Budget 2018: Expect rural boost, relief for middle class through tax cut

We expect Budget 2018 to provide a boost to consumption via higher allocation for rural-oriented schemes. Some relief for middle-class through a cut in tax rates/higher exemptions for tax savings cannot be ruled out either, given that this is the last full Budget before the general elections 2019. The focus on infrastructure spending to revive the capex cycle should see higher allocations for roads, railways, power programmes. We also anticipate some relaxation of fiscal deficit targets as this is the first year of transformational and disruptive reform like GST. However, overall the glide path for fiscal consolidation should continue in the medium term.
Sector-wise expectations from Motilal Oswal Institutional Equities:
Banks
* Increased incentives and budgetary allocation to encourage flow of credit to MSMEs.
* Inclusion of a wider income range under affordable housing schemes and further incentives to developers for the same
* Incentives for long term project financing by banks with focus on roads and railways
* More clarity over recapitalisation bonds for state owned banks’
* Reduction in the tenure for interest tax free deposits from 5 years to 3 years
* Digitisation initiatives including special focus on promoting UPI based payments across a broader platform
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