By Sravya Vemuri
The budget for the financial year 2018-19 was unveiled by Finance Minister Arun Jaitley today. Budget 2018 is the first budget after the implementation of Goods and Services Tax (GST) in June last year. The following were the highlights of the budget:
Rural population
It was stated that under the Pradhan Mantri Saubhagya Yojana, four crore poor people will get power connection so as to bring connectivity to the last mile. The Pradhan Mantri Saubhagya Yojana was launched in November last year with the main aim of providing power to all homes. The outlay for this scheme was set to be ?16,000 crore.
Furthermore, one crore houses will be built under the Pradhan Mantri Awas Yojana, a scheme launched in 2016 to provide houses for all in rural areas. The government plans to construct two crore toilets in the next fiscal year under the Swach Bharat Mission. The National livelihood scheme launched in 2011 to encourage self-employment and organisation among the rural poor, gets ?5,750 crore. Also, eight crore women belonging to BPL (Below Poverty Line) families will get new LPG connections.
Agriculture
The government brought out plans to ensure that farmers get higher incomes while reducing the costs of inputs. With the agricultural production reaching peaks currently, the government wants farmers to reap the benefits by setting the Minimum Selling Price (MSP) at 1.5 times the product price. In order to boost the connectivity to markets, a new Agricultural Market and Infrastructure Fund of ?2000 crore will be set up. Jaitley also announced Operation Green on the lines of Operation Flood to enhance the production of tomatoes, onions, and potatoes. ?500 crore was allocated for the same. The government also wants to extend the faculty of Kisan credit cards to fisheries and animal husbandry.
?10000 crore was set aside for fisheries and aquaculture development fund. To ensure that more amount of investment is pumped into the sector, the agricultural credit target for this fiscal is increased from ?8.5 lakh crore to ?11 lakh crore. Crop loss due to air pollution in Haryana, Punjab and other parts of the country was given due recognition in the budget as a proposal for a special scheme to tackle crop reduce was made.
Taxation
There were no changes in the personal income tax. The finance minister stated that the 85.51 lakh new taxpayers filed their income tax returns in the financial year 2017. However, there was a ?19,000 crore loss in revenue from the direct tax in the last fiscal year. In order to collect additional revenue of ?11,000 crore, the education cess increased from 3 percent to 4 percent. To bolster the Make in India initiative, customs duty on products such as mobile phones and televisions has been increased. However, the import of solar tempered glass for the manufacture of solar cells was given exemption from customs duty.
A social welfare surcharge of 10 percent will be imposed on all imported goods. As a major development after the implementation of GST, the Central Board Excise and Customs (CBEC) was renamed as Central Board of Indirect taxes and Customs (CBIC). The corporate tax of 25% has been extended to companies with a turnover of ?250 crore in the financial year 2016-17. A revenue of ?7,000 crore was foregone due to this move.
The government has reintroduced the long-term capital gains (LTCG) tax after 14 years. The budget proposed to levy 10 percent LTCG tax on profits of more than ?100,000 on shares and other equity-oriented investments. Hitherto such transactions were entirely exempt from taxes, while a flat 15 percent rate was applicable on short-term capital gains (profits made on investments held for less than a year). The blow was softened as the Centre announced grandfathering the existing investments. This means that while the new tax will be applicable to all investments, the highest quoted price on January 31, 2018, or the cost of acquisition, whichever is higher will be considered as the reference price.
Fiscal Policy
In the fiscal year 2017-18, the fiscal deficit is expected to account for 3.5 percent of the GDP which in absolute terms is ?5.9 lakh crore. The government has pegged the fiscal deficit at 3.3 percent for the next year. This is higher than 3 percent that was projected earlier in the fiscal consolidation path. Markets were anticipating the government to set a higher target as the government aims to increase investments in sectors like agriculture.
Healthcare sector
The worlds largest government-funded healthcare programme, National Healthcare Protection Scheme, was launched which is expected to benefit approximately 50 crore citizens of the country. The scheme provides up to ?5 lakh per family per year for secondary and tertiary hospitalisation. Under the Aayushman Bharat programme, 1.5 lakh centres will be set up across the country to provide health care closer to home. ?1,200 crore was allocated for the same.
With India being one of the countries in the world with the largest TB-affected population, the government allocated an additional ?600 crore for tuberculosis patients such that they receive ?500 per month during the course of their treatment. The Finance Minister also announced setting up one medical college for every three parliamentary constituencies.
Education
The government wants to increase digital technology in the process of learning, as it enhances the quality of education. An outlay of ?1 lakh crore was allocated for the revitalisation of the education sector in India. At par with Navodaya Vidyalayas, the government envisions to set up Eklavya schools in every block with more than 50 percent of ST population by 2022. The government wants to promote learning based on research and outcomes.
MSMEs
?3,794 crore was allocated to the Micro Small and Medium Enterprises (MSMEs) sector in the form of capital support and interest subsidy. An additional ?4.6 lakh crore was sanctioned under the MUDRA Yojana, which was launched in 2015 in order to bring millions of units which are existing outside the formal banking sector into the mainstream for easy funding.
Infrastructure
It was projected that India needs an investment of ?50 lakh crore in the infrastructure sector in order to improve the living conditions of the people. 99 smart cities have been selected and ?2.04 lakh crore was sanctioned to them. Bharatmala project will develop 35,000 Kms under phase I with an outlay of ?5.35 lakh crore. Launched in October 2017, the project aims at boosting road connectivity in the country. The government also introduced a pay-as-you-use system for the toll payments.
Social Security
The government wants to expand the PM Jan Dhan Yojana so as to include all the 16 crore accounts under micro insurance and pension schemes. The social inclusion schemes for the scheduled castes will receive ?52,719 crore and those for the scheduled tribes will receive ?39,139 crore. The Sukanya Samriddhi scheme was launched by the government of India as a small deposit scheme for the girl child under the Beti Bachao Beti Padhao campaign. Interest rates for this scheme are currently 8.1 percent and provided income tax benefits. A total of 1.26 crore accounts were opened under this scheme.
Tourism
In order to boost tourism, ten prominent tourist sites will be made iconic tourist destinations by aggregating private fishing, marketing and branding. A new tunnel in Sera Pass will be contracted to promote tourism and revenue generated from this sector.
Railways and Aviation
Unmanned railway crossing is eliminated. The railway capital expenditure is set at ?1.48 lakh crore. Escalators will be constructed in all railway stations that have a footfall of more than 25,000. More WiFi and CCTV camera facilities will be installed at the stations. ?11,000 crore was allocated to Mumbai railway network and ?17,000 crore to the Bengaluru metro. The UDAN scheme will connect 64 unconnected airports in the country. There is a proposal to increase the number of airports under the Airport Authority of India (AAI). The number of trips per year will be increased to 1 billion, thereby boosting airport capacity by 5 times.
Markets and Investments
After India jumped 30 notches in the Ease of Doing Business report, the government wants to take additional measures to attract angel investors and venture capitalists. The Securities and Exchange Board of India (SEBI) might ask the large companies to meet 25 percent debt burden from the bond market.
Digital Technology
The amount allocated to the Digital India scheme has been doubled to ?3073 crore. To provide broadband access to rural Indians, ?10,000 crore was sanctioned to set up WiFi hotspots. The FM declared that cryptocurrency will not be considered legal tender in the country. The government will explore the usage of blockchain technology, a recent development wherein there is no central authority of control and anonymity is ensured.
Corporates and Banking
The government wants to develop a separate scheme to assign a unique ID for companies on the lines of Aadhar. National Insurance Company, Oriental Insurance Company and United Assurance company will be merged and listed subsequently. The disinvestment target has been reduced to ?1 lakh crore for the financial year. After recapitalisation, the banks will be able to lend an additional of ?5 lakh crore. Recapitalisation will help deal with the twin balance sheet problem in the baking sector and corporate sector.
Miscellaneous
The defence outlay was raised to ?2.82 lakh crore for the next financial year. There is a substantial increase in the food subsidies as well. There is a proposal to formulate a law that increases the pay for parliamentarians based on the index to inflation. The emoluments for the President has been raised to ?5 lakh and ?4 lakh for the Vice- President.
Public reaction
The budget earned criticisms from across the political spectrum. Former Prime Minister H.D. Deve Gowda said that the union budget brought no relief to the farmers and the rural masses. Congress leader P.Chidambaram said that the budget failed the fiscal consolidation test by breaching the 3.2 percent fiscal deficit target and this would entail serious consequences to the economy. Opinions that the government should have given more importance to the textile sector and exports were also voiced.
Nevertheless, an attempt to bring about progress towards sustainable development, poverty eradication and digital connectivity is praiseworthy.
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