India Targets Lower Debt, Higher GDP in 2010

Mayank Mehta
26 Feb, 2010
New York City

The fiscal 2011 budget plan to raise $8 billion in stake sale in the government controlled companies and $7 billion through the sale of wireless licenses. Individual income of less than $3,000 will be tax exempt. Infrastructure companies increased after the government increased spending.

[R]6:00 PM Mumbai, 8:30 AM New York – The fiscal 2011 budget plan to raise $9 billion in stake sale in the government controlled companies and $8 billion through the sale of wireless licenses. Infrastructure spending will increase 24% and government debt sale is estimated to increase 1.3%.][/R]

The Sensex index in India increased 175.35 or 1.08% to 16,429.55 and CNX Nifty index rose 62.55 or 1.29% to 4,922.30. Among the Sensex 30 stocks, 25 rose and 5 fell.

On BSE trading, 1,834 stocks advanced, 935 declined and 84 were unchanged. Auto and metal stocks surged. Banking stocks also gained.

ICICI Bank, State Bank of India and HDFC Bank rose by between 1% and 3.2%.

Pranab Mukherjee in the latest budget presentation estimated at least 7.2% economic growth in the current year and pledged to lower budget deficit to 5.5% from 6.9% in the current fiscal year.

He also estimated economic growth to increase to 10% in the “not-too-distant future” but failed to project the time period.

The government in the next fiscal year budget estimated Rs 40,000 crore from disinvestment year beginning in April and Rs 35,000 crore from sale of third generation telecom auctions.

The finance minister has raised personal income tax slabs which will result in increase in disposable incomes. Income up to Rs 160,000 will be income tax free. Personal income tax for income between Rs 160,000 and 500,000 will be taxed at 10% and for the income between Rs 500,000 and Rs 800,000 will be 20%.

Mukherjee increased alternative minimum tax to 18% for corporations from 15% and expanded the service tax base to include real estate companies and electricity exchanges.

The government also proposed higher fuel tax and increased excise duty on most of the products to 10% from 8%. Automakers plan to increase car prices by at least 2% after the announcement.

Spending on roads, power and building infrastructure was increased 24% in the budget in the next fiscal year.

Government will raise 1.3% more in debt sale and proposed to raise Rs 457,000 crore, lower than expected by most economists.

Mukherjee said that 19% of government revenues will be used to pay the interests, 11% for defense and 9% for food and fertilizer subsidies for poor in the urban and rural areas. Allocations to states for their share of central government revenues will be at 27%.

Infrastructure Stocks Higher

Shares of road construction companies increased after the finance minister Pranab Mukherjee proposed allocation of Rs 19,894 crore for road transport in 2010-2011.

Nine power sector stocks rose 0.47% to 2.88% after the finance minister, in the Union Budget today, doubled allocation for power sector to Rs 5,130 crore.

Shares of six companies from the education sector rose by 1% to 2% after the finance minister proposed to increase allocation for education to Rs 31,000 crore.

Nine cement stocks rose 0.84% to 3.52% after the finance minister proposed a partial rollback of excise duty on cement and cement products.

Rupee edged higher 9 paisa to 46.31 against one dollar.

Gainers & Losers

ABG Shipyard Limited fell 0.08% to Rs 242.05 after Credit Suisse of Singapore hiked its stake in the firm.

Apollo Tyres Ltd gained 5.8% to Rs 58.20 after the company on a roll after brokerage upgrade.

Bartronics India Limited added 2.7% to Rs 155.70 after the finance minister allocated Rs 1,900 crore for unique identification project.

Everest Kanto Cylinder Limited declined 1.9% to Rs 111.40 after the high pressure seamless gas cylinders and pressure vessels maker announced that the company has received orders for the export of CNG cylinders aggregating to about $5 million.

Hindalco Industries Limited gained 3.1% to Rs 159.85 after the company prominent foreign broker raised its price estimate on the stock to Rs 187 from Rs 154 earlier.

Maruti Suzuki India Limited gained 6.9% to Rs 1,463.55 after the company increased vehicle prices due to excise duty increase.

Ranbaxy Laboratories Limited rose 4.5% to Rs 472.10 after the pharmaceutical industry shares falls on earnings forecast and the U.S. regulatory issue.

Reliance Infrastructure Limited increased 4.2% to Rs 1,004.00 after the company will build a planned sea link between Worli and Haji Ali. The first part of the project, which connects the Mumbai suburb of Bandra to Worli, was built by Hindustan Construction Company.

SEL Manufacturing Company Limited rose 3.8% to Rs 82.60 after the company's subsidiary SEL Textiles filed papers with the market regulator Securities and Exchange Board of India for an initial public offer.

Sterlite Industries (India) Limited climbed 2.9% to Rs 784.05 after the non-ferrous metals and mining company has launched an appeal in the 5th Circuit Court of Appeals in New Orleans against a U.S. District Court decision to allow Asarco LLC parent Grupo Mexico SAB to regain control of Asarco.

Tata Power Company Limited decreased 3.5% to Rs 1,213.95 after the company which is expected to stop supplying power to Reliance Infrastructure's distribution area in Mumbai, would now start supplying 500 MW of power to Maharashtra from April 1.