The Budget of 2018 is important because this is India’s first after the implementation of the Goods and Services tax (GST) in June last year. Union Finance Minister Arun Jaitley has already announced in the Parliament the key points of his budget for the year 2018-19.
We have already exceeded our disinvestment target.
-announced Arun Jaitley.
The major developments in the budget draft are as follows:
- Disinvestment target for 2017-18 has been exceeded and will reach Rs 1 lakh crore. Target for 2018-19 is Rs 80,000 crore.
- 5 lakh WiFi hotspots will be set up in rural areas to provide easy internet access.
- The government will take all steps to eliminate the use of cryptocurrencies which are funding illegitimate transactions.
- Govt announces Amrut program to focus on the water supply to all households in 500 cities.
- Water supply contracts for 494 projects worth Rs 19,428 core will be awarded: FM
- NITI Aayog will establish a national programme to direct our efforts in the area of Artificial Intelligence towards national development.
- Airport capacity to be hiked to handle 1 billion trips every year.
- Arun Jaitley says that 4,000 km of new railway track will be laid down by 2019.
- All railways stations with footfall more than 25,000 to have escalators, says the Finance Minister.
- The government will undertake redevelopment of 600 major railway stations across the country.
- Capital expenditure of Rs 1,48,528 crore for Indian Railways in 2018-19.
- National Heritage City Development Augmentation Scheme has been undertaken to preserve and protect heritage cities in the country, announces the Finance Minister.
- Government to contribute 12 percent of EPF contribution for new employees in all sectors.
- Infrastructure is the growth driver of the economy.
- A target of 3 lakh crore for lending under PM Mudra Yojana.
- MSME enterprises are a major element for growth, says Jaitley. He also added that mass formalisation of MSME sector is happening after demonetisation and GST.
- Govt will launch health scheme to cover 10 crores, poor families.
- The Government is slowly but steadily progressing towards universal health coverage.
- The government aims to bring 60 crore bank accounts under the Jan Dhan Yojana.
- Eklavya schools to be started for Scheduled Tribe populations.
- Rs 600 crore allocated to Tuberculosis patients undergoing treatment.
- Govt will set up two new Schools of Planning and Architecture, says Finance Minister Jaitley.
- To tackle brain drain, Jaitley announces a scheme to identify bright students pursuing B Tech in premier engineering institutes, and providing them higher-education opportunities in the IITs and IISc. These students will receive handsome fellowships and will be expected to dedicate a few hours to teach in higher education institutions weekly.
- Specialised railway university to be set up at Vadodara.
- Jaitley proposed integrated BEd programme for teachers: “training of teachers during service is essential.” Technology will be the biggest driver in improving the quality of education.
- The budget allocates money for social security and protection programme for all widows and orphaned children.
- We have a target to provide all Indians with their own homes by 2022, says Jaitley.
- Ujjwala scheme to amplify targets will now provide 8 crores, rural women, free LPG connections.
- Air pollution in Delhi-NCR has been a cause for concern, govt has proposed subsidised machinery for in-situ management of crop residue in Punjab, Haryana, Uttar Pradesh and NCT Delhi.
- Govt of India will take necessary measures to put in place measures for the state government to purchase surplus solar power produced by local farmers at suitable prices.
- Arun Jaitley proposes a sum of Rs 500 crore for ‘Operation Green’ on the lines of ‘Operation Flood’. Food processing sector is going at an average of 8 percent per annum. Arun Jaitley on Minimum Support Price of agricultural products: Only increasing the MSP is not enough, the government will fix the MSP of agricultural products at 1.5 times the market rate.
Furthermore, the major highlights in the Union Budget at a rather detailed note are as follows:
Fiscal situation and targets
GST revenue will be collected for 11 months and that would impact balance sheets. Rs 21.57 lakh crore transferred in the form of net GST against the predicted Rs 21.47 lakh. The government aims for 2018-19’s fiscal deficit target of 3.3 percent of GDP. The revised fiscal deficit for 2017-18 was Rs 5.95 lakh crore or 3.5 percent of GDP.
Agriculture and rural economy
Jaitley reasserted the government’s resolve to double farmers’ income, increase production from same land parcels. In a major relief to farmers, minimum support price (MSP) for all upcoming Kharif crops has been raised to 1.5 times the cost of production. In case the market prices are lower than MSP, the government would procure the produce or ensure farmers get right prices.
Agricultural market and infra fund of with corpus of Rs 2,000 will be created for 22,000 Gramin agricultural markets and 585 APMCs. Cluster development model of agricultural commodities, emphasis to encourage for organic farming.
Allocation for Food Processing Ministry has been doubled. Operation Green will produce farmer producer organisation, logistics, warehousing etc allocation of Rs 500 crore. Export of the agro-commodity has been liberalised to meet India’s agricultural exports potential of $100 billion.
To boost bamboo sector and animal husbandry, Kisan credit cards will now be extended to fisheries and animal husbandry farmers. A restructured national bamboo mission with the corpus of Rs 1,290 crore will be set up. Rs 10,000 crore are allocated to set up two funds to promote fisheries and animal husbandry.
Government to encourage favourable taxation treatment for farmer-producers organisations. To ensure agriculture received boost, agricultural products will now be in futures markets. In a big-ticket announcement, Jaitley proposed Rs 11 lakh crore for credit for the farm sector. He also announced a special scheme to manage crop residue.
In a big relief to farmers, Finance Minister Arun Jaitley announced that minimum support price for all upcoming Kharif crops will be set at 1.5 times the cost of production.
In terms of social protection and security, gas connections will now be provided to 8 crore poor women. In the energy coverage push, Rs 16,000 crore for PM Saubhagya Yojana was allocated for connecting 4 crore households with free electricity.
The government has set a target to construct at least 2 crore toilets under Swachh Bharat Mission. Also, under Housing for All by 2022 and PM Awas Yojana (rural), 51 lakh affordable housing units constructed in rural and 50 lakh in urban areas. Jaitley proposes dedicated affordable housing fund to meet targets.
For boosting livelihood opportunities and private enterprise, a target for loans to a self-help group for women has been increased to Rs 75,000 crore. Allocation to National Livelihood Mission set at Rs 5,750 crore. A total allocation of Rs 14.34 lakh crore from extra and non-budgetary resources has been estimated for housing, infrastructure and livelihood in rural areas.
Health Education and Social Protection
Comprehensive social security program National social assistance program over Rs 9,000 crore. Education in the country to be treated without segmentation from KG till class 12. Aim to move from Blackboard to digital board with a push for digital technology and re-education.
By 2022, every block with over 20,000 tribals and over 50 percent STs will have a special Eklavya school. As many as 10 crore people to get Rs 5 lakh health coverage for hospitalisation every year. The government aims to move towards universal health coverage. Allocation of Rs 600 crore has been proposed for tuberculosis patients who are undergoing treatment.
Government proposes the establishment of two new Schools of Planning and Infrastructure. To address brain drain issue in the country, a new scheme to identify bright students studying B Tech in top engineering schools and allow them the opportunity to study and do research in IITs and Indian Institute of Science.
Selected students to get special fellowships and will be expected to teach in institutes of higher education, particularly in rural areas. Mudra Yojana lending target has been set at Rs 3 lakh crore. Aim to bring 60 crore bank accounts under Jan Dhan Yojana.
Jailtey proposes an integrated B.Ed programme for teachers for improving quality of teachers and education. A fund for social security and protection of widows and orphaned children is to be set up.
Allocation of Rs 1 lakh crore has been proposed for revitalising and upgrading education sector. Jaitley pushes for learning based outcomes and research. Government to set up 1.5 lakh centres under Aayushman Bharat programme to provide health facilities with an allocation of Rs 1,200 crore.
In a major boost to healthcare and medical education, Jaitley pledges to set up at least one medical college for every three parliamentary constituencies. Also, PM Jivan Bima Yojana gave benefits to 5.22 crore families. Under Jan Dhan Yojana, the entire lot of 16 crore accounts will be brought under micro insurance and pension plans.
Jaitley says 1.26 crore bank accounts opened under the Sukanya Samriddhi Scheme. Allocation of Rs 52,719 crores for social inclusion of scheduled castes is proposed in the budget.
Jaitley allocated Rs 3,794 crore capital support and industry subsidy by 2022 for the MSME sector. Under Mudra Yojana, Jaitley set a target of Rs 3 lakh crore. The finance minister said Rs 4.6 lakh crore was sanctioned under Mudra Yojana.
Consumers get relief with excise cut on fuel. Excise on unbranded diesel was cut by Rs 2 to Rs 6.33 per litre and the same deduction was given from unbranded petrol top Rs 4.48 per litre.
Total capital expenditure for Indian Railways set at Rs 1,48,528 crore. A special railway university will also be set up in Vadodara, Gujarat. In order to cut travel times and delays, Jaitley proposed cutting 4,267 unmanned railway crossings. In a bid to overhaul the railway stations’ infrastructure, all station that has a footfall of 25,000 passengers will now have escalators. To provide connectivity on the go, all trains will soon be equipped with CCTV and WiFi.
Allocations for Mumbai rail network was pegged at Rs 11,000 crore and for Bengaluru Metro, Rs 17,000 crore was allocated.
The government aims for 2018-19’s fiscal deficit target of 3.3 percent of GDP. The revised fiscal deficit for 2017-18 was Rs 5.95 lakh crore or 3.5 percent of GDP.
The government proposes no change in personal income tax rates for salaried class. Jaitley said in his speech that there has been a 12.6% growth in direct taxes in 2017-18; 18.7% growth in indirect taxes in 2017-18. As many as 85.51 lakh new taxpayers filed their tax returns in 2017-18, as against 66.26 lakhs in 2016-17. The number has increased from 6.47 crore in 2016-17 to 8.27 crore by end of 2017.
Jaitley proposed liberalisation of presumptive income schemes for small businesses with income below Rs 2 crore, similar schemes for professionals with income below Rs 50 lakh. Rs 90,000 crore additional income tax collection was seen in 2016-17 and 2017-18.
Corporate tax reduced has been reduced from 30 percent to 25 percent for companies with turnover up to Rs 250 crore, move to boost MSME sector. The finance minister has proposed a revision in monthly emoluments of President of India at Rs 5 lakh,, Rs 4 lakh for vice president and Rs 3.5 lakh for governors.
A standard deduction of Rs 40,000 for salaried taxpayers was announced. In terms of capital gains tax, long-term capital gains are proposed to be taxed at 10 percent on investments over Rs 1 lakh. Short-term capital gains tax to remain unchanged at 15 percent.
For senior citizens, Jaitley proposed exemption of interest income on bank deposits raised to Rs 50,000 for senior citizens as well as exemption of Rs 10,000 on income from Bank FDs and post offices. The budget proposes 10 percent tax on distributed income by equity-oriented mutual funds as well as 100 percent deductions for cooperative societies.
In the realty sector, Jaitley proposed that were to be made when the circle is at or below 5 percent of sale consideration.
In terms of revenue loss, Jaitley said Rs 8,000 crore revenue was lost due to standard deductions for salaried employees. Also, Rs 7,000 crore forgone due to lower corporate tax on firms with turnover not exceeding Rs 250 crore. Rs 19,000 crore was lost last fiscal in terms of revenue from direct taxes.
Jaitley said that there is a requirement of Rs 50 lakh crore for the infrastructure sector. He said that construction of a new tunnel at Sera Pass will also work in promoting tourism. A total 10 prominent tourist sites will be upgraded as iconic tourist destinations.
In the flagship Bharatmala project that aims to connect India’s eastern and western ends with a 35,000 km highway and roads network, an outlay was announced to the tune of Rs 5.35 lakh crore under phase 1. For toll payments on highways, Jaitley said that the government will introduce a new system called “pay as you use”.
Customs duty on mobile phones, TVs hiked for providing the fillip to Make in India initiative. The government also proposes 10 percent social welfare surcharge on imports.
Budget for employees
Government pledges contribution of 12 percent in wages of new employees in all sectors for the upcoming 3 years under EPF scheme. Women contribution to EPF slashed for initial three years to 8 percent.
The total outlay for defence in budget 2018 is Rs 2.95 lakh crore, according to PTI, up from Rs 2.74 lakh crore last year. Jaitley expressed his intention to boost manufacturing in the defence sector and asserted the need to strike a balance between foreign procurements to meet immediate needs and Make in India initiative for the defence sector.
Jaitley said that during the course of this government, the emphasis was given on modernisation and enhancement of operational capabilities of the armed forces. The government will bring a new industry-friendly defence production policy 2018 for giving a boost to domestic production for the private sector, public sector as well as MSMEs. Jaitley said that the government will take measures to develop two defence industrial production corridors.
An allocation of Rs 3,073 crore was done for Digital India scheme. As many as 5 lakh WiFi hotspots will be installed to give access to broadband services to 5 crore rural citizens. An allocation of Rs 10,000 crore was proposed for the same.
The government will now explore the usage of Blockchain technology but it will also take steps to prohibit the circulation of cryptocurrencies as they are not classified as legal tenders as of now.
Markets, Finance and insurance
Government to encourage a strong environment for VCs and angel investors. Meanwhile, SEBI would make it mandatory for large corporations to meet a quarter of their debt needs from bond markets.
The disinvestment target for FY2019 has been set for Rs 80,000 crore. The disinvestment targets for the current fiscal have been set at Rs 1 lakh crore. The government would also evolve a scheme that would assign unique IDs for companies. The National Insurance Co, Oriental Insurance Co and United Assurance Co will be merged into one entity which will then be listed. For bank recapitalisation, Jaitley said it may set the path for public banks to lend an extra Rs 5 lakh crore.
Government plans to expand airport capacity by as much as five times and aims to take the trip count to 1 billion per year. An initial investment of Rs 60 has been set aside. Under UDAN scheme, 64 airports will be connected across the country to boost low-cost flying.
The food subsidy has been increased for the from Rs 1.4 lakh crore in 2017-18 to Rs 1.69 lakh crore in 2018-19. To commemorate the 150th birth anniversary of Mahatma Gandhi, Rs 150 crore has been set aside. Also, it has been proposed that the emoluments of MPs may be increased based on an index to inflation.
This year’s Budget will particularly focus on agriculture.
The finance minister also pointed out that India is one of the fastest-growing economies in the world.
Indian economy has performed very well since our government took over in May 2014.
-said Arun Jaitley.
Arun Jaitey also recalled the measures- like GST, FDI, demonetisation, etc.- taken by the NDA government in the past four years that have impacted the economy of the country. The cabinet, in the meeting, thus approves the Budget.