Largely as expected; Capex, sustainability – Core focus

INSTITUTIONAL EQUITY RESEARCH

Union Budget 2023-24

Largely as expected; Capex, sustainability – Core focus
1 February 2023
INDIA STRATEGY | Budget Review

Budget fared well across categories – prudent fiscal position, steep rise in capex allocations, SECTORAL IMPACT
continued focus on sustainability, Atmanirbhar Bharat, and social upliftment.
Incentivization of the new tax regime was anticipated, but gains are limited to income group
of under Rs 1mn/annum, others are expected to stay in the old tax regime. After witnessing
massive capex rise in FY22-23, FY24 is budgeted to record a stupendous growth of 37%; POSITIVE
capex has trebled between FY20-24. Buoyant public and private capex keeps us positive on
the investment sectors (capital goods, railways, cement, logistics; defence is a tad soft – as Automobiles
expected) more than the discretionary segments. We are also positive on the agriculture
Capital Goods
space, government’s focus on raising domestic production, and eventually encouraging
exports – is a long-term positive for rural income. Near-term, we are not positive on rural Cement
demand, FY24 allocations not encouraging. Infrastructure
Capex budgetary allocations have risen sharply in FY24 (up 37% vs. 23% in FY23); including Logistics
IEBR, growth stands at 32%/10% in FY24/23. Incremental capex allocation in FY24 is highest Metals & Mining
for railways, roads, infra spending by states, and energy; defence and housing are muted;
Midcaps
additional allocation of Rs 550bn has been made towards OMCs and BSNL capital infusion.
Sharp drop in food and fertiliser subsidy (Rs 1.6tn) is in the expected lines. MNREGA
allocations have also see a sharp decline to Rs 600bn vs. Rs 894bn in FY23RE.
Fiscal deficit for FY24/23 is in line with our expectation – at 5.9%/6.4% of GDP; gross/net NEUTRAL
borrowing expectedly remains elevated at Rs 15.4tn/11.8tn, marginally higher vs. FY23. We
expect this to keep yields elevated in the near future until clarity emerges on RBI rate
Agriculture Inputs
reduction path (likely by Q3-Q4 FY24). State fiscal deficit limit has been set at 3.5%
(including 0.5% for power sector reforms). Tax/GDP ratio at 11.1% bakes in all optimism, we Chemicals
expect marginal slippage considering likely economic softness in FY24. Revenue Healthcare
expenditure/disinvestment targets are realistic, marginal slippage also expected under non- Bank and Financial Services
tax revenue. FM reiterated the stance of achieving fiscal deficit of 4.5% by FY26.
FMCG
Green Growth Plans: The government aims to achieve the net-zero emission target by 2070,
and spur clean energy usage: (1) Green Hydrogen - outlay of Rs 197bn for low carbon intensity;
annual production of 5 MMT by 2030. (2) Rs 350bn for priority capital investments towards
energy transition and net zero objectives. (3) Viability-gap funding for Battery Energy Storage
Systems (capacity of 4,000 MWH). (4) Green Credits to incentivize environmentally sustainable
and responsive actions by corporates/individuals. (5) Incentives/schemes to promote
alternative fertilizers, natural farming, micro-fertilizer, and mangrove plantation. (6) 500 new
‘waste to wealth’ plants. (7) Allocated adequate funds to scrap old government vehicles. (8)
Exempted excise duty on GST-paid on compressed bio gas. (9) Extended customs duty
exemption on import of capital goods/machinery for manufacture of Li-ion batteries in EVs.
Atmanirbhar bharat, Start-Ups, and MSMEs – Government policy support continued: FM
altered customs duty to encourage domestic production and exports of electronics, EVs,
chemicals etc. 3 AI institutions to be set up focusing on agriculture, health, and sustainable
cities. Tax benefits for Start-ups extended to Mar’24 along with carrying forward of losses to
10-years vs. 7-years earlier. ECLGS scheme saw capital infusion of Rs 90bn to provide collateral
free loans to MSMEs. Additionally, limits of MSME were enhanced to Rs 3cr (from 2cr) for
availing benefits of presumptive taxation. DigiLocker for online documentation of MSMEs etc.
Promotion/Incentivization of Gift City: GIFT City – The government will facilitate setting up
of international data embassies for KYC benefit in the IFSC GIFT City. India will delegate powers
under the SEZ Act to International Financial Services Centres Authority (IFSCA) to avoid dual Anjali Verma
regulation and IFSC act will be amended to include arbitration. FM allowed recognition of (+ 9122 6246 4115)
offshore derivative instruments (ODIs) as valid contracts, this will attract FPI investment after anverma@phillipcapital.in
a gap of 4 years (ODIs earlier banned by SEBI). EXIM Bank to be set up at GIFT IFSC for trade
refinancing (to encourage emerging sectors such as aircraft and ship financing activities). To India Research Team
reduce the compliance and red tape, a single window IT system will be set up for registration
and approval from IFSCA, SEZ authorities, GSTN, RBI, SEBI and IRDAI. The Budget has
permitted acquisition financing by IFSC banking units of foreign banks.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

FY24 key fiscal parameters

• Headline capital expenditure to grow by 37% for FY24. It grew by 8%/23% in
FY23RE. Revenue expenditure to grow by a meagre 1%.
• Gross Tax-GDP ratio is estimated at 7.7% vs. 7.6% in FY22RE. Gross Tax Revenue is
expected to grow by 10% in FY24 over the 12% growth in FY23RE.
• Gross market borrowing at Rs 15,430bn (5.1% of GDP) vs. Rs 14,210bn (5.2% of
GDP) in FY23RE.
• Net market borrowing to increase by Rs 727bn to Rs 11,809bn vs. Rs 11,082bn in
FY23RE.
• States’ share in tax is estimated to be stable at 30% of gross tax revenue, as it was
in FY23RE; pay-out in FY23 was significantly higher – by Rs 991bn – than initially
budgeted.
• Disinvestment target of Rs 650bn revised lower to Rs 500bn in FY23RE. FY24
divestment receipts target at Rs 510bn.
• Telecom receipts was revised higher to Rs 688bn in FY23 vs. Rs 528bn budgeted.
FY24, too, to see higher telecom collections at Rs 895bn.
• Dividends from RBI and PSU revised lower to Rs 840bn while FY24 estimates at Rs
910bn (8% yoy growth).

Where will money be spent in FY24? Additional government spending in FY24 is Rs

3,159bn. Share of additional spending: Interest (44%), transport (40%), transfer to
states (17%), energy (8%), defence (7%), IT & telecom (6%), education/health (4%), and
home affairs/social welfare/agriculture (3%). Expenditure contracted by 28% for
subsidies with allocation for food subsidy lower by Rs 898bn, fertiliser subsidy (Rs
501bn) and petroleum subsidy (Rs 69bn).

Where is the FY24 money coming from? Total receipts breakup: Borrowings & other
liabilities (34%), GST (17%), corporation tax (15%), income tax (15%), union excise
duties (7%), non-tax revenue (6%), customs (4%) and non-debt capital receipts (2%).

Are the estimates realistic?

Slight shortfall expected in tax and non-tax revenue along with capex.

Major government schemes (yoy, Rs)

Up: National Rural Drinking Water Mission (Rs 150bn), construction of new railway line
(Rs 69bn), National Education Mission (Rs 63bn), Swachh Bharat Mission (Rs 52bn),
metro projects (Rs39bn), National Health Mission (Rs 31bn), Pradhan Mantri Krishi
Sinchai Yojana (Rs 27bn), Pradhan Mantri Awas Yojna (Rs 25bn), National Ganga plan
(Rs 15bn), police infrastructure (Rs 14bn), road safety works (Rs 14bn), modernisation
of police forces (Rs 13bn), crop insurance scheme (Rs 12bn), Urban Rejuvenation
Mission : AMRUT (Rs 7bn), Interest Equalisation Scheme (Rs 6bn), Saksham Anganwadi
and POSHAN 2.0 (Rs 3bn), National Livelihood Mission (Rs 2bn), Prime Minister
Employment Generation Program (Rs 2bn) and Rashtriya Krishi Vikas Yojna (Rs 2bn).

Down: Food subsidy to FCI under Food Security Act (Rs 775bn), MNREGA (Rs 294bn),
nutrient-based subsidy (Rs 271bn), urea subsidy (Rs 230bn), food subsidy for
decentralized procurement under NFSA (Rs 125bn), Pardhan Mantri Swasthya
Suraksha Yojana (Rs 49bn), Pradhan Mantri Poshan Shakti Nirman (Rs 12bn).

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Central government fiscal account

___________Rs Bn_____________ ___________% of GDP___________ ________yoy growth (%)_______
FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE
Nominal GDP 236646 258000 273078 301751 19.5 9.0 15.4 10.5
Revenue receipts 21699 22044 23484 26323 9.2 8.5 8.6 8.7 32.8 1.6 8.2 12.1
Tax (net) 18048 19348 20867 23306 7.6 7.5 7.6 7.7 26.5 7.2 15.6 11.7
Non – tax 3651 2697 2618 3017 1.5 1.0 1.0 1.0 75.8 -26.1 -28.3 15.2
Capital receipts 16239 17405 18388 18708 6.9 6.7 6.7 6.2 -13.4 7.2 13.2 1.7
Recovery of loans 247.4 142.9 235.0 230.0 0.1 0.1 0.1 0.1 25.6 -42.2 -5.0 -2.1
Other receipts (mainly PSU disinvestment) 146.4 650.0 235.0 230.0 0.1 0.3 0.1 0.1 -61.4 344.0 60.5 -2.1
Borrowings and other liabilities 15845 16612 235 230 6.7 6.4 0.1 0.1 -12.9 4.8 -98.5 -2.1
Total receipts 37938 39449 41872 45031 16.0 15.3 15.3 14.9 8.1 4.0 10.4 7.5
Total revenue expenditure 32009 31947 34590 35021 13.5 12.4 12.7 11.6 3.8 -0.2 8.1 1.2
Total capital expenditure 5929 7502 7283 10010 2.5 2.9 2.7 3.3 39.1 26.5 22.8 37.4
Total expenditure 37938 39449 41872 45031 16.0 15.3 15.3 14.9 8.1 4.0 10.4 7.5
Fiscal deficit 15845 16612 17553 17868 6.7 6.4 6.4 5.9 -12.9 4.8 10.8 1.8
Revenue deficit 10310 9902 11105 8699 4.4 3.8 4.1 2.9 -28.9 -4.0 7.7 -21.7
Effective Revenue deficit 7884 6726 7850 4999 3.3% 2.6% 2.9% 1.7% -35.3% -14.7% -0.4% -36.3%
Primary deficit 7790 7205 8147 7068 3.3% 2.8% 3.0% 2.3% -31.6% -7.5% 4.6% -13.2%
Gross Market Borrowing 9690 14950 14210 15430 6.4% 5% 4.5% 5.8% -23.1 54.3 46.6 8.6
Net Market Borrowing 7041 11186 11082 11809 5.2% 4% 3.3% 4.3% -31.8 58.9 57.4 6.6
Source: Budget Document, PhillipCapital India Research

Gross tax components

______ ________Rs Bn_______________ ____________YoY Growth____________ _____________% of GDP_____________
FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE
Gross Tax Revenue 27093 27578 30431 33609 33.7% 1.8% 12.3% 10.4% 11.4% 10.7% 11.1% 11.1%
Direct Tax 14083 14200 16500 18233 49% 1% 17% 11% 6.0% 5.5% 6.0% 6.0%
Personal Income Tax 6962 7000 8150 9006 43% 1% 17% 11% 2.9% 2.7% 3.0% 3.0%
Corporation Tax 7120 7200 8350 9227 56% 1% 17% 11% 3.0% 2.8% 3.1% 3.1%
Indirect tax 13010 13378 13931 15376 20% 3% 7% 10% 5.5% 5.2% 5.1% 5.1%
GST 6981 7800 8540 9566 27% 12% 22% 12% 3.0% 3.0% 3.1% 3.2%
Excise Duty 3946 3350 3200 3390 1% -15% -19% 6% 1.7% 1.3% 1.2% 1.1%
Customs Duty 1997 2130 2100 2331 48% 7% 5% 11% 0.8% 0.8% 0.8% 0.8%
Service Tax 10 20 10 5 -37% 98% -1% -50% 0.0% 0.0% 0.0% 0.0%
Source: Budget Document, PhillipCapital India Research

Non-tax and capital receipts break-up

Rs Bn FY19 FY20 FY21 FY22A FY23BE FY23RE FY24BE
Disinvestment 947 503 379 136 650 500 510
Telecom 408 698 455 858 528 688 895
Dividends 1134 1861 969 1606 1139 840 910
Public Enterprises 431 355 398 593 400 430 430
RBI & Financial institutions 704 1506 571 1014 739 410 480
Source: Budget Document, PhillipCapital India Research

Subsidies break-up
Rs Bn FY19 FY20 FY21 FY22A FY23BE FY23RE FY24BE
Subsidies 2992 2623 7582 5039 3556 5621 4031
Food 1013 1087 5413 2890 2068 2872 1974
Fertilisers 706 811 1279 1538 1052 2252 1751
Petroleum 248 385 385 34 58 92 23
Interest subsidies 227 237 302 413 247 375 276
Others 798 103 202 165 130 30 8
Source: Budget Document, PhillipCapital India Research

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Central government fiscal deficit Revenue and capital expenditure (% of GDP)

Fiscal deficit (Rs Bn) Fiscal deficit (% of GDP) (rhs) Revenue Exp (% of GDP) Capital Exp (% of GDP) (rhs)
20000 10.0 18.0 3.7
18000 9.0 16.0
16000 8.0 3.2
14.0
14000 7.0
12000 6.0 12.0 2.7
10000 5.0
10.0 2.2
8000 4.0
6000 3.0 8.0
4000 2.0 1.7
6.0
2000 1.0
4.0 1.2
0 0.0

FY22
FY18

FY19

FY20

FY21

FY23BE

FY23RE

FY24BE
FY18

FY19

FY20

FY21

FY22

FY23BE

FY23RE

FY24BE

Gross and Net market borrowing (Rs bn) Direct and indirect tax (% of GDP)
Gross borrowing Net borrowing Direct tax Indirect tax
11%
18000
16000 10%
14000
9%
12000
8%
10000
8000 7%
6000
6%
4000
5%
2000
0 4%
FY18

FY19

FY20

FY21

FY22

FY23BE

FY23RE

FY24BE

3%
FY18 FY19 FY20 FY21 FY22A FY23BE FY23RE FY24BE

Source: Budget Document, PhillipCapital India Research

Gross tax revenue

Gross Tax Revenue (Rs Bn, LHS) YoY growth (%, RHS) % of GDP (RHS)
40000 35%
30%
30000 25%
20%
20000 15%
10%
10000 5%
0%
0 -5%
FY18 FY19 FY20 FY21 FY22A FY23BE FY23RE FY24BE

Source: Budget Document, PhillipCapital India Research

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Outlay on major schemes

(Rs bn) FY22A FY23BE FY23RE FY24BE
Food Subsidy to Food Corporation of India under NFSA 2,089 1,459 2,147 1,372
Urea Subsidy 1,010 632 1,541 1,311
Pradhan Mantri Awas Yojna 900 480 771 796
National Rural Drinking Water Mission/ Jal Jeevan Mission 631 600 550 700
MNREGA 985 730 894 600
PM Kisan 668 680 600 600
Food Subsidy for Decentralized Procurement under NFSA 798 606 723 598
Nutrient Based Subsidy 528 420 711 440
National Education Mission 253 396 326 390
National Health Mission (NHM) 330 378 337 368
Construction of New Lines 208 249 319
Saksham Anganwadi and POSHAN 2.0 184 203 203 206
MRTS and Metro Projects 233 156 195
Pradhan Mantri Gram Sadak Yojna 140 190 190 190
Urban Rejuvenation Mission : AMRUT 139 141 153 160
National Livelihood Mission-Ajeevika 102 142 139 141
Crop Insurance Scheme 135 155 124 136
Swachh Bharat Mission (SBM) 51 95 70 122
Pradhan Mantri Poshan Shakti Nirman 102 128 116
Pradhan Mantri Krishi Sinchai Yojana 113 130 81 108
National Social Assistance prog 82 97 97 96
Road Safety Works 47 68 81
SBM: Rural 31 72 50 72
Rashtriya Krishi Vikas Yojna 104 70 72
SBM: Urban 20 23 20 50
Namami Gange-National Ganga Plan 28 25 40
Modernisation of Police Forces 33 28 24 38
Source: Budget Document, PhillipCapital India Research

GoI expenditure break-up

__________ Rs Bn_____________ _________YoY Growth__________ ______ of total expenditure_____
FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE FY22A FY23BE FY23RE FY24BE
Pension 1,989 2,071 2,448 2,344 -4.6 4.1 23.0 -4.3 5.2 5.3 5.8 5.2
Defence 3,665 3,854 4,095 4,327 7.8 5.1 11.7 5.7 9.7 9.8 9.8 9.6
Subsidy
Fertiliser 1,538 1,052 2,252 1,751 20.2 -31.6 46.5 -22.3 4.1 2.7 5.4 3.9
Food 2,890 2,068 2,872 1,974 -46.6 -28.4 -0.6 -31.3 7.6 5.2 6.9 4.4
Petroleum 34 58 92 23 -91.1 69.8 167.9 -75.4 0.1 0.1 0.2 0.1
Agriculture and Allied Activities 1,433 1,515 1,363 1,442 6.6 5.7 -4.9 5.8 3.8 3.8 3.3 3.2
Commerce and Industry 471 531 375 482 118.4 12.8 -20.2 28.3 1.2 1.3 0.9 1.1
Development of North East 27 28 28 59 43.1 5.5 3.8 113.9 0.1 0.1 0.1 0.1
Education 804 1,043 999 1,129 -4.6 29.8 24.3 13.0 2.1 2.6 2.4 2.5
Energy 537 492 709 949 64.1 -8.3 32.1 33.8 1.4 1.2 1.7 2.1
External Affairs 141 173 170 181 -1.3 21.9 20.0 6.3 0.4 0.4 0.4 0.4
Finance 574 214 179 136 54.9 -62.8 -68.8 -24.2 1.5 0.5 0.4 0.3
Health 841 866 774 890 5.1 3.0 -8.0 15.0 2.2 2.2 1.8 2.0
Home Affairs 1,123 1,270 1,249 1,349 16.2 13.1 11.2 8.0 3.0 3.2 3.0 3.0
Interest 8,055 9,407 9,407 10,800 18.5 16.8 16.8 14.8 21.2 23.8 22.5 24.0
IT and Telecom 251 799 741 935 -23.6 218.9 195.8 26.1 0.7 2.0 1.8 2.1
Others 1,084 1,133 1,081 1,205 17.9 4.5 -0.3 11.5 2.9 2.9 2.6 2.7
Planning and Statistics 38 57 62 63 18.3 52.4 65.4 1.0 0.1 0.1 0.1 0.1
Rural Development 2,288 2,063 2,433 2,382 6.8 -9.8 6.4 -2.1 6.0 5.2 5.8 5.3
Scientific Departments 278 306 256 322 25.7 10.1 -7.7 25.8 0.7 0.8 0.6 0.7
Social Welfare 406 518 465 551 8.1 27.6 14.6 18.4 1.1 1.3 1.1 1.2
Tax Administration 1,771 1,717 1,773 1,947 21.0 -3.1 0.1 9.8 4.7 4.4 4.2 4.3
of which transfer to GST compensation fund 1,108 1,200 1,300 1,450 4.2 8.3 17.3 11.5 2.9 3.0 3.1 3.2
Transfer to States 2,746 3,343 2,709 3,246 29.8 21.8 -1.3 19.8 7.2 8.5 6.5 7.2
Transport 3,322 3,519 3,905 5,170 53.2 5.9 17.5 32.4 8.8 8.9 9.3 11.5
Union Territories 565 588 690 611 18.7 4.0 22.2 -11.5 1.5 1.5 1.6 1.4
Urban Development 1,068 765 745 764 128.8 -28.4 -30.2 2.5 2.8 1.9 1.8 1.7
Grand Total 37,938 39,449 41,872 45,031 8.1 4.0 10.4 7.5 100.0 100.0 100.0 100.0
Source: Budget Document, PhillipCapital India Research

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Total department-wise Expediture (Revenue + Capital + IEBR)

Rs Bn FY22A FY2eBE FY23RE FY24BE
Ministry/ Department Rev Capital IEBR Total Rev Capital IEBR Total Rev Capital IEBR Total Rev Capital IEBR Total
Interest Payments 8055 ... 8055 9407 ... 9407 9407 ... 9407 10800 ... 10800
Food and Public Distribution 3017 26 612 3655 2139 20 877 3037 2943 20 553 3516 2054 2 1454 3509
Transfers to States 2520 225 2746 2224 1119 3343 1855 854 2709 1873 1374 3246
Railways 180 1173 734 2086 33 1371 1085 2489 32 1591 959 2583 13 2400 528 2941
Road Transport and Highways 102 1133 652 1887 114 1877 0 1991 107 2063 8 2178 118 2586 0 2704
Defence Services (Revenue) 2286 ... 2286 2330 ... 2330 2595 ... 2595 2701 ... 2701
Fertilisers 1537 1 5 1543 1053 0 6 1059 2253 ... 9 2261 1751 0 12 1763
Capital Outlay on Defence Serv 0 1380 1380 0 1524 1524 0 1500 1500 0 1626 1626
Rural Development 1604 ... 0 1604 1359 ... 0 1359 1811 ... 0 1811 1575 0 0 1575
Petroleum and Natural Gas 54 3 1067 1124 83 6 1114 1203 338 0 838 1176 55 355 1064 1474
Revenue 1119 0 0 1119 1212 0 0 1212 1312 0 0 1312 1462 1 0 1463
Defence Pensions 1168 ... 1168 1197 ... 1197 1534 ... 1534 1382 ... 1382
Police 994 72 1066 1072 105 1177 1102 89 1191 1159 118 1278
Agri., Coop and Farmers' Welfare 1145 0 1145 1240 0 1240 1102 1 1103 1155 0 1155
Telecommunications 285 33 72 390 304 542 3 849 446 372 55 873 359 617 66 1042
Housing and Urban Affairs 809 259 100 1168 492 273 179 944 509 237 194 940 504 260 170 934
Health and Family Welfare 787 31 5 823 774 56 1 831 728 36 1 764 809 53 1 862
Power 188 28 481 697 161 0 515 675 131 0 529 660 207 0 608 815
Drinking Water and Sanitation 663 ... 0 663 672 ... 0 672 600 ... 0 600 772 0 0 772
Pensions 646 ... 646 658 ... 658 673 ... 673 717 ... 717
School Education and Literacy 468 ... 0 468 634 ... 0 634 591 ... 0 591 688 0 0 688
New and Renewable Energy 40 26 159 225 69 0 286 355 70 0 275 346 102 0 378 481
Higher Education 335 0 0 336 408 0 0 408 408 0 0 409 441 0 0 441
Indirect Taxes 569 7 576 397 14 411 357 9 367 363 22 385
Atomic Energy 73 153 91 317 84 143 118 345 128 131 109 369 91 160 131 381
Jammu & kashmir 347 ... 347 356 ... 356 445 ... 445 356 ... 356
Posts 189 9 0 197 199 9 0 208 222 15 0 237 244 14 0 258
Defence (Misc.) 105 68 29 202 121 80 28 229 139 80 28 247 138 88 31 257
Women and Child Development 217 ... 217 252 0 252 239 0 239 254 0 254
Micro, Small and Medium
Enterprises 148 2 0 150 209 5 3 217 152 5 2 159 215 6 3 224
Coal 6 ... 197 202 4 ... 214 218 1 ... 210 211 2 0 210 212
Water Resources, develop 170 2 0 172 185 4 0 190 137 3 0 140 197 4 0 201
External Affairs 133 9 141 158 14 173 158 12 170 165 15 181
Electronics and Information
Technology 78 4 81 139 4 143 114 3 117 162 4 165
Social Justice and Empowerment 73 1 5 79 117 2 0 119 115 1 5 121 127 1 6 135
Labour and Employment 240 0 240 168 0 169 161 0 161 132 0 132
Space 56 69 0 125 62 75 0 137 60 46 0 105 62 64 0 125
Tribal Affairs 62 ... 62 84 1 85 73 0 73 124 0 125
Economic Affairs 45 77 123 61 84 145 68 49 117 63 46 109
Steel 0 ... 101 102 0 ... 132 132 1 ... 116 116 1 0 103 104
Direct Taxes 75 2 77 89 4 93 88 7 94 83 16 99
Agricultural Research and Educ 84 ... 84 85 ... 85 87 ... 87 95 0 95
Industrial Policy and Promotion 66 17 83 70 13 83 54 14 67 65 17 82
Science and Technology 51 1 51 59 1 60 49 0 49 78 1 79
Civil Aviation 50 669 0 719 106 1 46 152 93 1 42 136 30 1 34 66
Heavy Industry 10 1 3 14 32 1 3 36 32 0 3 35 61 0 3 65
Home Affairs 41 3 44 74 2 76 42 2 44 55 4 59
Development NE Region 20 7 0 27 21 7 0 28 20 7 0 28 18 41 0 59
Shipping 9 6 32 47 11 6 45 62 11 7 31 49 12 11 36 59
Indian Audit and Accounts 50 0 50 56 0 56 55 2 56 57 1 58
Scientific and Industrial Research 51 0 0 51 56 0 0 56 59 0 0 59 57 0 0 57
Statistics and Programme
Implementation 27 0 27 54 0 54 52 0 52 54 0 54
Information and Broadcasting 37 0 2 39 40 0 2 42 42 0 4 46 47 0 4 50
Textiles 109 1 111 124 0 124 35 0 36 44 0 44
Others 817 429 30 1277 826 137 38 1001 740 122 39 901 859 101 36 996
Total 32009 5929 4376 42314 31938 7502 4694 44135 34575 7281 4011 45867 35010 10010 4877 49897
Source:Budget documents, PhillipCapital India Research

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Direct-tax-related announcements
• Personal Income Tax:
a. Rebate limit: Rebate limit increased to Rs 7 lakh in the new tax regime from
Rs 5 lakh.
b. Change in tax Structure: Reduced the number of slabs to five (from five) and
increasing the tax exemption limit to Rs 3 lakh (from Rs 2.5 lakh) in new
personal income tax regime. The new tax rates are:

Rs 0-3 lakh Nil

Rs 3-6 lakh 5%
Rs 6-9 lakh 10%
Rs 9-12 lakh 15%
Rs 12-15 lakh 20%
Above Rs 15 lakh 30%

c. Benefit of Standard Deduction: Under new regime, each salaried person with
an income of Rs 15.5 lakh or more will benefit by Rs 52,500.
d. Reduced the highest surcharge rate from 37% to 25% in the new tax regime;
result in reduction of the maximum tax rate to 39% from 42.74%.
e. Limit of Rs 3 lakh for tax exemption on leave encashment on retirement of
non-government salaried employees increased to Rs 25 lakh.
• MSMEs and Professionals: Enhanced the limits of Micro enterprises (with
turnover up to Rs 2cr) to Rs 3cr and certain professionals (with turnover of up to
Rs 50 lakh) to Rs 75 lakh, for availing the benefit of presumptive taxation, whose
cash receipts are no more than 5%.
• Cooperation:
a. New co-operatives that commence manufacturing activities till Mar 2024
shall get the benefit of a lower tax rate of 15%.
b. Sugar co-operatives can claim payments made to sugarcane farmers for the
period prior to assessment year 2016-17 as expenditure.
c. Higher limit of Rs 2 lakh per member for cash deposits to and loans in cash
by Primary Agricultural Co-operative Societies (PACS) and Primary Co-
operative Agriculture and Rural Development Banks (PCARDBs).
d. Higher limit of Rs 3 crore for TDS on cash withdrawal is being provided to co-
operative societies.
• Startups: Extended the date of incorporation for income tax benefits to start-ups
from Mar 2023 to Mar 2024 and provided the benefit of carry forward of losses
on change of shareholding of start-ups from 7 years of incorporation to 10 years.
• Better targeting of tax concessions: Deduction from capital gains on investment
in residential house under sections 54 and 54F to Rs 10 crore. Limited income tax
exemption from proceeds of insurance policies with very high value.
• Removed the minimum threshold of Rs 10,000 for TDS and clarifying taxability
relating to online gaming.
• Not treating conversion of gold into electronic gold receipt and vice versa as
capital gain.
• Reducing the TDS rate to 20% from 30% on taxable portion of EPF withdrawal in
non-PAN cases.
• Extension of period of tax benefits to funds relocating to IFSC, GIFT City till Mar
2025.
• Allowing carry forward of losses on strategic disinvestment including that of IDBI
Bank.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Old tax regime (A)

Income Level (a) 700,000 750,000 1,200,000 1,500,000 1,750,000 2,000,000 2,500,000 3,000,000
Standard Deduction (b) 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Taxable Income (c=a-b) 650,000 700,000 1,150,000 1,450,000 1,700,000 1,950,000 2,450,000 2,950,000
Deduction under 80C (d) 100,000 100,000 150,000 150,000 150,000 150,000 150,000 150,000
Deduction under 80D (e) - - 15,000 20,000 25,000 25,000 25,000 25,000
HRA (f) 70,000 112,500 240,000 300,000 350,000 400,000 500,000 600,000
Deduction under 80TTA (g) - - 10,000 10,000 10,000 10,000 10,000 10,000
NPS (h) - - 50,000 50,000 50,000 50,000 50,000 50,000
Net Taxable Income (NTI) (i=c-d-e-f-g-h) 480,000 487,500 685,000 920,000 1,115,000 1,315,000 1,715,000 2,115,000
Upto 2,50,000 (NIL) (j) - - - - - - - -
>2,50,000 upto 5,00,000 (5%) (k) 11,500 11,875 12,500 12,500 12,500 12,500 12,500 12,500
>5,00,000 upto 10,00,000 (20%) (l) - - 37,000 100,000 100,000 100,000 100,000 100,000
>10,00,000 (30%) (m) - - - - 34,500 94,500 214,500 334,500
Tax (n=j+k+l+m) 11,500 11,875 49,500 112,500 147,000 207,000 327,000 447,000
Cess @ 4% (o) 460 475 1,980 4,500 5,880 8,280 13,080 17,880
Tax Liability (p=n+o) 11,960 12,350 51,480 117,000 152,880 215,280 340,080 464,880
Rebate u/s 87A- Only when NTI is upto 5lac (q) 11,960 12,350 - - - - - -
Tax Payable (p-q) - - 51,480 117,000 152,880 215,280 340,080 464,880

Proposed new tax regime (B)

Income Level (a) 700,000 750,000 1,200,000 1,500,000 1,750,000 2,000,000 2,500,000 3,000,000
Standard Deduction (b) - - - - 52,500 52,500 52,500 52,500
Taxable Income (c=a-b) 700,000 750,000 1,200,000 1,500,000 1,697,500 1,947,500 2,447,500 2,947,500
Deduction under 80C -Not Allowed (d) - - - - - - - -
Net Taxable Income (NTI) (e=c-d) 700,000 750,000 1,200,000 1,500,000 1,645,000 1,895,000 2,395,000 2,895,000
Upto 3,00,000 (NIL) (f) - - - - - - - -
>3,00,000 upto 6,00,000 (5%) (g) 15,000 15,000 15,000 15,000 15,000 15,000 15,000 15,000
>6,00,000 upto 9,00,000 (10%) (h) 10,000 15,000 30,000 30,000 30,000 30,000 30,000 30,000
>9,00,000 upto 12,00,000 (15%) (i) - - 45,000 45,000 45,000 45,000 45,000 45,000
>12,00,000 upto 15,00,000 (20%) (j) - - - 60,000 60,000 60,000 60,000 60,000
>15,00,000 (30%) (k) - - - - 43,500 118,500 268,500 418,500
Tax (l=f+g+h+i+j+k) 25,000 30,000 90,000 150,000 193,500 268,500 418,500 568,500
Cess @ 4% (m) 1,000 1,200 3,600 6,000 7,740 10,740 16,740 22,740
Tax Liability (n=l+m) 26,000 31,200 93,600 156,000 201,240 279,240 435,240 591,240
Rebate u/s 87A- Only when NTI is upto 7lac (o) 26,000 - - - - - - -
Tax Payable (n-o) - 31,200 93,600 156,000 201,240 279,240 435,240 591,240

Difference between Old and New Tax Regime (B-A) - 31,200 42,120 39,000 48,360 63,960 95,160 126,360
Source: PhillipCapital India Research

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Green Growth Plans

The FM highlighted several steps to be taken by the government to achieve the net-
zero carbon emission target by 2070. Following are the highlights:
• Green Hydrogen Mission (reiterated): Outlay of Rs 19,700cr to facilitate transition
to low carbon intensity and reduce dependence on fossil fuel imports. Targeting
to reach an annual production of 5 MMT by 2030.
• Energy Transition: Provided Rs 35,000cr for priority capital investments towards
energy transition and net zero objectives, and energy security by Ministry of
Petroleum & Natural Gas.
• Energy Storage Projects: Viability Gap Funding for Battery Energy Storage Systems
with capacity of 4,000 MWH.
• Renewable Energy Evacuation: Inter-state transmission system for evacuation
and grid integration of 13 GW RE from Ladakh will be constructed with investment
of Rs 20,700cr.
• Green Credit Programme: To incentivize environmentally sustainable and
responsive actions by companies, individuals and local bodies, and help mobilize
additional resources for such activities.
• PM-PRANAM (PM Programme for Restoration, Awareness, Nourishment and
Amelioration of Mother Earth): To incentivize States and Union Territories to
promote alternative fertilizers and balanced use of chemical fertilizers.
• GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme: 500 new
‘waste to wealth’ plants will be established with a total investment of Rs 10,000cr
for promoting circular economy; 200 compressed biogas (CBG) plants and 300
community/cluster-based plants.
• Bhartiya Prakritik Kheti Bio-Input Resource Centres: Over the next 3 years, 1
crore farmers will be felicitated to adopt natural farming. 10,000 Bio-Input
Resource Centres will be set-up, creating a national-level distributed micro-
fertilizer and pesticide manufacturing network.
• MISHTI (Mangrove Initiative for Shoreline Habitats & Tangible Incomes):
Initiative will be taken up for mangrove plantation along the coastline and on salt
pan lands.
• Amrit Dharohar: Scheme will be implemented (over the next three years) to
encourage optimal use of wetlands, and enhance bio-diversity, carbon stock, eco-
tourism opportunities and income generation for local communities.
• Coastal Shipping: It will be promoted as the energy efficient and lower cost mode
of transport through PPP mode with viability gap funding.
• Vehicle Replacement: Allocated adequate funds to scrap old vehicles of the
Central Government. States will also be supported in replacing old vehicles and
ambulances.
• Green Mobility: Exempted excise duty on GST-paid compressed bio gas and
extended customs duty exemption to import of capital goods and machinery
required for manufacture of lithium-ion cells for batteries used in EVs.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Agriculture Inputs – Neutral

Neutral: Coromandel Int, Paradeep Phosphate, Chambal Fert, NFL, RCF

The budget continued to support agriculture and its allied sectors with higher
spending on infrastructure, technologies, crop insurance, irrigation, and
improving farmers’ income. The agriculture credit target was increased to Rs
20,000bn with focus on animal husbandry, dairy and fisheries. For small and
marginal farmers, the government is promoting the ‘cooperative-based
economic development model’ with an investment of Rs 25.2bn.

The reduction in fertiliser subsidy was expected due to the recent significant
correction in prices of key raw materials. Hence, we do not expect a major
impact on fertiliser manufacturers.

Fertiliser subsidy allocation (Rs bn)

Fertiliser Subsidy Outlay (Rs bn) 2021 2022 BE 2022 RE 2023 BE
Urea Subsidy
i) Payment for Indigenous Urea 565 466 1,185 1,041
ii) Payment for Import of Urea 484 206 389 310
iii) Direct Benefit Transfer(DBT) in Fertiliser Subsidy 0 0 0 0
iv) Recovery (40) (40) (33) (40)
Net 1,010 632 1,541 1,311

Nutrient Based Subsidy

i) Payment for Indigenous P and K Fertilizers 319 252 421 255
ii) Payment for Imported P and K Fertilizers 208 168 290 185
iii) Payment for City Compost 0 - - -
Total- Nutrient Based Subsidy 528 420 711 440
Scheme for promotion of flagging of merchant ships in India - - 0 0
Total Subsidy Outlay 1,538 1,052 2,252 1,751
Source: Budget document, Phillip Capital India Research, R-Revised, B-Budgeted

Budget Proposals PhillipCapital’s Perspective

The revised subsidy outlay for FY23 stood at Rs 2,252bn vs. The reduction in fertiliser subsidy was expected due to the
budget estimates of Rs 1,052bn; we had anticipated it to recent significant correction in prices of key raw materials.
be below Rs 2,000bn for FY24. The budget estimates for Hence, we do not expect major impact on fertiliser
FY24 stand at Rs 1,751bn. manufacturers.
The government will facilitate organic farming by creating The government’s push for alternative fertilisers and balanced
10,000 Bio-Input Resource Centres, creating a national- use of chemicals in agriculture is expected to benefit companies,
level distributed micro-fertilizer and pesticide which have bio-fertilisers, water-soluble fertilisers, etc., as part
manufacturing network. Also, under PM-PRANAM the of their portfolio. For e.g., Coromandel has over the years built
government will incentivize States and Union Territories to a substantial base of bio products (world’s largest neem-based
promote alternative fertilizers and balanced use of bio pesticides manufacturer – 22.5MT manufacturing capacity).
chemical fertilizers.
To facilitate horticulture cultivation will set up an The government’s push for increased horticulture cultivation
Atmanirbhar Clean Plant Program at an outlay of Rs 22bn. benefits companies such as PI Industries, which has a subsidiary
‘Jivagro’, which focusses on developing agrochemicals for the
horticulture segment.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Automobiles – Positive
WINNERS: Tata Motors, Maruti Suzuki, M&M, Ashok Leyland

LOSERS: None

Budget Proposals PhillipCapital’s Perspective

Allocation of adequate funds to scrap old vehicles of Positive primarily for passenger vehicle OEMs (Tata
the central government. Support to states to replace Motors, Maruti Suzuki, M&M) as older government
old vehicles and ambulances. vehicles would be replaced by new ones, creating
demand. Also positive for commercial vehicles.
Extended customs-duty exemption for import of Positive for EV adoption and localization, combined with
capital goods and machinery required for PLI for ACC, should accelerate EV adoption. To benefit EV
manufacture of lithium-ion cells for batteries used in players and companies that have plans to get into
electric vehicles. manufacturing of Li-ion cells (Maruti Suzuki, Amara Raja,
Exide Ind).

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Bank and Financial Services – Neutral

WINNERS: Private banks, NBFCs, Fintechs

NEUTRAL: HFCs, AMCs, general insurers

LOSERS: Insurance

Budget Proposals Phillip Capital’s Perspective

Increased allocation for capital expenditure; thrust on roads, • Positive for large banks – ICICI, Axis, HDFC Bank, SBI.
highway infrastructure, and urban infrastructure to
stimulate the economy – augurs well for credit growth
Allocation under PM Awas Yojna increased to Rs 795bn • Neutral for affordable-housing finance companies
compared to revised budgeted number of Rs 771bn for FY22-
23
Credit Guarantee Scheme (ECLGS): Infusion of Rs 90bn to the • Marginally positive for banks.
corpus of the Credit Guarantee Scheme. This will help • Positive for SME financiers – MAS Financial, Five Star
provide collateral free loans worth Rs 2 trillion in the MSMSE Business Finance, Shriram Finance, Bajaj Finance
segment
One-time small-savings scheme for women: Special small- • Creates competition for banks in deposits at a time
savings facility for women upto Rs 0.2mn for a period of two when the system is grappling with various competing
years at 7.5% rate of interest products in financial savings.
New tax regime • Insurance sales are likely to be impacted as tax payers
move to the new tax regime. On average, 4Q contributes
around 35% of full-year sales, largely driven by tax
savings investments.
• However, we believe that the new tax regime is
beneficial only for the lower income-tax bracket. We
believe SBI Life will be the most impacted, given its
customer segment.
Rationalization of exempt income under life insurance policies • This will impact returns profile for NPAR products, which
– proposed to tax income from insurance policies (other than currently offer IRR of 6.5-7.0% (without tax) vs. banks’
ULIP, for which provisions already exist) having a premium or FD rate of 4.5-5.0% (post tax).
aggregate of premium above Rs 500,000 in a year • As income from NPAR becomes taxable, it will impact
product attractiveness.
• We believe, HDFC Life will be the most impacted, given
higher share of single-premium product (Sanchay FMP)
– which constitutes around 20-25% of NPAR APE.
• We believe SBI Life will be the least impacted, given lower
ticket size in NPAR.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Budget Proposals Phillip Capital’s Perspective

National data governance policy to unleash innovation • Positive for large banks – ICICI, Axis, HDFC Bank.
and research by start-ups and academia, a • Positive for NBFCs/HFCs and Fintechs.
National Data Governance Policy will be brought out. This will • Positive for credit card plays like SBI Cards.
enable access to anonymized data.
Simplification of KYC process: The KYC process will be • Positive for NBFCs/HFCs and Fintechs.
simplified adopting a ‘risk-based’ instead of ‘one size fits all’
approach. The financial sector regulators will also be
encouraged to have a KYC system fully amenable to meet the
needs of Digital India.
Enhancement of Digilocker services: A one-stop solution for • Positive for NBFCs/HFCs and Fintechs.
reconciliation and updating of identity and address of
individuals maintained by various government agencies,
regulators and regulated entities will be established using
DigiLocker service and Aadhaar as foundational identity.

To enable more fintech innovative services, the scope of

documents available in DigiLocker for individuals will be
expanded.

An Entity DigiLocker will be set up for use by MSMEs, large

business, and charitable trusts. This will be towards storing
and sharing documents online securely, whenever needed,
with various authorities, regulators,
banks and other business entities.
Vehicle replacement: In furtherance of the vehicle scrapping • Marginally positive for vehicle finance NBFCs like Sundaram
policy mentioned in Budget 2021-22, funds have been Finance, Cholamandalam Finance, MMFS and Shriram
allocated to scrap old vehicles of the central government. Finance.
States will also be supported in replacing old vehicles and
ambulances.
National financial information registry: A national financial • Positive for NBFCs, affordable HFCs, and fintechs.
information registry will be set up to serve as the • This will be in addition to account aggregator framework we
central repository of financial and ancillary information. This believe, thereby making underwriting better.
will facilitate efficient flow of credit, promote financial
inclusion, and foster financial stability. A new legislative
framework will govern this credit public infrastructure, and
it will be designed in consultation with the RBI.
Financial sector regulations: To simplify, ease and reduce • Positive for banks and NBFCs.
cost of compliance, financial sector regulators will be
requested to carry out a comprehensive review of existing
regulations. For this, they will consider suggestions from
public and regulated entities. Time limits to decide the
applications under various regulations will also be laid
down.
Digital payments: Fiscal support for this digital public • Positive for banks, fintechs, and credit cards.
infrastructure will continue in FY24. • Plays: SBI cards, PayTM.
Deposits: The maximum deposit limit for senior citizen • Positive for bank and deposit-taking NBFCs like Bajaj
savings scheme will be enhanced to Rs 3mn from Rs 1.5mn. Finance, Sundaram Finance, MMFS, Shriram Finance
The maximum deposit limit for monthly income account
scheme will be enhanced to Rs 0.9mn for single account and
Rs 1.5mn for joint account.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Capital Goods – Positive

WINNERS: L&T, Siemens, ABB, CG Power, Thermax, Hitachi Energy, KEC
International, Kalpataru Power, GE TD, Borosil Renewables, Cummins

NEUTRAL: All defence PSUs

LOSERS: None

Budget proposals PhillipCapital’s Perspective

Increase in overall capital expenditure by 33% yoy to Rs 33% increase in capex is much higher than our estimates and
10tn. this should provide an impetus to the capital goods sector. It
provides a strong guard against potential global headwinds and
will create impetus for private investments.
Investment into railways initiatives like new lines, gauge We believe that record budgeted outlay for the Indian railways
conversion, doubling, rolling stocks, track renewals, bridge will provide the necessary impetus to programs like the
works, signaling & telecom, metropolitan transportation dedicated freight corridor, high-speed rail, rapid rail transport
project, passenger amenities and other electrical works has which are critical to reduce the cost of movement & increase
increased 54% yoy to Rs 1,507bn (FY24BE) from Rs 981bn efficiency. We also expect increased traction for railway
(FY23RE). modernization projects like Vande Bharat Trains, locomotive
upgrades, station re-development, electrification & track
upgradation.
Capital outlay for Jal Jeevan Mission has been increased to Higher allocation would lead to increased traction for lift
Rs 700bn, +27% yoy, from Rs 550bn (FY23RE). irrigation schemes, which is positive for players like L&T, JMC
Projects, KSB, Thermax, VA Tech Vabag.
Capital outlay of Rs 207bn for renewable energy plan in The plan involves setting up 10-20 GW of large green energy
Ladakh. capacity comprising of solar and wind parks, which will require
transmission link of 900km. This plan will drive demand grid
integration products like HVDC, STATCOM, sub-station etc.
Capital allocation for defence grew 8% yoy to Rs 1.62tn in Increase in adjusted defence capital allocation (excluding R&D)
FY24 on FY23 revised estimate base of Rs 1.5tn. FY23RE was at 8.9% over FY23BE, lower than our estimate of 10-12%.
revised down by 1.4% vs. BE. However, we expect share of domestic procurement to
increase from 68% in FY23 as per the indigenization roadmap
shared by MoD with phase-wise localization targets for
imported items.

Defence budget
(Rs bn) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 RE FY24 BE
Revenue 1,257 1,294 1,406 1,546 1,699 1,973 2,062 2,532 2,781 2,973 3,254 3,339 3,454 4,129 4,083
% YoY 33.9% 3.0% 8.6% 10.0% 9.8% 16.1% 4.5% 22.8% 9.8% 6.9% 9.4% 2.6% 3.4% 19.6% -1.1%
% Share 71% 68% 67% 69% 68% 71% 72% 75% 75% 76% 75% 71% 71% 73% 72%
Capital 511 621 679 705 791 819 800 864 904 952 1,111 1,343 1,380 1,500 1,626
% YoY 24.7% 21.4% 9.4% 3.8% 12.2% 3.5% -2.4% 8.0% 4.7% 5.3% 16.7% 20.9% 2.7% 8.7% 8.4%
% Share 29% 32% 33% 31% 32% 29% 28% 25% 25% 24% 25% 29% 29% 27% 28%
Total 1,768 1,915 2,085 2,251 2,490 2,791 2,861 3,396 3,686 3,926 4,365 4,682 4,833 5,629 5,709
% YoY 31.1% 8.3% 8.9% 8.0% 10.6% 12.1% 2.5% 18.7% 8.5% 6.5% 11.2% 7.3% 3.2% 16.5% 1.4%

Defence capital outlay

Capital (Rs bn) FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 RE FY24 BE yoy (%)
Army 148 158 149 148 144 186 207 282 272 274 290 263 251 326 372 14.2%
Navy 133 171 192 178 204 223 199 200 201 215 274 417 450 477 528 10.6%
Airforce 186 236 288 330 386 328 312 304 349 365 451 581 518 537 571 6.3%
Others 44 55 49 50 57 82 82 77 83 98 96 82 160 159 154 -3.2%
Total 511 621 679 705 791 819 800 864 904 952 1,111 1,343 1,380 1,500 1,626 8.4%

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Cement – Positive
WINNERS: All. Large players like UltraTech Cement, Shree Cement, ACC Ltd.
and Ambuja Cements to remain the key beneficiaries. Northeast
continues to have a special mention – positive for Dalmia Bharat
and Star Cement.

LOSERS: None

Budget proposals PhillipCapital’s Perspective

Continued and improved thrust on infrastructure spends – Positive for the overall sector – The budget was a
continuation of past budgets in terms of increased allocation
towards infrastructure (roads, railways, airports etc.).
Continued focus on housing / affordable housing Continued focus on housing with large allocation towards the
PM Awas Yojana will drive cement demand. Notably, housing
drives c.60% of India’s cement demand.
Enhancing opportunities for private investment in Will help expedite execution of infrastructure creation.
infrastructure.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Chemicals – Neutral
WINNERS: None

LOSERS: None

Budget Proposals PhillipCapital Perspective

Basic customs duty reduced on acid-grade fluorspar to Marginally beneficial to SRF, Navin Fluorine, Gujarat Fluoro,
2.5% from 5% -- to make the domestic fluorochemicals Chemplast, etc. India imports material worth Rs 6bn
industry competitive
Customs duty on crude glycerin for use in manufacturing Indirect marginal benefit to epoxy manufacturers such as Atul
epicholorhydrin reduced to 2.5% from 7.5% and pharma API manufacturers.
• Increase in customs duty in styrene to 2.5% from 2.0% • Marginal impact on Chemplast due to duty rise in VCM
earlier • Marginal impact on Indian refiners
• VCM (vinyl chloride monomer) to 2.5% from 2%
• Naptha to 2.5% from 1%

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

FMCG – Neutral
WINNERS: ITC

LOSERS: HUL, Colgate, Dabur, and Emami

Budget Proposals PhillipCapital Perspective

Increase in National Contingent Calamity Duty by 16% on • Positive for ITC: Overall increase in tax incidence of only
all segments of cigarettes 2% vs. expectation of 7-8%. ITC needs to take a price
increase of 2-4% across segments to maintain absolute
operating profits.
• We believe mgmt is likely to take blended price increase
of 5% in FY24, with most of these price hikes directed
towards KSFT / RSFT segment, thereby keeping price
point of DSFT constant. As a result, operating margin at a
segmental level is likely to improve yoy.
Reduction in allocation towards the rural sector. Negative for HUL, Colgate, Dabur and Emami : Lower
allocation towards rural sector will lead to lower spending.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Healthcare – Neutral
WINNERS: None

LOSERS: None

Budget Proposals PhillipCapital's Perspective

• Department of pharmaceutical allocation increased to This is largely to promote medical devices to reduce import
Rs 31.6bn in FY24 from Rs 22.7bn in FY23. dependency.
• Allocation for promotion of Medical Devices Parks (ex-
PLI) received major focus with budget of Rs 2bn.
• A new program to promote research and innovation in
pharmaceuticals to be taken up through centre of
excellence.
• Department of Health and Family welfare allocation Should drive overall healthcare ecosystem and complement
increased to Rs 861.8bn in FY24 from Rs 763.7bn in existing universal healthcare schemes.
FY23.
• Allocation of Rs 68.3bn for establishment expenditure
of New AIIMs came into focus in this year’s budget.
• Ayushman Bharat Yojana / Ayushman Bharat Yojana
Infrastructure Mission increased to Rs 72/42bn in FY24
from Rs 64/19bn in FY23.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Infrastructure – Positive
WINNERS: PNC Infra, NCC, KNR Construction, HG Infra, GR Infra, IRB Infra,
Ashoka Buildcon, Ahluwalia Contracts, and Adani Ports & SEZ
LOSERS: None

Budget Proposals PhillipCapital’s Perspective

Increased allocation for roads • The increase in allocation is in line with expectations.
• +25% yoy growth in total outlay – NHAI outlay +14% yoy • Positive for road EPC companies – PNC, KNR, HG Infra, GR
• The budgetary allocation is higher for roads/NHAI, Infra, Ashoka Buildcon and NCC.
along with IEBR being ZERO for FY24.
Increased allocation for shipping Neutral for Adani Ports and SEZs
• +24% increase in overall budgetary allocation
• -12% decrease in allocation for Sagarmala and ports
Increased allocation for metro projects Positive for JKumar, ITD Cementation, NCC
• +25% yoy increase in allocation
Increased allocation for Smart Cities and AMRUT Positive for NCC, Ahluwalia Contracts
• +5% increase in allocation for Smart Cities and AMRUT
Increased allocation for Jal Shakti Positive for NCC, PNC, KNR
• +29% increase in allocation for Jal Jeevan mission

Key points
• Roads – The budgetary allocation is higher for Roads/NHAI. IEBR is ZERO for both FY23 and FY24. The total outlay has
been increased by +25/+14% – there is more certainty to it now, not being dependent on borrowings.
• Railways have been given significant importance in the budget. Allocations have increased by 49%. Major focus is on
capacity addition on new lines (Rs 318bn FY24BE), doubling (Rs 307.5bn FY24BE) and rolling stock (Rs 375.8bn FY24BE) –
which are up 28%/28%/148% respectively.
• Interlinking of rivers: The Union budget looks to re-kindle execution on this
project:
o Ken-Betwa River Link (in Uttar Pradesh and Madhya Pradesh) to be executed in 8 years with estimated cost of Rs
446.05bn. Total amount spent so far is Rs 75.4bn and work on land acquisition, forest clearance has been taken up – (Rs
35bn allocated in FY24BE vs. Rs 11bn in FY23RE)
o 5 more links (Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar, Pennar-Kaveri) draft DPRs
have been finalized. Click here to read the report.

Total budgetary allocation

Rs bn FY19 FY20 FY21 FY22 FY23BE FY23RE FY24BE % Increase
Roads 786.3 830.2 1,018.2 1,311.5 1,991.1 2,170.3 2,704.3 25%
Roads Total Outlay 1,668.6 1,961.5 1,991.1 2,170.3 2,704.3 25%
NHAI 373.2 366.9 460.6 650.6 1,340.2 1,424.0 1,622.1 14%
NHAI Total Outlay 1,111.0 1,300.6 1,340.2 1,424.0 1,622.1 14%
Urban development* 429.7 422.7 467.9 738.5 765.5 745.5 764.3 3%
Smart Cities + AMRUT 125.7 96.0 97.5 139.0 141.0 153.0 160.0 5%
Metro projects 156.0 180.3 85.7 189.8 191.3 156.3 195.2 25%
Railways 551.4 699.7 318.4 1,200.6 1,403.7 1,623.1 2,412.7 49%
Shipping 19.4 15.2 13.9 15.9 17.1 17.9 22.2 24%
Sagar mala, ports 3.8 3.8 2.5 3.9 4.1 5.1 4.5 -12%
Power 156.3 158.7 105.8 153.2 160.7 131.1 206.7 58%
Aviation 97.0 37.0 41.3 726.5 106.7 93.6 31.1 -67%
Jal Shakti 159.7 510.4 672.2 600.3 772.2 29%

Jal Jeevan Mission 100.3 110.0 450.1 600.0 550.0 700.0 27%
PMGSY 155.0 140.7 136.9 140.0 190.0 190.0 190.0 0%
PMAY 264.1 253.3 402.6 473.9 480.0 771.3 795.9 3%
Source: Budget documents

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Logistics – Positive
WINNERS: Concor, GDL, TCI, VRL

LOSERS: None

Budget Proposals Phillip Capital’s Perspective

• Master portal for PM GatiShakti has developed and • Positive for rail and road transport players.
Network Planning Group (NPG) is fully functional. • The improvement in rail infrastructure will help Concor,
Mapping of 4,800 projects under NIP come under PM GDL, and TCI.
GatiShakti in roads, railways, airports, ports, mass • Coastal shipping – Shreyas Shipping and TCI Ltd.
transport, waterways and logistics infrastructure.
• The data exchange among all mode operators will be
brought on Unified Logistics Interface Platform (ULIP),
which will provide efficient movement of goods through
different modes, reducing logistics cost and time,
inventory management, and in eliminating tedious
documentation.
• Contracts for implementation of MMLP at 4 locations -
Chennai, Bengaluru, Nagpur and Indore through PPP
mode will be awarded. Will develop 100 cargo terminals
in next 3 years – 21 commissioned and 74 new in
principle approvals.
• Digital Sky Platform has been developed to provide
single-window solution for most drone permissions and
approvals.
• PLI scheme in 14 sectors with potential of an additional
production of Rs 30tn over the next five years. Focus on
increase in domestic manufacturing in capital goods,
electronics, chemicals, textiles, MSME, etc.
• A capital outlay of Rs 2.4tn has been provided for
railways. This highest ever outlay is c. 9x the outlay made
in 2013-14.
• Coastal shipping will be promoted as the energy efficient
and lower cost mode of transport, both for passengers
and freight, through PPP mode with viability gap
funding.
• 50 additional airports, heliports and advance landing • Indigo, SpiceJet
grounds will be revived for air connectivity.
• The issuance of e-Passports using embedded chips and
futuristic technology will be rolled out in 2022-23 to
enhance convenience for citizens in their overseas
travel. Ministry of external affairs has placed an indent
for 7mn e-Passports.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Metals and Mining – Marginal Positive

WINNERS: Steel and pipe companies

LOSERS: None

• Overall, the budget was positive as the government announced a 33%

increase in capex.
• Special allocation of Rs 750bn for critical-infra and increased allocation for
PMAY (+65% yoy) and Nal se Jal (+17%) will continue to boost demand for
metals (mainly steel and pipe companies).
• The risk of reduction in basic customs duty on imported steel was
alleviated, as the government kept the rate unchanged for major products
(HRC/CRC/bars).

Budget Proposals PhillipCapital’s Perspective

Interlinking of rivers allocation increased 2.5x to Rs 35bn. Positive for steel large-diameter pipe (HSAW) players.
Jal Jeevan Mission allocation increased to Rs 700bn from Rs Positive for ductile-iron-pipe and HSAW pipe players.
600bn.
Under Pradhan Mantri Awas Yojna (PMAY) allocation Positive for steel players, particularly long products.
increased to Rs 796bn from Rs 480bn
Capital expenditure outlay stepped up 33% yoy to Rs 10 Positive for steel players.
trillion.
Emergency Credit Line outlay lowered by Rs 9bn. Marginal negative for steel demand.
Rs5.3bn additional payment to Karnataka for irrigation. Could be positive for DI Pipe and HSAW pipe players.
Rs 750bn for critical infra projects. Positive for metals and probably pipes (assuming water
security is a part of critical projects).
Rs 100bn for Urban Infra Development Fund. Positive for ERW pipe players.
Rs 197bn for hydrogen mission Positive for pipe players.
Allocation for scrapping old central and state government Higher demand for flat steel for new cars and vehicles; larger
vehicles. availability for scrap usage in domestic market - good for EAF
players.
Duty on silver increased to 10.0% from 7.5%. Positive for Hindustan Zinc.

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Midcaps – Positive
WINNERS: Consumer Electricals: Dixon, PGEL, Inflame, VGRD, KEI, Polycab,
and all domestic manufacturing companies
Building Materials: Kajaria, Somany, Century Plyboards, other
plywood and pipe companies.
Travel: IRCTC, IH, EIH
Textile: Indo Count, Welspun India, etc.
Engineering: Praj Industries

LOSERS: Nil

Budget Proposals PhillipCapital’s Perspective

Consumer electricals: Focused on Make in India and increased value addition
Change in customs duty: Mobile cameras, chimney, • Will promote more domestic manufacturing (Make in India).
toys, open cell, etc. • The proposed trajectory for the applicable BCD rates on open
cell (TV), chimneys, camera (mobile) will increase focus on
domestic manufacturing.
• Positive for Dixon, Optiemus Infracom, PGEL, Inflame and
VGRD (Sunflame), etc.
• Push towards increasing value addition and adding more
products in domestic manufacturing.
Capex push: Roads, railways, power, Swachh Bharat, • Ripple effect of electrification is already visible in the steady
PMAY, railway electrification and metro consumption of wires, cables, switches, lighting, etc.
• Positive for electrical companies with comprehensive
portfolios that include wires and cables, lighting, etc.;
Polycab, KEI Industries, Finolex Cables, Havells.
• Additionally, increasing capex in railway electrification + push
to domestic manufacturing will be positive for PCBA
companies like: Syrma, Kaynes, etc.
• Increasing capex in metros will benefit the EMP and
commercial AC segment of Blue Star.
Building Material: Push for Swachh Bharat, Jal Shakti, PMAY
Push for Swachh Bharat / Jal Shakti / PMAY: Allocation • Will create demand for toilets, tiles, wood panel and other
raised to 74%/29%/66% building material products.
• Positive for the Indian ceramic and wood panel industry.
• Companies that will benefit: Kajaria, Somany, Cera, HHIL,
Astral, Prince Pipes, Supreme, Century Plyboards,
Greenpanel, Stylam, Greenlam.
Travel + Tourism
• Push for tourism: Allocation increased by 79% • Higher focus on this sector will be positive for: IRCTC, Easy
trip, IH, EIH etc.
Praj and sugar sector
• 500 new ‘waste to wealth’ plants under GOBARdhan Focus on clean and sustainable mobility and ethanol blending is
scheme will be established for promoting circular positive for Praj industries.
economy. These will include 200 compressed biogas
(CBG) plants.
• 5% CBG mandate will be introduced for all
organizations marketing natural and bio gas. For

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

collection of bio-mass and distribution of bio-

manure, appropriate fiscal support will be provided.
• Promoting a shift to use of public transport in urban
areas complemented by clean special mobility zones
with zero fossil-fuel policy.
• Green Bonds will be issued for mobilizing resources
for green infrastructure, which help in reducing the
carbon intensity of the economy.
• Cluster-based and value-chain approach through Positive for Indo Count Industries.
Public Private Partnerships (PPP) to enhance the
productivity of extra-long staple cotton in
collaboration between farmers, state and industry
for input supplies, extension services, and market
linkages.
• New tariff lines for various products, which includes
cotton for better identification of products and
getting clarity on availing concessional import duty,
which will reduce dwell time

Change in Custom Duty

Heading, sub- Increase in duty
S.no. heading tariff item Components From To
Electrical Goods
1. 8414 60 00 Electric kitchen chimney 7.50% 15%
Electronic appliances
2. 8516 80 00 Heat coil for use in the manufacture of electric kitchen chimneys 20% 15%
Automobiles and Toys
3. 8712 00 10 Bicycles 30% 35%
4. 9503 Toys and parts of toys (other than parts of electronic toys) 60% 70%
IT, Electronics
Any Chapter Camera lens and its inputs/parts for use in manufacture of camera module 2.50% 0%
5. of cellular mobile phone
6. 8529 Specified parts for manufacture of open cell of TV panel 5% 2.50%
Commodity
7. 527A Lithium-ion cell for use in the manufacture of battery or battery pack of 5% 5% (up to
cellular mobile phone 31.03.2024)
8. 168 Specified inputs and sub-parts for use in the manufacture of Nil Nil up to
telecommunication-grade optical fiber or optical fiber (31.03.2025)
cables
9. 341 Preform of silica for use in the manufacture of telecommunication-grade 5% 5% (up to
optical fibers or optical fiber cables 31.03.2025)
Source: Budget documents

Budget Allocation
Schemes - Capital Allocated (Rs Bn) FY23RE FY24BE % Change
Swachh Bharat 70 122 74%
Jal Shakti 600 772 29%
Jal Jeevan Mission 550 700 27%
Railway Electrification Projects 2 81 3667%
PMAY 480 796 66%
Metro Projects 156 195 25%
Tourism 13 24 79%
Source: Budget documents

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 UNION BUDGET 2023-24 POST BUDGET REVIEW

Rating Methodology
We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one
year. We have different threshold for large market capitalisation stock and Mid/small market capitalisation
stock. The categorisation of stock based on market capitalisation is as per the SEBI requirement.

Large cap stocks

Rating Criteria Definition
BUY >= +10% Target price is equal to or more than 10% of current market price
NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10%
SELL <= -10% Target price is less than or equal to -10%.

Mid cap and Small cap stocks

Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.

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This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report.
Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness
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Sr. Particulars Yes/No

no.

Page | 25 | PHILLIPCAPITAL INDIA RESEARCH

 UNION BUDGET 2023-24 POST BUDGET REVIEW

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