India’s Prime Minister Narendra Modi’s government delivered an annual budget that laid out a slew of measures to bolster infrastructure for creating more jobs and attract investment ahead of next year’s national election.
With a year to go for national polls, it’s crucial for Modi to tackle the issues of high unemployment and inflation as he seeks to win a third consecutive term.
Finance minister Nirmala Sitharaman focused on farmers and women to deal with the inequities exacerbated by the pandemic.
The government increased capital spending 33% to IR10tn rupees ($122bn) that will enable the country to expand its network of roads, ports and airports, and make it an attractive investment destination.
2023 India budget winners
Agriculture
The government has increased spending on the farm sector, which accounts for about 19% of the economy. The budget proposes to spend IR22bn ($269m) on high-value horticulture and set up an agriculture accelerator fund to finance farm startups.
This will benefit companies such as Kaveri Seed, Dhanuka Agritech, Bombay Super Hybrid Seeds, Rashtriya Chemicals and Fertilisers.
Tourism
To capture the surge in travel demand, India will select 50 destinations to promote domestic tourism. It will also develop an app to guide tourists on food streets, security, physical and virtual connectivity to lift their experience.
Ticketing companies and hotels such as Indian Railway Catering and Tourism, Thomas Cook India, Indian Hotels and EIH will be the beneficiaries.
Infrastructure
Crucial to boosting last-mile connectivity, India has decided to build 50 additional airports, heliports and aerodromes, and identified 100 fresh projects.
Railways will benefit from a record capital outlay of IR2.4tn ($29.3bn). This is a win for airport operators such as Adani Airport Holdings, GMR Airports Infrastructure, GVK Airport Developers, and construction companies like Larsen & Toubro and Bharat Heavy Electricals.
Taxpayers
As expected, Modi’s administration gave some relief to taxpayers. Individuals with income up to IR700,000 ($8,500) won’t have to pay tax under the new income tax regime.
The number of tax slabs were reduced, while the maximum tax rate was cut to 39%. This will leave more money with the middle class and boost consumption demand.
Metal/Cement
Higher capital expenditure and investments for housing, infrastructure, railways announced in the budget are positive for steel mills and cement makers. Key gainers include Tata Steel, JSW Steel, and Jindal Steel & Power.
Electric Vehicles
India plans to provide impetus to green mobility by exempting import of capital goods required to manufacture lithium-ion cells used in electric vehicle batteries from customs duty.
This will be a boost for battery makers such as Exide Industries and Amara Raja Batteries and automakers like Tata Motors and Mahindra & Mahindra.
Green Energy
The budget provided IR350bn ($4.3bn) for investment in energy transition and carbon neutrality initiatives. The government will provide financial support to battery energy-storage systems with a capacity of 4,000 megawatt hours.
2023 India budget winners
Defence
The budget lacked impetus for defence manufacturing, said Gaurav Mehndiratta, partner and head of aerospace and defence at KPMG.
Military budget got a paltry increase of 7%, compared with a 33% increase in the nation’s overall capital expenditure, he said.
That’s a surprise given the rising tensions between India and China. State-run firms Hindustan Aeronautics and Mazagon Dock Shipbuilders, which have benefited from India’s local manufacturing push, were key decliners, falling more than 6% each.
Cigarette Makers
Shares of Godfrey Phillips India plunged in Mumbai after India increased a tax, effective Feb. 2, on specified cigarettes by about 16%.
Jewellers
Jewellery stocks dropped after the government left import taxes on gold unchanged despite demand from the bullion industry to reverse the hike announced in July.
The government also increased the import tax on silver. A higher tax increases the cost for consumers as the country imports almost all the bullion it consumes.
Benchmark gold futures in Mumbai rose as much as 1.3% to an all-time high of IR57,950 ($707) per 10 grams. Key losers would be Kalyan Jewellers, Titan Co and PC Jeweller.
Oil Refiners
Indian state-run refiners Indian Oil, Bharat Petroleum. and Hindustan Petroleum are likely losers as the government didn’t announce any compensation toward losses on keeping a check on diesel and gasoline prices.
There have been demands from the companies and the oil ministry to partly cover the losses via budgetary support.
Foreign Carmakers
Imported automobiles, including electric vehicles, will attract higher levies. The customs duty on cars and EVs priced above $40,000 and imported as completely-built units was increased to 70% from 60%.
Foreign carmakers like BYD and Mercedes Benz that rely on imported cars to serve Indian market will face challenges.
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