With a forward-looking announcement in infrastructure development and affordable housing, the Union Budget 2017 will boost the construction equipment segment.
The construction equipment segment in India has something to cheer about from the Budget measures such as more fund allocation to rural roads and highways construction, and announcement of infrastructure status to affordable housing. The focus on infrastructure development, especially the increased allocation for rural roads and highways will drive construction activities in future, which will be a boon to the construction equipment market. The housing sector is likely to get some relief from the impact of demonetisation after the announcement of infrastructure status to the affordable housing segment. This can improve the flow of investment into the sector and subsequently pick up construction activities. The government´s thrust on skill development is reflected in the Budget with the announcement of the Sankalp scheme, which provides relevant training for youth. Equipment India dwells into a sector-wise Budget boost that can drive the growth of the construction equipment market.
Roads & highways: The Government has allocated a total of Rs 91,000 crore for roads and highways sector for fiscal year 2017-18. While the Budget 2017 provides for an outlay of Rs 64,000 crore for roads and highways, the Finance Minister announced that Rs 27,000 crore would be specially earmarked for the Pradhan Mantri Gram Sadak Yojana (PMGSY) in FY18. He has also identified around 2,000 km of coastal roads that can be developed for better port connectivity. Transport infrastructure: Transport infrastructure including highways, railways, rural roads and shipping got a big boost in the Union Budget 2017 with a total outlay of Rs 2.41 lakh crore. Majority of this allocation (54 per cent or Rs 1.31 lakh crore) will go towards modernising rail infrastructure. The highways sector will get Rs 64,000 crore, while rural roads and operation and maintenance of selected airports in Tier-II cities will also get a boost.
The government is rolling out Bharat Mala, the coastal connectivity project that envisages developing 6,000 km roads along coastal and border areas. Under PMGSY, the government wants to connect the remaining 65,000 rural habitations by constructing 2.23 lakh km of roads.
Skill development: The Finance Minister has announced the launch of Sankalp, a Rs 4,000 crore scheme, for skill development. The programme will aim to give market-relevant training to crores of youth. He has also announced that the number of Pradhan Mantri Kaushal Kendras would be increased from 60 to over 600. The other major initiative on the skill development front that has been announced is the establishment of 100 India International Skills Centres (IISCs) for advanced training and courses in foreign languages. This will help those seeking job opportunities outside the country.
Realty: Budget 2017 has proposed infrastructure status for affordable housing and also increased the allocation for the Prime Minister Awas Yojana (PMAY) from Rs 15,000 crore to Rs 23,000 crore.
There are many positives in this Budget 2017. Sufficient thrust has been given for the sectors across transport and infrastructure development including rail road, highways, PMGSY programme, etc. Reduction in the holding period for long-term capital gain from 3 years to 2 years and advancing the base year for calculating the indexation for cost of acquisition from 1981 to 2001 is very much welcome and could provide a boost to the real estate sector. Significant emphasis on digitalisation to bring in transparency and to reduce corruption is a move in the right direction. The Income Tax rebate given to promote the MSME sector is also a very good decision. Some steps to incentivise savings and investments could have been provided for.
- Anand Sundaresan, Vice Chairman and Managing Director, Schwing Stetter India, and President, Indian Construction Equipment Manufacturers´ Association (iCEMA)
Finance Minister Arun Jaitley has presented a well-balanced and constructive combined budget, focusing on the most critical aspects of the economy, such as infrastructure, agriculture and rural India. The Budget has managed to press key buttons that are necessary to bolster overall development of the nation. From the earthmoving and construction equipment industry´s perspective, we till now witnessed the roads and highway sector leading the growth momentum, however, to really create sustainable growth, other sectors needed attention.
- Vipin Sondhi, Managing Director & CEO, JCB India.
While maintaining fiscal discipline, this year´s Budget announced by Finance Minister Arun Jaitley demonstrably seeks to stimulate economic growth and job creation. The agriculture, housing, rural development, and infrastructure sectors, in particular, will benefit from the increased outlays set aside for them in this Budget. In particular, with the record Rs 3.96 lakh crore allocated to infrastructure, we can look forward to greater activity in the construction of roads, railways, and ports. Overall, this Budget is a blueprint for sustainable long-term growth in our country, and execution of these strategies will be key now, for the rest of the year.
- Dimitrov Krishnan, Vice President, Sales & Marketing, and Head, Volvo CE India
Provisions made keeping in mind roads and highways is a positive step and a systematic increase in the same is also visible. Provisions made for the fundamental facilities and security in the Railways, will also prove to be encouraging for the sector. The time-frame set to ensure that power is made available across the nation is a very positive thing, and it will expedite the growth process of the power sector. Though not much is given to the manufacturing sector. It was expected by professionals and industrialists that at least interest rates would be brought down. However, no such measure is taken as far as this Union Budget is concerned.
- Satish Parakh, Managing Director, Ashoka Buildcon
The Union Budget 2017, with an agenda to transform, energise and sanitise India is reasonably balanced for an inclusive growth of the Indian economy. The implementation of end-to-end solutions by Railways for some commodities, and significant investment in development of national highways, are steps towards ensuring multimodal connectivity and better transport system. The Budget puts forth some initiatives like the Metro Rail Policy, development of railways through investment of Rs 1.31 lakh crore in 2017-18, development of coastal roads, etc, that aim to create job opportunities and boost infrastructure; however, there is no much clarity. The success of these projects lies in their efficient management and implementation. While there are some positives for the sector in the Budget, there are no remarkable announcements that the logistics sector can bank on. We were hopeful of some incentives and investments especially in coastal shipping, given that India has a coastline of more than 7,500 km and has been one of the priorities of the government in the last few years. Initiatives to boost port modernisation, development of industries and industrial corridors, seem to have been given a miss.
- Adarsh Hegde, Joint Managing Director, Allcargo Logistics
A 10 per cent reduction in trade costs can boost the country´s competitiveness and contribute additional revenues of up to $5.5 billion annually. In that regard, Maersk welcomes the Budget´s proposed increase in expenditure on infrastructure for improving coastal road connectivity from ports to the hinterland, expanding railway connectivity, introducing end-to-end integrated transport solutions in partnership with logistics players, and encouraging public private partnerships for airport developments in certain smaller cities. These efforts, complemented by timely implementation of GST, building of multimodal parks, increased emphasis on digitisation for greater transparency and the introduction of a trade infrastructure export scheme, will all collectively boost quicker inland movement of cargo. In turn, this will help reduce hidden costs of trade and improve India´s global trade opportunity.
- Julian Bevis, Senior Director, South Asia, Maersk Group
The big push to expenditure for farmers, rural sector, affordable housing and infrastructure will give a fillip to growth and employment. Putting more money in the hands of the common man through tax rate reduction, encouraging FDI, measures for education, skilling and employment of youth, are all positive measures for economic growth over the next few years. A commitment to the path of fiscal prudence has been made, although fiscal deficit was pegged higher at 3.2 per cent, keeping in mind the need to increase public investments in the absence of private sector investments to ensure GDP growth. Reduction in corporate tax rate for MSMEs, measures to increase transparency by restricting cash transactions to Rs 3 lakh and change in framework of political funding are welcome. The reduction in capital gains period for real estate is a positive move. A big thrust to digital transactions is a step in the right direction. Overall, it is a positive Budget with focus on the right segments, with an aim to increase tax to GDP ratio and targeted expenditure to give growth and employment a fillip.
- Shanti Ekambaram, President - Consumer Banking, Kotak Mahindra Bank
I would term it as a reform-oriented Budget where the expenditure was well-directed towards economic growth and development, especially in the rural areas. It also reflected the government´s concern and priority to improve the investment climate with a view to stimulate growth. The massive push for improvement in infrastructure, including record capital expenditure for roads, railways, will indirectly benefit the real estate sector in the long run. We welcome the move to grant infrastructure status for affordable housing as it will act as a catalyst to the government´s vision of æHousing for All by 2022´. While these initiatives are noteworthy, we need to remember that deregulation will be the key to the success of various government initiatives. A major impediment to real estate development in India remains the approval process. While the government has done a lot to ease the functioning of the real estate sector and protect the consumers, it must get the statutory authorities responsible for clearing the projects within the purview of law. The other major concern remains that corporate taxes and dividend distribution tax remains the highest in the world. We hope this is addressed in the future to attract more investments in the corporate sector.
- Surendra Hiranandani, Chairman & Managing Director, House of Hiranandani
Budget 2017 has rightly provided the much-needed focus on farmers and affordable housing. Good initiatives like increased fund corpus with NABARD, higher availability of credit to farmers, affordable housing getting infrastructure status, refinancing by National Housing Bank, construction of one crore houses for the homeless, an augmentation in sanitation coverage and provision for safe drinking water in villages, higher spending on infrastructure and in rural areas, will give the requisite boost to the economic activity in irrigation for farming and housing. Even as a business, these initiatives will bring about great impetus in demand for the pipes vertical at Finolex Industries.
- Prakash Chhabria, Executive Chairman, Finolex Industries