Trump’s 50% tariffs on Indian goods have upset the country’s US$11bil textile export industry and shaken confidence in the US market. — AFP
NEW DELHI: India has announced measures to invest nearly US$133bil to turbocharge its infrastructure overhaul and boost manufacturing for sectors from textiles to electronic components in its federal budget. It also raised taxes on equity futures to curb speculative trading.
The nearly 90-minute long speech by India’s Finance Minister Nirmala Sitharaman last Sunday seeks to protect the economy at a time of global uncertainty and continuing 50% US tariffs while the trade deal with the country remains elusive.
India’s small businesses were also given a 100-billion-rupees growth fund as well as 20-billion-rupees top up on a 2021 self-reliant fund.
“We face an external environment in which trade and multilateralism are imperiled and access to resources and supply chains are disrupted,” Sitharaman said while presenting the budget in Parliament.
While plans to boost manufacturing, data centres and exports boosted some shares, higher transaction tax on equity derivatives led to investors shunning brokerage stocks.
The NSE Nifty 50 Index fell as much as 3% after the announcement, before paring the decline partially. While further details are awaited on these announcements, here’s a quick look at sectors which are likely to benefit and lose out:
> Pharmaceuticals
India announced an outlay of US$1.1bil over the next five years to boost the production and research for biologics and biosimilar drugs.
India wants to be a biopharma manufacturing hub, Sitharaman said, especially as more Indians are diagnosed with non-communicable diseases including diabetes and cancer.
Nifty Pharma Index surged after the announcement, with major players like Sun Pharmaceutical Industries Ltd and Biocon Ltd jumping as much as 3.8% and 2.9%, respectively.
> Textiles
The apparel makers who have been pummelled by Donald Trump administration’s 50% tariffs, are likely to benefit from a number of policy measures announced, including plans to set up “mega textile parks”.
Raymond Ltd and Trident Ltd surged more than 8% during trading in Mumbai last Sunday, before giving up some of those gains.
> Electronic manufacturing
India announced a US$4.3bil outlay for electronic components manufacturing to propel an industry which has become a focus area as firms such as Apple Inc boost their manufacturing in India.
The high-tech pursuits of most of India’s leading conglomerates, such as the Tata Group, Adani Group, Reliance Industries Ltd and the Godrej Group, are expected to benefit.
Shares of local electronics component makers including Amber Enterprises India Ltd, Dixon Technologies India Ltd and Kaynes Technology India Ltd gained.
> Data centres
A proposal offering a tax holiday for foreign companies providing cloud services globally from India-based data centres through 2047 is a boost for cloud infrastructure companies.
As Alphabet Inc’s Google and other US tech behemoths pledge billions of dollars to build artificial intelligence infrastructure in India, investors are racing to identify local firms set to benefit from the wave of investments.
Shares of Anant Raj Ltd, which is heavily investing in data centres, jumped as much as 14.2%.
> Infrastructure
Shipping stocks gained after the finance minister announced a ship-repair ecosystem and incentives for seaplanes in the annual budget, with Shipping Corp of India rising as much as 4.3%. Others like Essar Shipping Ltd and Dredging Corp of India surged more than 9%.
Additionally, firms like Container Corp of India Ltd are set to benefit from cargo and transport sector reforms after India’s federal budget proposed allocations for initiatives including new dedicated freight corridor and high-speed city rail corridors.
> GIFT City
India will extend a tax holiday at the Gujarat International Finance Tec-City, or GIFT City, to boost the appeal for businesses setting up shop there. It plans to propose doubling the tax holiday to 20 consecutive years, easing concerns of large banks and asset managers.
The move is expected to bolster the government’s effort to attract foreign capital to the country’s sole international financial services centre which policymakers are hoping can eventually rival hubs like Dubai or Singapore.
> Brokers
The government hiked the securities transaction tax on equity futures to 0.05% from 0.02%. The levy on options premium and on the exercise of options was increased to 0.15%.
Shares of the BSE – India’s second-largest stock exchange – and stock brokers including Angle One Ltd tumbled.
The move marks India’s determination to curb speculative trading after an influx of retail traders made the country the world’s top destination for such products by contracts traded.
> State-owned banks
Investors and industry leaders were expecting an announcement around consolidation of state-run banks in the budget, as well as a relaxation in foreign shareholding cap in these lenders.
India’s proposal to sell a record amount of bonds in the year starting April 1 could also affect state-run banks. — Bloomberg
