Budget 2018: Tightrope walk for Jaitley; expect a focus on housing, infra

Within infra, areas like housing, rural connectivity, digital connectivity, metro projects, waterways, sanitation, urban & rural infra, and rural electrification will be beneficiaries

Budget 2018, to be presented on February 1, is set to be a tightrope walk for Finance Minister Arun Jaitley. While political compulsions might need him to announce some populist measures, the need of the time from the point of view of the economy would call for some tough calls. Which path would the finance minister take? Nitasha Shankar, senior vice-president and head of research, YES Securities, lists her Budget 2018-19 expectations.

Considering the government’s long term vision as well as the trend set through the earlier budgets, the focus this time is expected to remain largely on housing, infrastructure and the rural economy. Thus, companies catering to these areas should be the key beneficiaries. These include the ones involved in construction, cement, building material (tiles, paints, pipes), housing finance, fast-moving consumer goods (FMCG), consumer durables, amongst others.

Within infra, areas such as housing, rural connectivity, digital connectivity, metro projects, waterways, sanitation, urban & rural infrastructure, irrigation, and rural electrification are likely to continue to be some of the focus areas, as was seen through the sharp rise in the allocation towards the same in the previous Budget. Within the real estate space, the focus is likely to be on the measures towards boosting the affordable housing through various measures and schemes – including efforts taken to liquidate inventory in the system as well as providing platforms to raise capital for builders. 

With the likelihood of the budget being more on the side of pro-poor, there could be incentives going in the way of the rural economy, including through a focus on job creation. Not to mention that the expectations for tax cuts and lower rates for individuals and corporate both, are high as well. All of these will have a trickledown effect on consumption, and will give a fillip to areas such as farm mechanization, fertilizer usage, auto consumption and NBFCs. These would get a further boost if the government allocates higher amounts towards crop insurance (given its importance) and special focus on rolling out direct benefit transfer (given that it has helped curb the leakage in the system considerably) quicker. 

The financial services area could be an interesting category to look at as well, especially if the government is looking to increase the focus on long term investing in equities though various schemes - including increasing deductions under section 80c.

The author is senior vice-president and head of research, YES Securities