Highlights of Interim Budget for 2019/20

Rural Affairs

• India to allocate 750 billion rupees ($10.56 billion) per year to support farmers’ incomes
• Impact of 200 billion rupees in the current fiscal year
• Vulnerable farmers to receive 6,000 rupees per year under this new scheme
• Farmers affected by natural disasters to receive 2 percent interest subvention plus an additional 3 percent if they repay loans on time
• Government to provide 2 percent interest subvention for farmers pursuing animal husbandry and fisheries

Employment

• India to launch social security coverage for workers in the unorganized sector
• New scheme to provide assured monthly pension of 3,000 rupees per month, with a contribution of 100 rupees per month for workers in the unorganized sector after 60 years of age
• The scheme will benefit 100 million workers in the unorganized sector and may become the world’s biggest pension scheme for the unorganized sector in five years – Finance Ministry
• Announced an allocation of Rs. 60,000 crores for MGNREGA for Budget Estimates 2019-20
• Pradhan Mantri Gram Sadak Yojana (PMGSY) is being allocated Rs. 19,000 crores in Budget Estimates 2019-20

Economics

• India’s Current Account Deficit (CAD) for 2018/19 seen at 2.5 percent of GDP
• Fiscal deficit for 2018/19 seen at 3.4 percent of GDP
• Government has been successful in bringing down the average inflation to 4.6% over the last five years

Tax Benefits

• Individual taxpayers having taxable annual income up to Rs. 5 lakhs will not be required to pay any income tax.
• Persons having gross income up to Rs. 6.50 lakhs are not required to pay any income tax if they make investments in provident funds, specified savings, insurance, etc.
• Additional deductions such as interest on home loan up to Rs. 2 lakh, interest on education loans, National Pension Scheme (NPS) contributions, medical insurance and medical expenditure on senior citizens etc, are also provided for in the Interim Budget 2019-20.

Other Commodity News

1. Weak dollar after Fed meeting supported the Indian rupee

January 30, 2019

The dollar index, which measures the greenback against a basket of currencies, fell after the Fed's cautious statement. The Indian rupee gained following the weakness in the dollar. Although the Indian rupee is trading weak from last several weeks following FII outflows in January along with the rising crude oil prices and a strong dollar on export demand, now the focus is on the Budget.

Source: Economic Times

2. Saudi to cut oil production more in February than January

January 28, 2019

Saudi Arabia is targeting oil production of 10.10 million bpd instead of 10.20 million bpd of January levels.Saudi Arabia's voluntary limit after the deal with Russia and other producers were 10.33 million barrels a day, indicating a production cut.

Source: Bloomberg

3. Higher prices and import duty on gold and gems hurting Indian jewellery demand

January 29, 2019

The Indian demand for gold is not picking up as gold prices continue to remain at elevated levels near multi-year highs. Import duty on gold and gems is also adding the burden to consumer budgets. The Gems and Jewellery industry is badly affected by this and expects minimum support from the government to reduce import duty by 4% from 10% on Gold and also reduce import duty on cut and polished gems to 2.5% from 7.5%.

Source: Economic Times

4. Crude oil trading higher after talks of Venezuela sanctions

January 31, 2019

Oil prices rallied after news of concerns about supply disruptions following US sanctions on Venezuela’s oil industry. Venezuela's opposition leader Juan Guido declared himself as the interim president earlier this week, winning the backing from Washington and large parts of Latin America, prompting Nicolas Maduro, the country’s leader since 2013, to break relations with the United States.

Source: Tribune

5. Gold near a eight-month peak after Fed meeting

January 30, 2019

Gold prices rallied after the Federal Reserve kept benchmark rates unchanged and hinted at slower monetary tightening. The Fed’s decision is as per market expectations of holding interest rates between 2.25 percent and 2.5 percent. The Fed further stated that “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Source: Reuters

6. Gold ETF AUM drops in the year 2018

January 27, 2019

Indian investors were quick to exit the Gold ETF as domestic gold prices rose to multi-year highs after a consolidation of 3 years. Although international gold prices remained in a range, Indian gold prices received support from a drop in its currency value during 2018. Even investors found a safe bet in gold bonds which were giving 2.5% assured returns, which were not possible in ETF.

Source: Business Standard

7. China industrial slowdown keeping prices under pressure

January 28, 2019

Crude prices drop as a trade war between Washington and Beijing weighed on futures as investor optimism waned that the two sides would soon end the months-long tariff fight that has damaged China’s economy. Industrial companies in China reported a second monthly fall in earnings in December, despite the government’s efforts to support borrowing and investment.

Source: Reuters

8. India taking steps to reduce oil imports by 10%

January 27, 2019

Prime Minister Narendra Modi said the government has taken "decisive steps" to bring down crude oil imports by 10 percent and save precious foreign exchange for the country. Nearly 11 oil PSU’s have adopted the modern 'lignocellulosic' route for establishing twelve 2G ethanol plants in 11 states of the country.

Source: Moneycontrol