Finance Minister Nirmala Sitharaman laid out India’s budget for the financial year starting April 1, 2022, on Tuesday. The pandemic has crippled small businesses and widened inequalities. India is Asia’s third-largest economy and the budget calls for bigger spending as it is recovering from the pandemic.
There were expectations that the budget will address issues of high unemployment amid the elections, economic uncertainty and global headwinds. Ahead of national elections in 2024, the state elections this year will help to assess the Modi Government’s popularity.
Major stock market indices gained points on Tuesday. The BSE Sensex gained 1.46%. Benefits for unlisted companies and capping the long-term capital gains at 15% buoyed the markets.
It is proposed that the Indian economy’s spending for the financial year 2022-23 will be ₹39.5 trillion ($529 billion). Spending on housing, infrastructure, defence and agriculture are expected to have a multiplier effect on the economy.
Winners: Sectors that will benefit from the budget
EV Battery Makers
The new battery swapping policy for electric vehicles will benefit most battery makers and help to promote clean transport technology. Beneficiaries will exclude Exide Industries Limited and Amara Raja Batteries Limited.
Transport and Infrastructure
Introduction 400 new Vande Bharat trains in India within the next three years will benefit infrastructure players including Larson & Toubro, KNR Constructions Limited, GMR Infra Ltd., IRB Infra Ltd., Container Corporation of India Ltd, Allcargo Logistics Ltd. and IRCTC.
Oil and Gas
Differential excise duty on unblended fuel will help oil and gas companies as they are transitioning towards cleaner fuel. This will open up additional avenues of financing green projects.
Metals
India’s metal producers including Vedanta Limited, JSW Steel Ltd., Tata Steel Ltd., Jindal Stainless Ltd., KSB Ltd., Pipemakers Jain Irrigation Systems Ltd., Kirloskar Brothers Ltd., could benefit from the Government’s 600 billion rupee allocation for piped water to 38 million homes under the Nal se Jal Scheme.
Solar
Companies like Tata Power, Suzlon Energy, Adani Enterprises Ltd and Reliance Industries Ltd. and more will benefit from the production linked incentives worth 195 billion rupees for solar modules. This government plans to achieve net-zero emissions by 2070 and is rigorously moving towards achieving this goal.
Cement, Construction
The government plans to build more homes for low-income earners in various cities. Cement and construction companies will gain from this as they might get more contracts. Some of the major companies in this sector are UltraTech Cement Ltd., Birla Corp., Ambuja Cements Ltd., and ACC Ltd., amongst others.
Telcos, Data Centres
5G auctions will take place in 2022 and help to boost the telecom sector. Data storage has been classified as infrastructure spending and this will benefit companies like Bharti Airtel Ltd. Reliance Industries Ltd., Vodafone Idea Ltd., HFCL Ltd, Mahanagar Telephone Nigam Ltd., Sterlite Technologies Ltd., Tejas Network Ltd., and more.
Digital Finance
The budget is focused on expanding digital financial services and this will benefit the digital finance sector. Companies like Paytm’s owner One 97 Communications Ltd., PB Fintech Ltd., the parent of PolicyBazaar, Paisalo Digital Ltd. and eClerx Services Ltd. will benefit.
Defence Manufacturers
Nirmala Sitharaman’s plan to earmark 68% of the sector Capex for local companies in the annual budget will benefit companies manufacturing defence equipment. Paras Defence and Space Technologies Ltd., Bharat Forge Ltd., Larsen & Toubro Ltd., will gain from this.
Apart from this drone startups like New Space India Ltd, BotLab Dynamics and Zeus Numerix might be benefitted. Private players will be encouraged to collaborate with the DRDO and other organizations through the SPV Model.
Healthcare and Insurance
The government might increase spending in healthcare companies and increase access to better medical care and provide tax relief to individuals buying health insurance. This will benefit healthcare, pharmaceutical and insurance companies.
Textile
Phasing out of customs duty exemptions on fabrics will support the growth of domestic textiles manufacturing in the long run. The extension of the emergency credit guarantee scheme for MSMEs for one more year will benefit them.
Gems and Jewellery
Customs duty on cut and polished diamonds and gemstones will be reduced to 5%. Export of jewellery through e-commerce will be facilitated. This will boost the industry.
Losers: Sectors that will get affected by the budget
State-Run Banks
Traditional banking will get affected as India plans to start a digital currency. State-run banks like State Bank of India Ltd., Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India and Union Bank of India might get affected.
Crypto Players
Though the government did not ban cryptocurrencies, they have decided to levy a 30% tax on profits from digital asset transactions like the ones from cryptocurrencies and non-fungible tokens. This will make trading in cryptocurrencies less profitable. Crypto exchanges like WazirX, CoinDCX, Coinswitch Kuber, Zebpay, etc will get affected.
Coal and Thermal Power
In a bid to use cleaner fuels like solar power and biomass pellets, the demand for coal might get affected. This will in turn affect companies like Coal India Ltd., Adani Enterprises Ltd. and Singareni Collieries Co.
Stainless Steel
The budget proposes to revoke anti-dumping duty and countervailing duties on stainless steel, bars of alloy steel and high-speed steel and coated steel flat products, amid rising metal prices. This will impact companies like Tata Metaliks Ltd. and Jindal Stainless Ltd.
Automobile makers
The semiconductor crunch is affecting car manufacturers like Tata Motors Ltd, Maruti Suzuki India Ltd., Mahindra and Mahindra Ltd. This sector received little attention in the budget and the S&P BSE Auto Index was one of the worst performers after the budget’s announcement on Tuesday.
