THE BUDGET, 2018
The Honourable Finance Minister, Mr. Arun Jaitley presented the Indian Budget 2018 before the Parliament on Thursday February 1, 2018. Mr. Jaitley had a tough balancing act amid supporting economic growth, creating employment opportunities, addressing rural distress and maintaining fiscal discipline.
The Union Budget 2018 is significant for several reasons. First, this is the first post – GST era budget, the most far reaching tax reform independent India has seen; second, it is the present Government’s fourth and last full fledged budget presentation ahead of the impending 2019 general elections. While the 2017 budget was hailed as a reformist budget, the 2018 budget was speculated to be a populist one.
Farmers, Rural India and Healthcare are the main focus of Budget 2018. The farmers have been assured a Minimum Support Price (MSP) 1.5 times the cost of production. “Operation Greens” was launched to address price fluctuations for benefit of farmers and consumers.
Honourable Finance Minister announced the world’s largest Government funded healthcare programme. The ambitious flagship programme – the National Health Protection Scheme – will cover 100 million poor and vulnerable families or 40% of India’s population. This is targeted to reaching approximately 500 million beneficiaries. Under this programme, each family can claim medical reimbursement up to ₹ 5 lakh every year for secondary and tertiary care hospitalisation. The Finance Minister said that the programme would be a step towards offering Universal Health Coverage and would take healthcare protection to a new aspirational level.
Technology will be the biggest driver in improving the quality of education in India. The Government proposes to increase the digital intensity in education and move gradually from ‘black board’ to ‘digital board’. Technology will also be used to upgrade the skills of teachers through the recently launched digital portal “DIKSHA’.
The middle class expectation for Income tax relief did not bear fruits, However standard deduction for salaried employees has been reintroduced at ₹ 40,000/- in lieu of the medical and transport allowance currently available. Reintroduction of long term capital gains tax on listed securities at 10% was quite on expected lines. The serious effort has been made in this budget to tax income earned by foreign entities having ‘significant economic presence’ in India by use of technology. The corporate tax rate has been reduced from 30% to 25% for all domestic companies with turnover less than INR. 2.5 billion. The cess on tax which was 3% of cess has been proposed to be increased to 4%.
By signing up for a slightly higher fiscal deficit than expected, a mild expansionary fiscal stance could put some pressure on consumer price.
Some sizeable economic gains are still low hanging fruit, and continued reforms remain key to their realisation. For example, in exports much more can be achieved by fixing sector specific issues instead of reaching out for exchange rate or more spending –intensive measures.
As the FM rightly put it, this year’s budget has sought to consolidate the gains made in past years and was particularly focused on strengthening agriculture and rural economy provision of good health care to economically less privileged, taking care of senior citizens, infrastructure creation and working for the States to provide more resources for improving the quality of education in the country.
The Finance Minister has made a commendable effort to achieve the Modi Government’s target to an “Inclusive Growth” – Sabka Sath – Sabka Vikas.
H. N. Motiwalla