Budget expectations on commodities

In this last comprehensive budget before the 2019 general elections, the commodity market participants are expecting the below:

There is a common expectation that the government will come out with a populist budget, albeit with measures to improve the fiscal health of the economy.

First expectation is abolition of CTT. The levy of Commodities Transaction Tax on non-agriculture commodities ever since 2013, has severely impacted trading volumes. Increase in transaction cost, post-tax, has affected all market players, especially retail traders.

In bullion, the domestic industry is hoping for tax relief. Trade bodies have asked for a cut in import duty from 10 per cent to 4 per cent. Lowering of duty may possibly curb illegal gold imports into the country and make the industry more compliant. Also, since the gems and jewellery sector contributes significantly to exports, it is expected that the Finance Minister may take measures to boost exports and create jobs in this labour-intensive sector. Further, there may be measures to attract more investor participation in sovereign gold bonds.

The oil industry is anticipating a cut in excise duty on petrol and diesel. Any positive move from the Finance Minister would be an immediate relief for the consumers too.

Various trade bodies have also urged the government to increase basic custom duty on aluminium and its scrap to 10 per cent each from 7.5 per cent and 2.5 per cent respectively.

On the agriculture front, increased investment in agriculture is expected with prime focus on facilitating agriculture infrastructure like warehousing, irrigation and cold storages.

The writer is Head of Commodities Research at Geojit Financial Services

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