By Pushkar Moni and Purvee Khandelwal


The currency (notes) is the most liquid legal tender issued by the RBI which can be used to extinguish a public or private debt. The Indian economy, until 8th November 2016 had an estimated ₹14.18 trillion worth of currency notes in circulation, making India predominantly a cash-based economy. The Indian agrarian economy which is also primarily cash based, and is highly unorganized, has emerged as a source to route black money, back into the system both in terms of tax exemptions and channelling funds to create legitimate funds [1]. According to the Central Board of Direct Taxes, only 3.81% of the total Indian population pay income taxes and it is suspected that enormous sums of money are tied up in illegal transactions that are unaccounted for. These illegal transactions not only form a parallel economy in the country but also distort the actual Indian economy. As a countermeasure, the Government of India hitherto referred to as GoI, enacted to demonetize (strip a currency of its legal status) its currency notes of 500 and 1000 denomination. These denominations accounted for 86% [2] of the total currency in circulation. This paper intends to highlight the effects of demonetization on the Indian agrarian economy.

Impact of Cash Crunch on Agriculture

Agriculture is primarily a cash based sector with large capital input. This sector contributes about 15% to the Indian GDP and employs about 49% of the total workforce. The real growth rate of the sector is reported to be 1.3% [3]. This low growth rate is usually attributed to the droughts experienced in the past two years.




By The Editorial Board of TJEF

(Anil Shankar, Gandhali Inamdar and Isha Varma)


Demonetization has been the buzz word since November 8th 2016 when our Prime Minister made the historic announcement about the decision to discontinue the 500 and 1000 rupee notes. This historic decision has affected almost all the sectors. Some have benefited while others have suffered. This paper intends to analyze the effects of demonetization on the major financial institutions and the Indian economy in general.

Effects of Demonetization on Banking sector

Since the advent of asset quality review (AQR), there has been a rise in the number of NPAs. To get an idea, the GNPA of banks is 6 lakh crore as of June, 2016 which is 8.2% of the total loans1. These are only the NPAs as there are an equal number of restructured loans which might transform to NPAs in future.


Figure 1: Total NPAs as of March 2016, Source: Finance Ministry

A recent data provided by the Finance ministry, which has been depicted in Figure 1, shows that 5.3 lakh crore of the 6 lakh crore NPAs are under the public sector banks. It’s clearly visible that there has been a rise in the NPAs from October 2015. This can be attributed to the ever greening of loans which led to the creation of a distorted picture of the banks. Though the asset quality review led to the identification of such NPAs which were previously classified as standard, the problem of NPAs existed since the 2008 financial crisis but remained hidden due to the above mentioned reason.



by Divya Ramesh


IT sector in India can be categorized into the following segments-

  • Software products and engineering services (own software products)
  • IT services (application, website development)
  • IT enabled services (medical – transcription, BPOs, ERP)
  • IT hardware (PCs, laptops, mobile phones)

The IT industry has had a 5-year CAGR of 10.1% from 2008-2009 to 2015-2016 of which the exports markets had 12.6% and the domestic market had 3.8%. Though the export market of IT contributes to a major share of revenue, the domestic market is strengthened with a steadily rising number of mobile applications, e-commerce services and the government’s strategic push to a digital economy.


  • Government and BFSI verticals contribute to 35% and 30% of the domestic IT revenue respectively
  • Key drivers of the IT sector:
    • Government projects
    • BFSI
    • Telecom
  • IT infrastructure is key in digitalizing the existing government processes
  • Government initiatives such as “The Digital India” program boosts the domestic IT Industry


  • The 2017 union budget primarily emphasizes on a digital economy with increased cashless transactions aimed at weeding out corruption within the country. This shift towards digital payments and use of online portals for secured transactions increases the demand for cyber security and it’s applications in future.
  • Statistics for period 2013-16 show that online traffic in the e-governance portal has increased from 2060 million to 4940 million transactions accounting for a 140% increase. This calls for the need of contemporary and competent IT solutions to manage the ever-increasing data and maintain support for such services.
  • Schemes introduced such as:
    • Aadhar pay
    • Digital modes of payment for political donations
    • Removal of service tax for online ticket bookings
    • Digital payments in petrol pumps, universities, colleges, etc. lead to increase in online transaction and thus provide more opportunities for the IT sector in terms of job and revenue.
  • The Budget has proposed to improve the digital payment infrastructure and online grievance handling. This will result in a huge increase in the online traffic and data to be handled thus increasing the involvement of the IT sector services.
BHIM app promotional features and Aadhar pay app for cashless transactions Increases the number of cashless transactions which would increase online traffic and would require more IT services help to establish the application on a large scale. Increased web traffic also leads to the growth of cyber security.
High speed internet for Gram Panchayats Increases the connectivity thereby driving the cloud infrastructure of the IT sector. IT would also encourage the gram panchayats to buy phones improving the IT hardware sector
DigiGaon to provide education through digital technology, tele-medicine etc., To create digitally able citizens which would require IT infrastructure in terms of application and data management
Core banking support for cooperative banks and encouragement to provide core banking software Government rope in IT companies to sell core banking software strengthening the domestic IT sector

Thus, domestic IT market is expected to grow at CAGR of 10 % according to CRISIL reports and long-term growth will be achieved through e-governance initiatives of central and state government.

Though the export IT market seems to have become a bit volatile after Brexit and Trump’s assuming office as President of the US, there is a ray of hope with the disruptive Indian market steered by a number of digital initiatives taken by the Indian government.


By Bhargavi

After demonetization of Rs.500 and Rs.1000 currency notes, the sector which saw major hit was FMCG. So all those looking up to the budget had expectations that government will try to revive this sector.

However, instead of making any direct allocation to FMCG sector the government has made many indirect moves like focusing on youth, rural economy, agriculture, the housing and cleanliness. All these combined will lead to increase in consumption expenditure of individuals.

Expectations from Budget 2017- FMCG Sector

Giving money into the hands of consumers– With demonetization taking away the money from hands of the consumers, people expected that the post-budget the cash crunch will end and they will be able to exercise their spending power.

Ease of doing Business– If various taxes are removed and replaced by GST, the cost for FMCG companies on various products like soaps, oils will go down. Not only this, the supply side will be improved and lead time will reduce. This will also help companies in reducing the holding cost of inventory.

Outcomes and Impact of Budget on FMCG Sector

Reduction in income tax by 5% for individuals with income of 2.5 -5 lakhs will help in save 12500 annually. This will give more disposable income in the hands of people which will increase non-food expense. This tax cut will cost government somewhere around 15000 crore. We can expect that some of this will go to consumption and some for saving.

MGNREGA Allocation- Government this time made highest ever allocation to MGNREGA of 48000 crore. This will increase the income of the rural people which will again increase their spending power.

Increase in allocation to rural economy by 24%– With the aim to double the farmer’s income by next five years government allocated 1.87 lakh crore to boost the agriculture sector.

Government also made several other allocations to boost the rural economy which will increase farmers income;

  • Allocation of 5000 crore to micro irrigation fund by NABARD as part of their Per Drop per Crop Mission
  • Increase in sanitation expenditure in rural areas – Sanitation coverage has increased from 42% to 60%. This will increase the demand for personal care products and sanitary ware
  • Integration of fruits and vegetables with agro-processing units – This will help farmers get a better price for their products
  • Setting up of Dairy Processing Fund of 8000 crores– According to analysts, this fund will increase the farmer’s income by 50000 crores. Also, food segment in FMCG account for 19%, second highest after personal care products. A push to dairy products will directly lead to increase in production of food products
  • Safe drinking water to 28000 arsenic and fluoride affected habitants. This will be a welcome step for beverages company
  • Increase emphasis on Skill development in rural India– Emphasis on skill development and entrepreneurship will increase the employment in rural India which will increase the disposable income

Currently, FMCG sector derives 40% of its revenues from rural sector and rural sector spends 50% of its expenditure on consumption. Also, growth in revenues in rural markets is more higher paced than the growth of revenues in urban markets. Keeping all this is mind, the government has taken up steps in the right direction to boost the rural economy. This will increase the income of farmers which will raise their standard of living and hence the expenditure in food and personal care products.

Excise on Tabacco products– Government announced an increase in the excise duty on filter cigarettes by 6%. Duty on Pan Masala is up by 3% and on unmanufactured tobacco by 4.1%. Excise on machine made beedis have increased from 21 per thousand to 78 per thousand, that is almost 300%

This will negatively effect the revenues of companies like ITC, Godfrey Philip, VST etc.

Reduction in tax rate for MSMEs by 5%- Government reduced the tax rate for MSMEs from 30% to 25%. Close to 90% of companies belong to this category. This will increase the profits of MSMEs and will encourage them to scale up their production.

CONCLUSION– Overall Positive! the government made a good move by focusing on the rural economy as this segment has more growth in the context of FMCG sector. FMCG companies should devise strategies to market their products in the rural economy and the companies which already are leaders in the rural market will be able to take the share of growth.


By Abhishek Kwatra


  • Increased allocation from the budget spending towards the textile sector.
  • Budgetary allocation towards Amended Technology Upgradation Fund Scheme (ATUFS) was expected to increase.Under ATUFS, the garment manufacturing units get a subsidy of 25% for capital expenditures which was increased from 15% in Jan ’17 recently. Its budget allocation was reduced to Rs. 2013 Cr. from Rs. 2610 Cr.
  • An export incentive scheme reducing duty costs, specifically for cotton products as cotton makes up for 90% of export demand.

Budget announcements

  • Allocation to textile sector decreased marginally. It was reduced from Rs 6290 Cr. in 2016-17 to 6230 Cr. in 2017-18. Most of the spending on any other components of the budget was reduced due to overall lesser allocation of the budget which went against the industry expectation. This could be attributed to Rs. 6000 Cr. special package announced for textile sector in June ’16.
  • Tax rate for SMEs (of annual turnover up to Rs 50 Cr. in 2015-16) has been reduced from 30 to 25%. Since more than 60% of the sector is unorganized, this will help improve the bottom line of the companies.
  • The provision for textile infrastructure has been increased to Rs 1,860 Cr. in 2017-18 from Rs 506 Cr. in FY17. It will give a major boost to textile infrastructure by increasing the allocation for building textile parks, incubation facilities, processing and development centers.
  • Lesser allocation of the budget towards Amended Technology Upgradation Fund Scheme(ATUFS). The allocation was reduced to Rs. 2013 Cr. in 2017-18 from Rs. 2610 Cr in 2016-17. This has been one of the major government schemes helping the manufacturing units to remain competitive upgrading their production facilities.
  • Sharp reduction in allocation to price support scheme (Rs 0.01 Cr. in 2017-18 as against Rs 610 Cr. in 2016-17) under the Cotton Corporation of India (CCI) It may lead to greater volatility in cotton prices in next fiscal for the domestic companies. Cotton prices increased 66.6% in July’16 which forced many firms to reduce production. Firms have maintained a need for higher subsidies for cotton from CCI. This would greatly impact the bottom line of the companies.
  • announced plans to launch a scheme for labor-intensive leather and footwear industry to boost employment generation. This announcement was in line with the special package of 6000 Cr. announced for textile sector in June’16 with an aim of increasing exports by $30 billion and help attract investment worth 74,000 Cr.  in three years.
  • Basic Custom Duty on Nylon mono filament yarn (for use in long line system for Tuna fishing only) reduced to 5% (from earlier 7.5%)
  • The objective of doubling farmers’ income, skilling of youth, and development of Infrastructure. This would provide end to end solution by integrating rail, road, air and sea which in turn would greatly benefit the textile industry that is spread across the nation.

Market movement:

Companies have more or less maintained their price on Feb 3 since the announcement of budget on Feb 1. Companies such as Page industries, Arvind Ltd. and Raymonds Ltd. Were some of these. However, Vardhman Textiles defied the trend as it rallied by about 5% of its value.


The budget did not meet the expectations of the textile industry. It ignored many important issues such as an export incentive scheme and raw material subsidies, specifically Cotton.

With already strong competition from Bangladesh and Vietnam, an export incentive scheme was the push that the sector needed as many firms had been able to cover their losses from domestic market owing to demonetization only due to stable export demand. Though the domestic demand would improve eventually, GST implementation needs to be implemented as soon as possible bringing in cost savings (outbound taxes) from the supply chain.


by Twinkle Garg

Expectation from Budget –

  • Phasing out of weighted deductions
  • Incentives for patents
  • Exemptions of certain duties and taxes
  • Boost to SME

What the Budget has to offer?

  • Action plan prepared to eradicate following non-communicable disease (NCD) –
  • Kala Azar by 2017
  • Filariasis by 2017
  • Leprosy by 2018
  • Measles by 2020
  • Tuberculosis (TB) by 2025
  • Proposal to set two new AIIMS (All India Institutes of Medical Sciences) hospitals in Jharkhand and Gujrat.
  • Government proposes to amend the Drug and Cosmetic Rules to ensure availability of drugs at the reasonable price and to promote the use of generic medicines.
  • Government shows commitment to transform 1.5 lakh health sub-centres to health and wellness centers.
  • New rules for regulating medical devices will be internationally harmonized to attract investments. This will reduce the cost of such devices.
  • New 5000 postgraduate medical seats to be added by Government to increase the number of specialty doctors.
  • Finance assistance in the form of direct transfer of Rs.6000 to bank accounts of pregnant women who undergo institutional delivery and vaccinate the new born.

Pharmaceutical companies which provide medicines for non-communicable disease are :

Tuberculosis Lupin India Ltd, Glaxo SmithKline Ltd
Filariasis Merck & Co
Leprosy Cipla Ltd


Taj Pharmaceuticals Ltd., RANBAXY Laboratories Ltd  

Market Reaction:

Budget 2017 receives mixed reaction from pharma sector

Stocks Price as on 31st Jan, 2017 Price as on 1st Feb, 2017 Percentage change
Aurobindo Pharma Ltd. 682.3 666.65 -2.3 %
Torrent Pharma 1299.95 1298.3 -0.1%
Nacto Pharma Ltd. 690.9 671.55 -2.8 %
Hester Bio 760.8 771 +1.3 %
Sun Pharma 636.55 624.85 -1.8 %
Lupin 1474.25 1472.15 -0.1 %
Glenmark 893.40 899.10 +0.6 %
Pfizer 1770 1794.95 +1.4 %


In an uncertain global market, it was expected that more incentives would be given to meet the imminent challenges directly affecting the key industry. Expectations were based on the Government’s vision of making India one of the top three pharmaceutical markets by 2020.  However, Government’s impetus to reduce the borrowing cost and to increase access to credit will help the industry to grow.