Railway Minister highlighted that there might not be a need for diesel in the coming 3-4 years since the country is moving rapidly to electrification.
Railway Ministry is planning to spend ~₹50-lakh-crore after analysing the key focus areas namely: (i) freight corridors; (ii) more semi-high-speed or high-speed trains; (iii) double, triple or quadruple tracks
Giving houses on rent may get the required push with much more clarity on the legal front post the Budget. The government announced that it proposes to come up with a model tenancy law to give a fillip to rental housing.
The move will not only help in doing away with the currently prevalent archaic law but will also help realistically and fairly define the relationship between the lessor and lessee. Once finalised, the law will be circulated to the States, said Finance Minister Nirmala Sitharaman.
The Budget also proposed additional incentive for the purchase of affordable housing. It proposed to provide a deduction up to ₹1,50,000 for interest paid on loan taken for purchase of residential house with a value of up to ₹45 lakh. This deduction of interest for affordable housing will be in addition to the existing interest deduction of ₹2 lakh.
Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to ₹3.5 lakh.
In the context of carpet area, the Budget proposed to increase its limit from 30 sq mt to 60 sq mt in metropolitan regions to align the definition of affordable housing in the Income Tax Act with the GST Act. In the non-metropolitan regions, the limit will increase from 60 sq mt to 90 sq mt.
Sitharaman also proposed that the housing finance sector regulation authority return back to the purview of the RBI from the National Housing Bank.
She said the necessary proposals had been placed in the Finance Bill.
The steel and cement sectors are pinning hopes on a government push for more affordable housing and road spends to boost domestic consumption.
According to analysts, domestic steel consumption grew at 7.5% in 2018-19, down from 7.9% in 2017-18.
According to ICRA Ltd the muted growth of steel consumption in 2018-19 is due to liquidity and fuel price-related headwinds faced by the auto sector during the second half of the financial year.
The larger amount of steel demand comes from the infrastructure and construction sectors, including projects in real estate and roads.
According to CARE Ratings estimates, India’s steel consumption from 98 million tonnes in FY19 is expected to grow by 5-6% on the back of government’s expenditure towards infrastructure and construction.
Steel production has increased by 19.9% in May 2019 over May 2018. This is the 12th consecutive month that steel production has reported an increase as per the Index of Eight Core Industries compiled by the Ministry of Commerce.
Whereas, the incremental demand from proposed ‘Housing for All’ scheme and construction activities of metro or Irrigation projects are likely to aid utilisation and profitability of the cement industry in the long-term.
Till date the Centre has planned 81 lakh houses at an investment of ₹4.83 lakh crore under the Pradhan Mantri Awas Yojana — Urban. Out of these, around 48 lakh houses are at various stages of construction. About 26 lakh houses have been completed and handed over. The mission targets for providing housing for all by 2022 is way ahead of the timelines and targets, according to estimates by the Ministry of Housing & Urban Affairs. Projects worth another ₹1.33 lakh crore have been tendered under the Smart Cities Mission.
The road sector is the next key sector expected to drive demand. In Uttar Pradesh alone, the Ministry of Roads has planned National Highways projects worth ₹1.10 lakh crore. The Roads Ministry had set a target of construction of 61,000 km road length by providing connectivity to 19,725 habitations during the financial year 2018-2019. Now the goal post has been shifted to PMGSY-II, a programme to better the quality of these roads, widen them, and provide civic amenities.
The domestic steel industry is proposing a 25% anticipatory safeguard duty on imports when the demand for steel picks up in a few months. The purpose is to protect the domestic market as the industry fears the following:
• Alleged dumping;
• Higher demand may not be met by domestic steel industry; and
• Imports by India from China, Japan and South Korea have grown substantially
Despite the alleged dumping, steel industry still continues to earn profits on account of:
• Lower input costs since domestic high grade iron ore prices are on a decline;
• Mining activity is pushing down ore prices.
As for mining activity, with some iron ore mines licences expiring in the coming year, miners are expected to ramp up production and build inventories.
Bringing private investment in the infrastructure sector is key to India becoming a $10-trillion economy by 2030, as fiscal constraints continue to limit fund flow from public sector, said the Economic Survey 2018-19.
Along with physical infrastructure, provision of social infrastructure is equally important as these two would determine where India will be placed in the world by 2030, the survey said.
India needs to spend 7-8% of its GDP on infrastructure annually, which translates into annual infrastructure investment of $200 billion.
However, the country has been able to spend only about $100-110 billion annually on infrastructure, leaving a deficit of around $90 billion per annum.
The survey further said that public-private partnerships (PPPs) are “quintessential” for addressing the infrastructure gaps in the country. Private investment in infrastructure has come mainly through PPPs. Need is to establish an institutional mechanism to deal with time-bound resolution of disputes in infrastructure sectors and also government must look at asset recycling in airports, power and railways, just as it did for the roads sector.