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The Union Budget 2018-19 has gathered mixed reviews. While the Budget caters to the constituent sections of ‘Bharat’, it has missed out on the larger section of the middle class and the general public of India. With the implementation of demonetisation and the Goods and Services Tax (GST), this Budget held significance and hopes for India. As the Budget focussed on rural upliftment, it left behind the middle-classes. 

The first part of the Budget session catered predominantly to the agricultural sector and aimed at strengthening the rural economy, education, and healthcare for the vulnerable and marginalised.  The second part of the Budget was rather dull. It proposed to increase custom duty on mobiles, increase health and education cess, reintroduce standard deduction for salaried employees, and no promising news for the corporate sector. India, which is already plagued by a high capital cost, is likely to suffer major drawbacks from this Budget as it holds no promise for the growth of industries. However, special focus on the marginalised and certain positive outlays on infrastructure, education, and health is expected to raise the country’s economy and attract positive FDIs and push up the country’s GDP.

Infrastructure: The increased expenditure in infrastructure with a sum of Rs 50 lakh crore will enable India to become more competitive by reducing supply chain jobs. It shall also contribute to the growth in jobs and exports.

Finance Minister Arun Jaitley in his Budget speech has proposed to create world class infrastructure in the country. Ninety-nine cities have been selected with an outlay of Rs 2.09 lakh crore under the Smart City programme. The AMRUT programme will focus on providing water supply to all households in 500 cities. State level plans of Rs 77,640 crore for 500 cities have been approved. Water supply contracts for 494 projects, worth Rs 19,428 crore, and sewerage work contract for 272 projects, costing Rs 12,429 crore, has been earmarked.

Post-Budget, Pradeep Misra, CMD, Rudrabhishek Enterprises Limited, said, “There is adequate emphasis on the infrastructure sector. As the Finance Minister stated, under AMRUT scheme water supply will take various indices of development into consideration.  Construction of a tunnel under the Se-La pass in Arunachal Pradesh has been proposed that will develop 10 prominent tourist destinations as iconic tourism destinations. Airports Authority of India now has 124 airports which will be expanded by five times. Rs 1.48 lakh crore have been allocated for Indian Railways. All these initiatives will overall boost the infrastructure industry and benefit the other industries associated with the same. Focus on MSMEs will have direct impact on employment scenario. We were expecting the infrastructure industry status for the real estate sector, which has again been overlooked in the policy announcements. The rationalisation of the GST for the properties purchase was also required for the industry which is going through very sluggish phase.”

However, while infrastructure has been described as a growth driver of the economy, the Budget allocation for this sector is still not impressive.  While the Finance Minister said that the country needs `50 lakh crore for infra spending, he increased the budgetary allocation for the sector by a meagre Rs 1 lakh crore to Rs 5.97 lakh crore for the 2018-19 fiscal. Will the said allocation push up infra growth and generate necessary employment?  While the government’s attempt to improve the rural economy is laudable, it urgently needs good infrastructure. Big investments like that of a Golden Quadrangle are not being emphasised enough. Campaigns like ‘Make in India’ won’t suffice until progressive outlays are made to mend the sector.

Construction:  Budgetary allocations for infra will upswing related stocks like construction, metal and cement. The recently released Economic Survey 2018 had marked the deceleration in the real estate sector. According to the survey, the share of real estate sector which includes ownership of dwellings accounted for 7.7% of India’s overall GVA (Gross Value Added) in 2015-16. The growth of this sector decelerated in the last three years from 7.5% in 2013-14 to 6.6% in 2014-15 and further to 4.4% in 2015-16.

Accounting for the second highest inflows of FDI, real estate has been adversely affected by the big triad policy implementation of the central government in the short-term. The big-three policy initiatives are GST, demonetisation and Real Estate (Regulation and Development) Act, 2016. Budget 2018 had to compensate for all this.

According to Rakesh Tarway, Head Research, Reliance Securities, “Budget 2018 continued to put a strong focus on infrastructure development, which is in line with the expectations. FM has allocated an extra-budgetary support of Rs 5.97 lakh crore for the infrastructure sector, which is encouraging as India needs a large amount of investment in infrastructure due to growing needs.”

Anshul Jain, Country Head, Managing Director, India said, “The Union Budget 2018-19 has proved to be crucial, largely geared towards agriculture and social protection of the ‘aam aadmi’ through health, education and housing. The government has continued its focus on ‘Housing for all by 2022’ by announcing a dedicated affordable housing fund under priority sector lending. We believe that the fund, which will be set up in collaboration with National Housing Bank, will provide ease of credit to homebuyers, thereby giving a much-needed boost to demand for low-cost homes across the country.”

Rajeev Piramal, Vice Chairman & Managing Director, Peninsula Land Ltd., says, “Budget 2018 has been a mixed bag for real estate sector, the announcements made by the Government are very optimistic for affordable housing and will definitely attract more corporate players to enter this space. We welcome the Finance Minister’s decision of allocating budget for infrastructure spending on roads and construction that will definitely improve connectivity and boost housing demand, thus creating opportunities for new homes and development.”

The construction sector’s share in the Indian GDP has stayed constant between 7% - 8% over the past five years. Owing to the impact of construction delays and demonetisation, which affected residential sales, the growth in the sector remained sluggish during 2016 and is expected to decline from 3.9% in 2015–16 to 2.9% in 2016-17. But the real estate sector, which is the third largest employer and third-highest contributor to the Indian economy (after agriculture and manufacturing) in India and employs over 40 million workforce with forward and backward linkages to over 250 sectors and ancillary industries, has not got any special emphasis. This will not only hamper the realty companies, developers, and the consumers. This is likely to dampen the sector’s growth and reduce its employment prospects.  

Piramal said, “The real estate industry was looking forward to the long-pending demand of receiving infrastructure status and single window clearance for all real estate projects that will avoid project delays and increase transparency in the sector. Also, from home buyers’ perspective, additional relief on stamp duty and registration could have been reduced or merged with GST as that would ease the financial burden and expedite the decision of home buying.”

Energy: Not ignoring the fact that there is a steady rise in pollution, Budget 2018 had touched upon the importance of energy. To reduce the dependence on diesel pumps to irrigate crops, Arun Jaitley, in his Budget, offered incentives to farmers to shift to solar powered pumps. Surplus electricity generated by the farmers will be bought by state electricity distribution companies (discoms) and will help boost India’s emerging green economy.

While presenting his Budget, Arun Jaitley said, “Many farmers are installing solar water pumps to irrigate their fields. Government of India will take necessary measures and encourage state governments to put in place a mechanism that their surplus solar power is purchased by the distribution companies or licensees at reasonably remunerative rates.” The government is also looking forward to the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) to provide the architecture through which it will seek to reduce import of fossil fuels, boost underutilised power plants and meet its climate change commitments. Last year, Prime Minister Narendra Modi had also launched `16,320 crore scheme to provide electricity connections to more than 40 million families in rural and urban areas by December 2018. The reduce in price of solar plants and elimination of 5% customs duty on solar tempered glass used for manufacturing cells, panels and modules is a welcome move.

The Government of India had earlier set out a target of 10% reduction in energy imports by 2022, in order to move towards a self-sufficient India. This sector is the key to India’s growth, yet the per capita electricity consumption in the country is less than that of Africa’s and one-tenth of America’s levels. In fact, even though India is the third largest market in terms of gross electricity generation, it still has almost 250 million people without access to power.

If India is to reach the target of 40% renewables by 2040, $120 to $130 billion dollars will be required for the implementation of its renewable energy target of 175 GW by 2022. The magnitude of the task can be gauged by taking a look at India’s entire infrastructure sector debt, which is around $190 billion. India needs to go beyond its restricted financing mechanism and look at more prudent options such as bonds, capital markets and investment trusts or securitised loans.

Looking at the budgetary allocations, it is clear that the Budget presented was purely an election Budget.