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Budget 2022 Sectoral Pick: Cement sector likely to shine with mega infra announcements, say rating agencies
Rating agencies such as CARE Ratings and ICRA Ratings have released sector-specific reports regarding their expectations from respective sectors.
Ahead of Budget 2022, the rating agencies are of view that the government’s continued focus on infrastructure building, housing, and rural development is a positive for the cement industry. Any announcement towards the realty segment will have direct impact on the cement sector, they estimated.
Rating agencies such as CARE Ratings and ICRA Ratings have released sector-specific reports regarding their expectations from respective sectors. In this, the cement sector, which is direct beneficiary of infra, have put major spotlight on it by the agencies.
CARE Ratings’ expectations from Budget 2022 for the cement segment:
* Incentivise and boost affordable housing through increased funding via schemes such as MGNREGA that could support in augmenting rural income and in-turn aid in the creation of demand for cement
* These measures would indirectly boost demand for the commodity
* The industry expects a reduction in GST slab from the current 28% on cement, thereby reducing the final price to the end consumer
* Subsidised freight rates for the transportation of waste materials or alternate fuels would help the industry to reduce freight expenses to some extent
ICRA Ratings’ expectations from Budget 2022 for the cement segment:
* Budget allocation towards rural development and agriculture sector expected to remain healthy
* To increase the pace of infrastructure investment as envisaged under the National Infrastructure Pipeline (NIP), budgetary allocation towards various infrastructure sectors, including key implementing agencies like the NHAI, needs to be increased
* Enhanced budgetary allocations for housing schemes such as Pradhan Mantri Awas Yojana (PMAY)
* Expansion of income tax benefits for housing loans can improve affordability
In Union Budget 2021-22, the government had allocated Rs 5.54 lakh crore as compared with Rs 4.39 lakh crore for a revised estimate (RE) 2020-21.
The government is expected to continue taking steps towards achieving a Rs 111 lakh crore infrastructure investment as per the NIP, while providing more clarity on the current status of the NIP and its capex phasing over the next few years.
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