mahindra Bank

The fact that the government has had the courage to control deficit at 3.5
percent down from 3.9 percent this year with higher Pay Commission and
One Rank, One Pension (OROP) itself is a very significant thing for Indian
bond markets in particular.

DEEPAK PAREKH
Chairman, HDFC

People who earn more have to pay more taxes. We are not the highest
paying tax payer in the highest paying nation in the world and if you earn
more than Rs 10 lakh, I think it is just fair to pay 10 percent of that as
additional income and you have to make up revenues.

SAMIR ARORA

Fund Manager, Helios Capital

The big picture is that you avoided service tax which we had more or less
accepted at two percent increase, and also the fears on long term capital
gains taxes turned out to be unfounded. The biggest negative is no extra
funds for bank recapitalisation.

EXPERTS
VALLABH BHANSALI

Co-founder and Chairman, Enam Financial Consultants

The question of whether Budget is really an occasion to restructure the
way the country is governed, is a moot point and that follows from much
greater political will or political opportunism. It would have happened in
the first Budget or the second Budget. Third Budget, that kind of surgery
normally does not happen.

RAMESH DAMANI
Member, BSE

You can keep taxing something from various angles but given the tradeoffs
that he was doing between long-term capital gains (LTCG) and dividend
distribution, I think he made the wise choice. However, more importantly,
its an event out of the way. He has kept service tax also stable, so market
will find good reason to cheer ultimately.