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Union Budget 2019 – What is in it for the investors and the industry?

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Publish Date: July 05th, 2019

By: Sandhya Kannan, Head – Content

In the run-up to the Union Budget presentation on July 5, the Stock Exchange was trading at less than a percentage change since the previous day. Investors have been keen on finding out how the government plans to increase consumer demand and boost revenues.

During her opening speech, the Finance Minister mentioned the government’s vision for the decade. With the spotlight on MSMEs, defence manufacturing, commercialisation of space technology and foodgrain exports, the announcements were significant for both, investors and industries. The government intends to open up new space to private players through disinvestment. In addition to this, an improvement in compliance framework could also reduce compliance hassles for corporates and individuals.

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Here’s a look at the announcements made during the Union Budget 2019 speech that could be of interest to retail and institutional investors in India, as well as the industry as a whole.

  • Infrastructural announcements around industrial corridors, dedicated freight corridors, river cargo routes open up newer avenues of industrial investments.
  • While the Aviation sector stands to benefit from the UDAN scheme, the FM also disclosed plans of aircraft financing, leasing activities, and building an ecosystem for Maintenance, Repair and Overhaul industry to achieve self-reliance in this sector.
  • New metro rail projects have been approved, and renewed impetus has been given to the Electric Vehicle segment.
  • The government is inviting private players to help in building public infrastructure in land parcels available to the government.
  • The FM declared ease of credit scheme for MSMEs, faster release of government payments and creation of a payment platform specifically for MSMEs.
  • To fuel investment-driven growth, investors will be able to avail of low-cost capital. This will include setting up of a Credit Guarantee Enhancement Corporation and an action plan to deepen the market for long-term bonds.
  • The FM has asked SEBI to reconsider the minimum public shareholding threshold from 25% to 35%.
  • The government plans to open up Foreign Direct Investment (FDI) in sectors like aviation, media and insurance, after consulting with stakeholders.
  • 100% FDI to be allowed in insurance intermediaries, and local sourcing norms to be eased for single brand retail.
  • The government plans to organise Global Investors Meet in India with the National Infrastructure Investment Fund (NIIF) as the anchor.
  • Making investment opportunity available for Foreign Portfolio Investors, and providing access to Indian equities to NRIs as well, through these series of initiatives.
  • New Space India Limited to be acting as the new commercial arm of Department of Space. This opens up commercial opportunities in this sector.
  • Apart from the reduction of NPA and consolidation in the public banking sector, credit guarantee has been offered for the purchase of high-rated pooled assets of NBFCs.
  • There has also been a proposal to increase the regulatory authority of RBI over NBFCs.
  • A change in the stake structure of PSUs is proposed, with a reduction in the minimum government stake below 51%, on a case-to-case basis. The 51% is set to include the stake of government-controlled corporations as well.
  • The government intends to further encourage public participation in Central Public Sector Enterprises via strategic disinvestment and long-term ETF investment schemes in CPSEs steps in this direction.
  • The FM has proposed to restrict Security Transaction Tax (STT) to the difference between settlement and strike price in case of exercise of options. This change, however, will not affect the levying of STT on any other transaction on the exchanges.
  • The rate of 25% corporate tax is now applicable to companies with an annual turnover of up to Rs 400 crore (from the earlier Rs 250 crore). This move will cover 99.3% of all companies in India.
  • The government to launch a scheme to invite global companies to set-up mega manufacturing plants in India.
  • The government plans to resolve the “angel tax” issue and reduce the stringency for start-ups. Valuation of shares issued to Alternative Investment Funds by start-ups will also be entirely outside the scope of Income Tax scrutiny. Additionally, start-ups will also enjoy relaxation in the set-off and carry forward of losses.
  • Relaxation in return filing under GST is proposed, along with free accounting software, automated refund, electronic invoice system and even elimination of e-way bill by January 2020.
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