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The Expectation from Union Budget 2018: An Analysis


Budgets can take many forms and serve many functions, providing the basis for detailed sales targets, staffing plans, inventory production, cash investment/borrowing, capital expenditures (for plant assets, etc.), and so on. Budgets provide benchmarks against which to compare actual results and develop corrective measures; give managers “preapproval” for execution of spending plans; and allow managers to provide forward-looking guidance to investors and creditors. Like each budgets the year’s  budget too had some pros and cons. Analysed below are the definitive points and industry expectation from the budget declaration.

Roads – including highways and rural roads – and railways are one of the most capital intensive expenditures of the Union Budget, after the defence sector. While the former totals Rs 1.3 trillion, the latter alone, at Rs 865 billion, represents the biggest chunk of capital expenditure.

The outlook and expectations of the budget 2018.


According to Shri Sorab Agarwal, Executive Director, Action Construction Equipment Ltd., “The announcement of the proposed Union Budget 2018 with an agenda to develop, educate and sanitize rural India is reasonably balanced for an inclusive growth of the Indian economy. The government has taken note of the signs of distress in the rural economy and the budget has provided some decent measures to address some pressing concerns. Initiatives announced in the budget bought many cheers to infrastructure, healthcare, education and agriculture sectors. As Budget 2018 has identified infrastructure as one of the key drivers of the economy, lot of initiatives has been announced for the betterment of the sector. The government has taken the onus of constructing 35,000 kms of roads under the Bharatmala Pariyojana project for which the Budget allocated is Rs 5.35 lakh crore which aims to provide seamless connectivity in backward and border areas. The allocation of Rs 11,000 crore for Mumbai rail network will definitely create a positive impact on the infrastructure sector. The announcement of constructing 9,000 km national highways will create job opportunities.

Budget is also strengthening the railway network and enhancing railways’ carrying capacity. The Capex for Railways pegged at Rs 1,48,528 crore for FY2018-19, will not only boost the transport system but also create a huge opportunity for ancillary industries. UDAAN initiative is also set to escalate the airways sector and provide lot of opportunities for companies in the infrastructure space. Urbanization being on the priority, various affordable housing schemes and government’s investment of 2.04 lakh crore for building 100 Smart Cities with state-of-the-art amenities will further enhance the development in infrastructure sector.

Overall this is a growth budget with high emphasis on infrastructure, health, education and agriculture sector”, he says.




Acccording to business-standard reports, Progress here has been slow. Construction of highways measuring 15,000 km was targeted for FY18, of which 4,942 km or 33 per cent had been completed. Highways in the North East are going through more lags, with 256 km of the planned 1,052 km completed in eight months of the financial year. As of now, 276 projects are pending. Some of these were initially scheduled to be completed as early as 2006. The Centre had budgeted Rs 178 billion infusion in urban metro rail projects in FY18, of which, Rs 118 billion was spent till December, according to data given in Parliament. About Rs 109 billion of the entire urban development capex of Rs 193 billion was spent till November, according to government accounts. Therefore the pointers from budget 2018 becomes even more crucial.

Mr. Vipin Sondhi, MD & CEO, JCB India Ltd. believes that, “The Union Budget presented is a balanced Budget with a focus on the Agri Sector, Rural Development, Healthcare and a continued thrust on Infrastructure creation. All of these will provide significant impetus to the revival of growth and creation of employment. The Budget also addresses the opportunities to modernise and create new infrastructure in Affordable Housing, Railways, Airports which continues the effort of the last few years. These will present favourable opportunities for growth to the Indian Construction Equipment Industry. Incentivisation to the MSME sector, which forms the backbone of industrialisation of a Nation, as also job creation is another welcome step.”

Infrastructure and Financial Sector Development

According to Press Information Bureau, Government of India Ministry of Finance report, Emphasising that infrastructure is the growth driver of economy, the Finance Minister estimated that investment in excess of Rs.50 lakh crore is needed to increase growth of GDP and connect the nation with a network of roads, airports, railways, ports and inland waterways. He announced increase of budgetary allocation on infrastructure for 2018-19 to Rs.5.97 lakh crore against estimated expenditure of Rs.4.94 lakh crore in 2017-18.The Government has made an all-time high allocation to rail and road sectors and is committed to further enhance public investment. The Prime Minister personally reviews the targets and achievements in infrastructure sectors on a regular basis. Using online monitoring system of PRAGATI alone, projects worth 9.46 lakh crore have been facilitated and fast tracked. To further boost tourism, the Budget proposes to develop ten prominent tourist sites into Iconic Tourism destinations by following a holistic approach involving infrastructure and skill development, development of technology, attracting private investment, branding and marketing. Under the Bharatmala Pariyojana, about 35000 kms road construction in Phase-I at an estimated cost of Rs.5,35,000 crore has been approved.

Mr. Ravichandran Purushothaman, President, Danfoss India, says“ Through the government’s efforts to double farmer incomes by 2020, through initiatives such as setting up of an agricultural market fund of Rs. 2000 crores, doubling the budget allocation for the food processing sector from Rs. 750 crores to Rs. 1500 crores and the upcoming 42 food parks for agriculture exports, India is set to uncover its potential to emerge as the food factory of the world. This development-oriented budget’s focus towards strengthening India’s infrastructure sector through the expansion of highways, railways, metros and airports are set to re-write India’s growth story. With the projected growth rate of 7.4% p.a in the coming year, India can look forward to furthering its development across all sectors but the key growth outcomes will depend on how states execute the new projects on ground.”


According to pib.nic.in, Railways Capital Expenditure for the year 2018-19 has been pegged at Rs.1,48,528 crore. A large part of the Capex is devoted to capacity creation. 4000 kilometers of electrified railway network is slated for commissioning during 2017-18. Work on Eastern and Western dedicated Freight Corridors is in full swing. Adequate number of rolling stock – 12000 wagons, 5160 coaches and approximately 700 locomotives are being procured during 2018-19. Over 3600 kms of track renewal is targeted during the current fiscal. Redevelopment of 600 major railway stations is being taken up.

Mumbai’s local train network will have 90 kilometers of double line tracks at a cost of over Rs.11,000 crore. 150 kilometers of additional suburban network is being planned at a cost of over Rs.40,000 crore, including elevated corridors on some sections. A suburban network of approximately 160 kilometers at an estimated cost of Rs.17,000 crore is being planned to cater to the growth of the Bengaluru metropolis.

Mr Jayant Mhaiskar, Vice Chairman & Managing Director, MEP Infrastructure Developers, says, Union Budget 2018 has struck a fine balance between fiscal prudence and providing growth boosters to the economy. It is a progressive budget and in line with the development priorities of the Government. The Finance Minister has made a strong attempt to pump prime the rural economy, agriculture and infrastructure sector. The Government continues to boost the infrastructure sector, which is the backbone of the country’s overall development, with a proposed Rs 5.97 lakh crore additional budgetary allocation for infrastructure. Ambitious Bharatmala Pariyojana has been approved for providing seamless connectivity of interior and backward areas and borders of the country to develop about 35000 kms in Phase-I at an estimated cost of Rs5,35,000 crore. To raise equity from the market for its mature road assets, NHAI will consider organizing its road assets into Special Purpose Vehicles and use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs). Overall, a populist budget  which adheres to the fiscal discipline, with emphasis on growth and development of the economy.

According to business-standard, report, Of the Rs 550 billion allocated for railways, Rs 212 billion was earmarked for the construction of new lines. Till November 2017, 56 per cent of the physical target – 2,000 km of the targeted 3,600 km – was completed. Apart from new lines, 130 rail overbridges and 332 underbridges had been constructed in FY18 till December 2017. On revenue expenditure, working expenses of Indian Railways at Rs 929 billion had surpassed the planned expenses of Rs 916 billion till November. On revenues earned, passenger and freight revenue of Rs 1 billion was collected against expected revenue of Rs 1.1 trillion.

Air Transport

The Budget proposes to expand the airport capacity more than five times to handle a billion trips a year under a new initiative – NABH Nirman. Under the  Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the Government last year, 56 unserved airports and 31 unserved helipads would be connected, according to pib.nic.in.

Peeyush Naidu, Partner, Deloitte India, says, “The budget sets the right course for the Aviation Sector. It reaffirmed commitment to sustaining the growth in the sector by focusing on substantial increase in airport capacity! UDAN – a scheme where Deloitte has closely worked with and supported the Ministry, is expanding the aviation network through a transparent market-based model as a result of which hitherto unserved airports and helipads will be connected by existing and new operators. The budget has maintained focus on required capital expenditure for Indian Railways for the year 2018-19 – for modernization and safety related initiatives as well as capacity expansion. The key imperatives going forward would be for the Ministry to focus on leveraging technology and private sector involvement in effectively and efficiently meeting mobility solution expectations of its different Client segments (freight, different passenger segments, etc.).”

Aneel Gambhir, CFO, Blue Dart, says, “We welcome the Union Budget 2018 announced by honourable Finance Minister which has recognised infrastructure as a growth driver of the economy. The investments in infrastructure are estimated to be in excess of Rs 50 lakh crore. This will support the growth of GDP and connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways.

To facilitate trade and e-commerce, the government should consider Aviation Turbine Fuel (ATF) under the ambit of GST as the excise / VAT paid on these products are not available as input credit. Under the Service Tax regime, input credit was available for the excise paid on ATF. Under GST, this has a negative impact on logistics costs.”

Digital India

In regard to Digital India Initiation, Mr Samay Kohli, Group CEO, GreyOrange says, “We are glad to see the government’s increased focus on Digital India. With the budgets for the initiative doubled this year, it is set to be one of the key drivers of India’s economic growth. The Union Budget for 2018-19 has laid a strong emphasis on emerging technologies, such as Robotics, Artificial Intelligence, Machine Learning, Big Data and IoT, which we believe, is an important step towards fostering innovation in the country. This would also help in creating jobs, improving the quality of education and healthcare. The announcement of a national program directed towards research and development of AI and Machine Learning, as well as efforts towards exploring Blockchain technology, are the testimony to the fact that India is taking significant steps to gain a rightful place on the global technology map. Along with the push on technology, the new provisions for financial support, in the form of credit, financing and tax relief for MSMEs, will further boost the growth of smaller businesses in the country and help spur the Indian economy at large. With the stage set, we look forward to a great year of growth for the robotics and automation sector.”


‘The budget reaffirms continued focus on Infrastructure and programmes such as Smart City mission, AMRUT, NMCG, the Regional Connectivity Scheme (UDAAN) etc. as can be seen by increased outlay by 20% from the previous year. The key takeaway form this budget is the thrust on social and rural infrastructure including health, education, housing, agri-value chain and penetration of digital infrastructure .Another key point is the emphasis on job creation particularly in the rural area through investment in the infrastructure. Overall, given the constraints and recent reforms initiatives, it is a balanced budget; however, the true picture will emerge only after implementation framework are detailed, says, P Pranavant, Partner, Deloitte India

Real estate

“Overall, the budget is growth oriented for real estate sector. The government move to set up a special fund for affordable housing is a welcome move. It will boost the development of affordable homes in the city. We expected the government to come up with other measures such as initiating single-window clearance system and according industry status to the sector. However, the budget will definitely enhance the Prime Minister’s initiative of ‘housing for all by 2022’. It will certainly boost the real estate market as we can expect increase in bookings. ”Mr. Ambresh Tipnis, Director, Shivalik Ventures.

“While the announcement of the affordable housing fund and increase in allocation towards infrastructure have brought the much-needed hope for the real estate sector, the lack of inclusion of announcements relating to lowering of GST and bringing stamp duty under the ambit of GST has been highly discouraging. The government’s announcement to establish a dedicated affordable housing fund in the National Housing Bank through various funding measures will give the much-needed boost to the realty sector.  As part of this measure, almost 31 lakh homes are to be built in urban areas in 2018-2019 and 51 lakh in rural areas. Infrastructure has also received a major boost in this Budget. Rs 5.97 lakh crore has been allocated for development of infrastructure across the country Rs 2.04 lakh crore towards smart cities. This move will definitely boost the real estate sector in the long-term as development of infrastructure is one of the major hurdles facing the industry. Bengaluru also stands to gain from this announcement with Rs17,000 crore allocated for the development of a 160-km of suburban railway network for the city. Bengaluru is in need of an alternative mode of transport that will offer some relief to its traffic woes’, says,  Ashok Naidu, Director, Kumari Builders and Developers.

Rural India

Mr. Ravi Kirpalani, CEO, thyssenkrupp India believes that the emphasis is on infrastructure development and electrification of rural India apart from modernisation of railways.”A stronger push has also been given to urban mobility by focusing on improving access facilities for passenger convenience in places with high urban density like railway stations and  airports. The railways have received a major thrust from the government as 600 stations have been identified for upgradation by the railways. All the railway stations with more than 25,000 footfalls will have escalators. Such upgrades will undoubtedly help move people faster at railway stations and make the entire travelling experience more convenient. The proposal to enhance airport handling capacity five-times to one billion trips and the allocation of Rs. 2.04 lakh crore for the development of the 99 identified smart cities will also catalyse the growth plans of the country”, he says.

Shishir Baijal, Chairman & Managing Director, Knight Frank India says, “The Union Budget 2018-2019 has predominantly focussed on revitalising the rural economy which is a good move. We also welcome the thrust on the healthcare, agriculture and infrastructure sectors outlined in this budget. Throughout last year, measures surrounding ‘Affordable Housing’ were the mainstay from the perspective of real estate industry. This was also evident in the Credit Linked Subsidy Scheme (CLSS) and the last Goods & Services Tax (GST) Council meet where they brought down the effective rate to 8% from 12%. A similar trend is visible in this budget where the ‘Affordable Housing’ fund under National Housing Bank (NHB) has been created as a part of the priority sector lending. However, there has been a silence in the budget on stimulating mainstream real estate demand. The sector grappling with the reforms-driven new order has been bereft of any meaningful interventions that could have been achieved through the budget.”

Make In India

Mr. Manish Nuwal, MD & CEO at Solar Industries India Ltd. (SIIL), says, ‘Finance Minister Arun Jaitley’s move to set up 2 defence production corridors is the right step to boost the `Make in India’ initiative aimed at self-sufficiency in ammunition procurement. It also compliments initiatives taken in the past to nurture domestic defence production capability that will make India self-reliant in meeting our defence needs. He further adds, Allocating Rs. 5.97 lakh crores to improve India’s infrastructure is a firm step towards bringing it at par to Asian levels. We see rising demand for industrial explosives due to encouraging measures such as the target to complete construction of 9,000 km of national highways this year by the NHAI. Spent on rural roads out of total allocation for Rural development is also enhanced in big way and these will boost demand industries explosives.”


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