Soon after Finance Minister Pranab Mukherjee presented the Union Budget 2009, the first negative sign came from the market and Sensex went southward.However, there is silver line for other sectors and already they are showing the Budget 2009 impact.

Cars and TVs reduce prices: In the Budget 2009 presented on Monday Pranab had announced the cuts in excise and custom duties. Already automobile companies like Mitsubishi, Ford, Toyota et al have announced the full benefit to customers.

The Budget 2009 had directed a cut of Rs 5,000 in excise duty on all passenger vehicles with engines over 2000cc that means SUVs get major benefit as 70% of sales in passenger vehicles comes from the small car segment. Mitsubishi’s Outlander, Pajero and Montero, have cut Rs 6000 while Ford’s Endeavour, Toyota’s Camry and Innova, General Motors’ Tavera and vehicles from Mahindra & Mahindra too followed suit.

Consumer companies like Samsung Electronics and LG who are major players in LCD TVs too have said they would pass on the benefit to the customer. Samsung Electronics announced a cut Rs 1,200 on 32 inch monitors, Rs 2000 on 40-inch monitors and Rs 3500 on 46-inch, according to reliable sources. However Samsung spokesman promised further cut from August. So did LG who have less than 30% market share on LCDs. And both auto makers as well as consumer companies are confident to make the best of time till September.

No hike in home loan tax exemption: Despite plea from urban development ministry, Pranab chose it to ignore coolly by not increasing the income tax ceiling on home loan interest payments. "It has been requested that the deduction on account of interest payment available under section 24 of the Income-tax Act should be increased to the extent of full payment paid in housing loan taken, for all categories of assesses, at least in respect of one house," acknowledged Minister of State for Finance S. S. Palanimanickam. The ceiling of Rs 1.5 lakh is applicable only in case of self-occupied property and in the case of rented property, the entire interest paid on home loan is already allowed as a deduction.

Employers may rejig salary: The removal of the Fringe Benefit Tax (FBT) proposed in the Budget is being regarded as a welcome move for companies and may also provide them scope to restructure employee remuneration, say Human Resources experts.

"The abolishment of the FBT is a welcome move from employers. It means that perquisites will be taxed in the hands of employees at the marginal rate of tax applicable to them," observed R. Sankar of PricewaterhouseCoopers India.

Many analysts opined that the withdrawal of FBT will benefit employees rather than the employees. The companies will reintroduce superannuation plans as the third retirement benefit for their employees, said one.

"There are possibilities that companies may look at increasing salaries to an optimal level," another expert was quoted as saying in a news agency.

HR experts said that the removal of 10 per cent surcharge is also a good move and would be seen as beneficial for the salaried class, particularly against the prevailing backdrop of salary freezes and reductions.

Another expert said that the cut in FBT is also a loss for the exchequer: Employers use this opportunity to add this as an incentive for the employees and thus means less salary!.

Not just LCDs got a excise duty cut, Pranab also showered benefits to gems and jewellery and gave bonanza to the upper middle class by doing away 10 per cent surcharge and doubling the threshold on wealth tax of 1 per cent to Rs 30 lakh. Also do not forget pharmaceutical companies.

Items like biscuits, cakes, pressure cookers, vacuum and gas-filled bulbs of retail selling price of not more than Rs 20 per bulb, certain varieties of paper, paperboard and related articles were put under the exempted items list.

Some say Union General Budget as an expenditure budget as Pranab enhanced allocations for National Rural Employment Guarantee Act, National Rural Health Mission and other social sector schemes like Rajiv Awas Yojana and Pradhan Mantri Adarsh Gram Yojana for villages which have a Scheduled Caste majority.

The budget also focused on housing for urban poor, relief for farmers who paid loans on time, hike in allocation for Bharat Nirman and a new scheme for 1,000 villages with Scheduled Caste majority.

Disinvestment: Pranab was expected to mention something for disinvestment in the loss making public sector units who are are bleeding the exchequer. At least 100 such PSUs combined losses over Rs 10000 crores. PSUs like National Aviation Co of India Ltd, that operates Air India is expected to register a loss Rs.5,000 crore in 2008-09, others include NTPC (National Thermal Power Corporation), BHEL (Bharat Heavy Electricals Ltd).

Pharma firms smile: "Reduction in customs and central excise duties for selected drugs will benefit patients," promised a top offical pharma company. Even though the excise duty of 4% has been retained, custom duty has been lowered on some vital life saving drugs. With reduction in custom duty on certain selected life saving drugs, the prices of 9 particular drugs used for the treatment of fatal ailments like cancer, HIV, Hepatitis B and Arthritis are to be cut soon. The prices of two vital heart devices are also expected to come down.

Interest rates to rise: Amidst all these happenings, one sector - bankers - foresee rising interest rates in six months. They say that the days of softer interest rates were over. Since the government would be forced to pack in a dramatic increase in borrowing in the next three months, pressing the Reserve Bank of India (RBI) to buy more bonds from the market, crowding out borrowing by the private sector. On July 11, Finance Minister Pranab Mukherjee will address the Central Board of Directors of the Reserve Bank and is expected to discuss the government’s borrowing programme and other issues. Bankers are also waiting anxiously for the first quarter monetary policy review scheduled for July 28, where the central bank is expected to announce its strategy to ensure that government borrowings would not affect corporate fund raising plans and interest rates.

(Source: MSN News)

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Railways Minister Mamata Banerjee on Friday unveiled a massive plan to revamp railway stations in the country, saying that 50 stations in large cities would get world class facilities, while 50 more would have multi-functional complexes.

Presenting her ministry's budget for the current fiscal in the Lok Sabha, Banerjee said: "The world class facilities in the 50 stations will be developed through innovative financing and under public private partnership mode."

Some of these stations are: CST Mumbai, Pune, Nagpur, Howrah, Sealdah, Bhubaneswar, New Delhi, Lucknow, Varanasi, Amritsar, Kanpur, Guwahati, Jaipur and Chennai Central.

The multi-functional complexes will be developed in "fifty such railway stations in places of pilgrimage, industry and tourist interest," Banerjee said. They will have shopping centres, food stalls, restaurants, book shops, telephone and fax booths, medicine and variety stores and budget hotels as well as underground parking.

State-run IRCON and Rail Land Development Authority will develop these complexes.

Some of the stations where the complexes will come up are Alipurduar, Allahabad, Banspani, Bikaner, Bilaspur, Cuttack, Darjeeling, Dehradun, Ernakulum, Gandhidham and Gwalior.

The minister also proposed to develop 375 "Adarsh stations", which would have better basic facilities such as drinking water, adequate toilets, catering services and waiting rooms.

"These stations will also have dormitories especially for lady passengers and other basic facilities," Banerjee said.

Out of the 375, the railways have already identified 309 stations for the Adarsh station project.

Banerjee added that the railways would extend a helping hand to physically challenged and senior citizens.

"The Indian railways will extend a helping hand to the persons with physical disabilities and old age people. Standard ramps, earmarked parking lots, specially designed coaches in each mail and express train, lifts and escalators would be provided in a phased manner," she said.

(Source: Economic Times)

Budget Summary
* Mamata ends Rail Budget speech with Urdu couplet
* No hike in freight rates
* No increase in passenger fares across classes
* Tatkal scheme to be reduced from 5 days to 2 days
* 12 new 'Durant' AC sleeper trains between major metros
* Non-stop AC 'Durant' trains to be introduced
* 1000 MW power plant with NTPC on Bengal-Jharkhand border
* Kolkata Metro to get more extensions
* Ladies Special to be extended to Kolkata, Chennai, Delhi
* Metro concession in Kolkata to minority students
* Press correspondents to get 50% concession
* Cold storage facilities for farmers to store produce
* New scheme called 'Izzat' for low-income monthly travel
* Total working expenditure estimated at Rs 81,685cr
* Unrealistic high targets of Interim Budget not sustainable
* Freight loading fell short of target
* New coach factory to be set up in Kanchrapara in Bengal
* Mega logistics hubs in Eastern and Western corridor
* Launch of premium parcel service between 3 stations
* New policy to allow private freight terminal
* Railways to lease out land for commercial purposes
* Special recruitment drive to fill up physically challenged posts
* Metro Rail Hospital in Tollygunj to be upgraded
* Hospitals to be developed for railway staff
* Colleges on railway land through public-private partnership
* Girl child scholarship for Group B Railway employees
* To increase number of women commandos in key routes
* Ramps, special bogeys for physically challenged passengers
* To introduce double-decker AC coaches for inter-city travel
* Passengers can buy tickets from Post Offices
* SMS update on waitlisted tickets
* Automatic ticket vending machines in 200 stations
* Ticketing services in 200 new towns and cities
* Infotainment services in Rajdhani, Shatabdi
* 49 stations of religious importance to be upgraded
* To introduce ambulance facilities in long-distance trains
* Depute one doctor in long-distance trains
* Specially designed coaches for handicapped passengers
* Book stores, PCOs to be set up across stations
* Multi-functional complexes for railway users at stations
* Toilet facilities for women at stations
* Public-private partnership to develop stations
* 309 out of 370 stations identified for development
* CST Mumbai, Pune, Nagpur, Howrah, Sealdah to be developed
* Develop 50 stations as world-class
* To lay stress on platform and train security, catering
* Mamata quotes Tagore's "where the mind is without fear..."
* Expert committee on socially unviable projects to be set up
* Mamata invokes Indira Gandhi in her Budget speech
* All-inclusive development needs to happen
* Rail projects governed by social viability: Mamata
* Rail projects shouldn't be gauged by economic viability
* We are proud of the Indian Railways: Mamata
* Mamata Banerjee begins speech in Parliament
* Mamata Banerjee tables her third Rail Budget
* 'My Budget by the people, for the people'

(Source: IBN Live)

Download Entire Budget Speech

The economic survey prepared by the finance ministry, released ahead of Monday's budget announcement for the fiscal year ending in March 2010, said inflation is no longer a worry and called for an urgent return to the targeted fiscal deficit of 3 percent.

KEY POINTS:
- Economy could grow around 7 percent in 2009/10 if U.S. economy bottoms by Sept.
- Economy could return to 8.5-9 percent growth in medium term if reforms are pursued.
- Fiscal deficit target must be set at 3 percent of GDP at the earliest.
- Interest rates remain high despite easing of monetary policy.
- Calibrated monetary policy approach needed for early return to high growth path.

MARKET REACTION:
- The partially convertible rupee was at 47.7850/7950 per dollar, little changed from 47.79/80 before the survey. It had closed at 47.88/90 on Wednesday.
- The yield on the most traded 2021 federal bond was steady at 7.19 percent, unchanged from before the survey. It had ended at 7.23 percent on Wednesday.
- The 30-share BSE index was up 0.48 percent, from 0.23 percent higher before the report.

BACKGROUND:
- The economy grew 6.7 percent in 2008/09, slower than 9 percent or more in the previous three years.
- Fiscal deficit surged to 6.2 percent of GDP in 2008/09 on higher spending and duty cuts to prime a slowing economy.
- India raised retail fuel prices by as much as 10 percent on Wednesday, the first increase this year, on higher global crude prices.
- Manufacturing activity in India slowed slightly in June but still expanded for a third straight month, on strong local demand. But exports fell for eight consecutive months in May.
- A policy adviser to the prime minister has said the WPI number could show an annual rise of 6 percent by March end, while the economy may expand 7 percent in 2009/10.
- India's monsoon rains this year are expected to be less than normal and weakest in last four years, prompting analysts to predict lower farm output and price rise in the months ahead.
- India's factory output unexpectedly rose in April, and analysts said it confirmed early signs of economic recovery and an end to the central bank's rate cutting cycle.
- In April, the central bank cut its key short-term lending and borrowing rates by 25 basis points to shore up faltering growth in the face of the global economic slowdown. It has cut the rate by 425 basis points since October.

(Source: Reuters)

The inflation for the week ended June 06, 2009 stood negative by falling sharply to –1.61% from the previous week’s level of 0.13%. However, the negative run of the inflation has raised concerns of the analysts of its co-relation with the actual price scenario in the economy.

The decline in the inflation rate was mainly attributed to the high base effect of the previous year created by a steep 1.8% week-over-week (WoW) increase during the corresponding period of the last year.

The wholesale price index (WPI) stood at 232.7 marginally up by 0.04% on a WoW basis. The WPI has, continued its increasing trend on a sequential basis for the past seven weeks, despite the headline inflation rate remained below 1% for past three months.

The rise in the inflation rate was mainly on the back of a 0.68% WoW rise in the fuel, power & light category. The inflation rate in the primary articles category declined by 0.66% WoW as the inflation rate in the nonfood articles remained negative at –0.92% for the week.

However, the inflation rate in the food articles segment remained high and inched up to 8.71% from 8.6% in the previous week, which is worrisome.

The deflationary trend in the fuel, power & light category has now continued for over six months with the inflation rate for the segment reaching –12.83% for the week.

Interestingly, the inflation rate measured in terms of the Consumer Price Index (CPI) remains high despite the WPI inflation falling to sub-zero levels. The inflation rate in terms of the CPI (for industrial workers) has softened from its peak of 10.5% in January 2009 but still remains high at 8.7% as in April 2009.

The inflation measured in terms of WPI has fallen significantly from its peak of 12.91 in August 2008 and is now in the negative zone.

However, according to experts, the negative inflation rate is more statistical in nature and not a result of any significant fall in the consumption demand. The actual price scenario is much different from, which could be understood from the negative WPI inflation. The fact is that the inflation measured in terms of the CPI is still hovering at higher levels.

Considering the sharp fall in WPI inflation, central bank would require a strong monetary easing policy. However, experts opined that any such move is unlikely as there is ample liquidity in the system and further stimulus may cause the fears of higher consumption led inflation on account of expectations of economic recovery.

Source: Commodity Online

A CAR, stripped to its bare bones and rebuilt using only those bits that are strictly necessary, might turn out to be super-light and capable of taking on the speediest of competitors. Or it could just end up as two piles of junk. On Monday June 1st, putting an end to weeks of expectation, General Motors filed for Chapter 11 bankruptcy protection. The idea is that the 100-year-old carmaker will be stripped of debts, other obligations and unsaveable parts and will then emerge from the bankruptcy court ready to perform like a sleek racer. The risk, however, is that it instead emerges as an old crock with a dodgy respray.

Bankrutpcy will certainly ensure the emergence of a smaller firm. The car company is being remade to cope with operating in a North American market with sales of 10m vehicles a year, roughly the number that will find buyers in 2009. GM might expect to get a little over a fifth of that market. To get into shape, more than 12 of its American plants will close and four brands—Pontiac, Saturn, Hummer and Saab—will be sold out of bankruptcy or will disappear for good. Hummer, apparently, already has a buyer. A significant proportion of GM’s dealers will go too. The end result will be over 21,000 GM workers out of a job.

GM’s European operation, Opel, will also go, ensuring that the American company is no longer a truly global car company (although it will retain arms in Latin American and Asia). Opel’s fate is now in the hands of Germany’s government, which sealed a deal on Saturday between GM and Magna, a Canadian car-parts business. Germany, home to many of Opel’s operations, will provide loans and guarantees worth €4.5 billion ($6.4 billion) to keep Opel from entanglement with GM’s bankrutpcy filing and to support the company until Magna takes over.

The demise of GM, a company that made over half of the cars on America’s roads a few decades ago, is a reminder that companies cannot afford to take their eyes off the road. GM, along with Chrysler and Ford, kept their vast share of the American car market only until globalisation had its way. High import duties on profitable light trucks and sports utitily vehicles kept competitors at bay until Asian carmakers set up shop in America (with generous subsidies from states where they located). Detroit’s competitiveness was further weakened by pension liabilities and huge health-care costs that added hundreds of dollars to the cost of each vehicle.

As market share shrunk and profits dwindled, America’s carmakers made periodic attempts to restructure, in the face of stiff union resistance until recent years. But these efforts were insufficient, usually amounting to cutting capacity usually long after market share had evaporated. At least the wholesale rejigging of GM in bankruptcy should bring the two into line for a time. And a deal with the United Auto Workers will allow GM to forgo a $10 billion payment to a union healthcare fund in return for a 17.5% stake in the new GM. Aggrieved bondholders are likely to emerge with 10% of the new firm for loans totalling $27 billion.

The UAW and GM’s other likely new owners—the governments of America and Canada, with 72.5%—have said that they want to sell out as soon as possible after GM emerges from bankruptcy. But will America’s government ever come close to recouping the $50 billion so far sunk into GM?

The cuts will take some of the overcapacity out of the North American car market, unlike the arrangements with Opel, where Germany’s government is intent on preserving jobs and hence the car manufacturintg capability that Europe could do with shedding. But GM’s problem is that it must still compete with Asian manufacturers that make cheap and reliable cars. Chrysler, set to emerge from bankruptcy with Fiat as a partner and Ford, still loaded with debt and other liabilities, will also provide car buyers with more choices. GM now makes some decent vehicles but its reputation it still suffering from the decades when it made bad cars. If GM cannot revive its good name, and if the cycle of falling market share and piecemeal readjustment begins again then GM, in any form, looks doomed.

(Source: Economist)

Highlights of the deal:

• The proposed $23-billion mega deal between Bharti Airtel and South Africa's MTN would be the biggest ever M&A transaction involving an Indian company.
• As per the exploring agreement, MTN and its shareholders would acquire around 36 per cent economic interest in Bharti Airtel. While, the Sunil Mittal-promoted Bharti Airtel would acquire 49 per cent stake in South African telecom giant MTN
• If the deal materializes, the combined entity would have revenues of over 20 billion dollars and a subscriber base of over 200 million.
• MTN is 50% bigger than Bharti though Bharti grows at 1,000 bps faster than MTN
• Bharti commands a higher multiple than MTN, though growth opportunities are extremely similar in both target markets, i.e. India or MEA
• Net debt / EBITDA is still pretty good for MTN Airtel given the > 40% growth rates, which should sustain at 35-40% levels at least till FY11/12
• Although gearing appears to increase post-transaction EBITDA is strong enough to support debt servicing
• Capex requirements possibly range from $5-6 billion going forward, coupled with strong network footprint established by both players in the existing markets.
• MTN is essentially part financing the buyout of its own shareholders by paying $2.9 billion to Bharti for the latter to increase its stake to 49% in MTN
• Bharti is thinly leveraged currently, and would need to resort to short term acquisition financing to fund the deal
• Minority interests of JV partners needs to be assessed
• Any further upsides on synergy (capex, management, towers, etc) will only add to the value proposition