Govt maintains promised pro-poor, pro-farmer thrust
Modi Government’s 2018-19 Budget did not spring surprises but rather stuck to fiscal consolidation path by restricting the fiscal deficit target of 3.3 per cent of the GDP in 2018-19, lower from 3.5 per cent expected in 2017-18. Some criticised the Government for slipping from the original target of 3.2 per cent deficit in 2017-18, but Finance Minister Arun Jaitley did well gliding around that. Being the last full Budget before the 2019 general election, there was speculation about the Government announcing populist measures. On the contrary, the Budget has enough measures to curb the elements that have long been causing slippages in the fiscal deficit and irreparable damage to the economy.
The FM, however, did announce world’s largest health protection scheme called National Health Protection Scheme, providing cover of up to Rs 5 lakh per family per year for secondary and tertiary medical treatment in hospitals to 10 crore poor families or about 50 crore people. According to experts, who are terming it as “Modicare”, the scheme is bigger than ‘Obamacare’ which covered 3.5 crore people.
The two ailing sectors of Agriculture and Micro Small and Medium Enterprises (MSME) also received support from the Government. Following massive criticism that the Government received with regard to the farmers’ suicides across India, the announcement to increase the MSP by one-and-a-half times of the cost for all crops, Rabi and Kharif, seemed a genuine initiative to aid the agricultural sector and not merely a gimmick with an eye to the upcoming elections. The long suffering MSME sector that had taken massive beating post-demonetisation will now be charged 25 per cent tax for companies with a turnover up to Rs 250 crore, thereby covering almost 99 per cent of the companies. Earlier, the reduced tax rate of 25 per cent was available only to the companies whose turnover was less than Rs 50 crore. The companies with a turnover of more than 250 crore will continue to be taxed at 30 per cent.
The Finance Minister also spoke about increasing the salaries of the President of India, Vice President, State Governors, and Members of Parliament.
The Budget also announced the contentious decision of disinvestment of Air India, an issue that has long rankled the Governments. Air India is one of the 24 public sector enterprises to be disinvested in 2018-19 to raise Rs 80,000 crore. In 2017-18 disinvestment exercise raised Rs 1,00,000 crore for the Government.
To generate revenues, the Finance Minister reintroduced long-term capital gains tax, fourteen years after it was scrapped. Capital gains exceeding Rs 1 lakh from shares held for more than a year will be taxed at 10 per cent. Presently, gains from equity investments held for more than 12 months are exempt from tax. In July 2004, the Government had abolished long-term capital gains tax on shares and replaced it with the securities transaction tax (STT) that continues.
Jaitley raised customs duty on import of a host of products from cellphones to perfumes and toiletry, watches to auto parts, sunglasses to truck and bus tyres, footwear to diamond and edible oils to fruit juices from 5 to 20 per cent. This was perhaps done to help Indian companies compete with imports from China. Explaining the rational behind this move, the Finance Minister said this was a calibrated departure from the Government policy in the last two decades wherein the trend largely had been to reduce customs duty.
Keeping the income tax rates slabs unchanged, Jaitley introduced a Rs 40,000 standard deduction for salaried employees and pensioners in lieu of present exemption in respect of transport and medical expenses which was earlier at Rs 19,200 and Rs 15,000 respectively.
laying major emphasis on rural sector, the Finance Minister set the ambitious target of employment of 321 crore person days, 3.17 lakh km of rural roads, 50 lakh new rural houses, 1.8 crore toilets and providing 1.75 crore new electricity connections at an estimated cost of Rs 14.34 lakh crore in 2018-19.
Prime Minister Narendra Modi termed the Budget as “development-friendly” and said it will strengthen the vision of a “new India”. The Budget is “farmer friendly, common citizen friendly, business environment friendly” and will add to “ease of living” and “ease of doing business”, Modi added.
A 100 per cent tax deduction will be given for the first five years to companies registered as farmer producer companies with a turnover of Rs 100 crore and above. “While making the proposals in this year’s Budget, we have been guided by our mission to especially strengthen agriculture, rural development, health, education, employment, MSME (micro, small and medium enterprises) and infrastructure sectors of Indian economy,” Jaitley said.
He put revised expenditure for 2017-18 at Rs 21.57 lakh crore and projected Rs 24.42 lakh crore expenditure in 2018- 19. Railway capital expenditure has been put at Rs 1.49 lakh crore in 2018-19. Gross market borrowing is seen at Rs 6.06 lakh crore and net borrowing at Rs 4.62 lakh crore in 2018. Government will also switch Rs 28,000 crore of bonds next fiscal.
Customs duty on import of mobile phones is proposed to be increased to 20 per cent from 15 per cent, on some of their parts and accessories to 15 per cent, and certain TV parts to 15 per cent. Jaitley said measures to address bad loans of small and medium enterprises would be announced soon. He proposed setting up Rs 3 lakh crore target
for lending to small enterprises. Three Government-owned non-life insurers --- National Insurance Co, United India Assurance Co and Oriental India Insurance Co --- will be merged into a single entity and listed subsequently.
Special schemes for States around Delhi will be implemented to address air pollution, he said, adding the removal of crop residue will be subsidised in order to tackle the problem of pollution due to burning of crop residue.