By Karthikeyan Sundaram
From banks to farmers to the property market, the gains from India’s budget in July haven’t yet panned out as expected.
In her maiden budget six months ago, Finance Minister Nirmala Sitharaman pledged to boost revenue collection by 13%, narrow the fiscal deficit to 3.3% of gross domestic product and spur the economy to $3 trillion by March. Things haven’t gone according to plan though, largely because of a worsening slowdown in the economy, which has put pressure on government revenue and the fiscal deficit.
As the finance minister prepares to deliver her second budget on Feb. 1, here’s a look at how the expected winners from last year’s fiscal plan fared:
State-Run Banks
In July, Sitharaman said the government would inject 700 billion rupees ($9.9 billion) of capital into state-run banks, including Union Bank of India, Bank of Baroda and Canara Bank. In August, the government followed up by announcing the biggest-ever consolidation of banks it controls to spur lending.
However, that’s done little to boost credit growth, which is at a three-year low and has weighed on the profitability of banks, including State Bank of India Ltd., the country’s largest lender.
Rural India
The July budget gave bigger allocations for rural housing, roads and programs that support small businesses producing cattle feed, measures that were seen buoying companies like Hindustan Unilever Ltd., ITC Ltd. and Mahindra & Mahindra Ltd.
However, the slump in consumption has hit the rural sector hard. Unilever, the parent of Hindustan Unilever, cited India’s slowdown as a reason for its weaker growth outlook. Carmakers like Mahindra, which sells SUVs and tractors, have also suffered from declining vehicle sales. Godrej Agrovet Ltd., a local animal feed and edible oil producer, bucked the trend.
Aviation
The government’s plan to consider further opening up foreign investment in aviation and forming an aircraft financing and leasing company remain incomplete, and carriers including SpiceJet Ltd., InterGlobe Aviation Ltd. and TATA SIA Airlines Ltd. are yet to see any real benefits. At the same time, the economic slowdown has meant local air traffic has been growing at low single digits from double-digits previously.
Water
A plan to provide piped water to households across the country by 2024 was seen benefiting companies such as Shakti Pumps India Ltd., Jain Irrigation Systems Ltd., Kirloskar Brothers Ltd., VA Tech Wabag Ltd. and PI Industries Ltd.
Given the long gestation period of the program, any gains are yet to reflect in the stock prices of most of those companies.
Real Estate & Construction
The July budget outlined plans to build 19.5 million rural homes by 2022 and continue the government’s focus on road construction -- steps that would help builders like Larsen & Toubro Ltd., Dilip Buildcon Ltd., IRB Infrastructure Ltd., GMR Infrastructure Ltd., Oberoi Realty Ltd., and DLF Ltd.
But domestic orders continue to be affected by the slowdown, Larsen’s Chief Financial Officer R Shankar Raman said in October, adding that the government’s corporate tax cuts announced in September addresses supply-side problems, rather than demand.
In November, the government announced a 250 billion-rupee fund to revive stalled residential projects. Still, overall housing sales growth slowed to 5% in 2019, according to data from Anarock Property Consultants, compared with almost 18% growth across top seven cities the previous year.