• Associate Sponsor

Union Budget 2018: Rural poor is focus, cost is breach of fiscal target 

In the 35 minutes of Finance Minister Arun Jaitley's 105-minute Union Budget speech, during which he unveiled his agriculture and health schemes, there were 38 references to the word ‘agri,’ 39 mentions of the word “farm,” 35 references to “rural.”

Written by Anil Sasi , Sunny Verma | New Delhi | Updated: February 2, 2018 7:32 am
Finance Minister Arun Jaitley arrives in Parliament to present the Union Budget 2018 on Thursday (Express photo/Renuka Puri)

Finance Minister Arun Jaitley’s last full Budget before the Lok Sabha elections was predominantly a rural-sector budget with a clear political overtone: to reinforce the Narendra Modi government as one with pro-poor credentials and dissipate mounting pressure to address discontent over falling farm income and economic slowdown.

The slew of measures for agriculture and a new health insurance scheme for the poor come a month after the bruising Gujarat election results and ahead of the eight states that go to polls this year at the cost of a breach in the fiscal deficit target for 2017-18 and a stock market tax reintroduced after 12 years.

On the fiscal deficit, the budget estimate of 3.2 per cent of GDP for this year has been revised to 3.5 per cent — the second year in a row that the government has pushed back its stated fiscal commitment to push through its spending aimed at the Indian hinterland.

Also read | Five-lakh health cover for 10 crore poor, prescription awaited

For the middle-class, investors and corporates, there was little to celebrate in the subtext of the budget that Jaitley clearly said “is aimed at the agri, rural, health, education, employment, MSME and infrastructure sectors of Indian economy” and is in keeping with the NDA Government’s pursuit of the “New India which we aspire to create”.

There was an additional cess amounting to one percentage point on all income tax payers and large companies. The big dampener for the stock market was the reintroduction of the Long Term Capital Gains (LTCG) tax, with a proposal to tax gains of more than Rs 1 lakh in the equity market at a rate of 10 per cent. All gains up to January 31, however, will be grandfathered.

Read | Assurance on MSP but for government, rural is more about infrastructure than agriculture

Budget papers stacked amid high security outside Parliament on Thursday. (Express Photo/Tashi Tobgyal)

The budget also extended the cut in the corporate tax rate from 30 per cent to 25 per cent to companies clocking a turnover of up to Rs 250 crore, up from Rs 50 crore. A comprehensive package was also directed at the MSME (micro small and medium enterprises) sector, which bore the brunt of demonetisation and hurried implementation of the goods and services tax. (GST).

Jaitley’s emphasis was clear. In the 35 minutes of his 105-minute speech during which he unveiled his agriculture and health schemes, there were 38 references to the word ‘agri,’ 39 mentions of the word “farm,” 35 references to “rural.” The proposals included a cluster-based models for horticulture and a hike in the minimum support price to one-and-a-half times the production cost for Kharif crops, a key demand of farmers.

Also read | 10 per cent market tax in name of helping real economy

Jaitley also announced what is among the world’s biggest government-funded healthcare schemes that will cover 50 crore people, even through the fineprint does not show specifics of the allocation for the scheme. Add to this schemes and allocations to kickstart jobs, more loans under MUDRA and an MSME sector package — the “farm livelihood” package, Jaitley said, had a cumulative allocation of Rs 14.34 lakh crore.

A big positive was the government exceeding the disinvestment target for the current fiscal — the first time since 1998-99 — with receipts of around Rs 100,000 crore against the targeted Rs 72,500 crore. A target of Rs 80,000 crore has been set for for FY19. The sharp surge in rural allocation notwithstanding, the increase of 10.1 per cent in government spending in the budget estimate of 2018-19 over the current year’s revised estimate marks the slowest rate of expenditure growth in each of the last three pre-election years — 2013-14, 2008-09 and 2003-04.

Stating that MSMEs are a major engine of growth and employment, the FM has said he will soon announce measures for tackling bad loans in the SME sector. This comes amid concerns that the initial set of cases taken up under the insolvency and bankruptcy code were overwhelmingly focused on the big corporates.

Besides, in a major boost to the start-up sector, Jaitley changed the taxation structure to expand the definition of “eligible business” to include firms engaged in “innovation, development or improvement of products or processes or services, or a scalable business model with a high potential of employment generation or wealth creation”. Alongside this, the proposals included the introduction of measures to support the VCF/Angel investors coupled with the recognition of hybrid instruments, which are expected to encourage the industry and boost the Government’s flagship Start-up India scheme.

Finance Minister Arun Jaitley during a press conference in New Delhi on Thursday,
after presenting the Budget in Parliament (Express Photo/Tashi Tobgyal)

Micro-entrepreneurs will benefit from the 23 percent growth in the flagship MUDRA target while the announcement of a dedicated fund for affordable housing could provide a thrust to the construction sector — one of the largest employers in the country. Market regulator SEBI has been entrusted to prod larger companies to raise one-fourth of their debt requirement from the corporate bond market, a move that should help widen the Indian bond market.

There was also some relief on MAT and carry forward of loss for companies facing insolvency proceedings under the IBC (Insolvency and Bankruptcy Code) process.

Senior citizens got some relief — Rs 50,000 per annum exemption for medical insurance under Sec 80D. Women working in the formal sector would get to take home higher wages, with the Employees Provident Fund and Miscellaneous Provisions Act, 1952 set to be amended to reduce women employees’ contribution to 8 per cent for first three years of their employment against existing rate of 12 per cent or 10 per cent, with no change in employers’ contribution. There were, however, no changes to I-T structure for individuals.

An announcement of a standard deduction of Rs 40,000 (from around Rs 34,000 allowed currently) for transport, medical reimbursement for salaried tax payers ended up as merely a token move for the rest of the salaried class who would be further hit by a 10 per cent tax on mutual fund dividends at the hands of the investor.

Stating that creating job opportunities has been at the core of the government’s policy-making, Jaitley announced that the Government will contribute 12 per cent of the wages of new employees in the EPF for all the sectors for next three years, with a salary cut-off limit of Rs 15,000 per month. In the budget for 2016-17, Jaitley had announced that the government would bear 8.33 per cent of the EPS (employee pension scheme) contribution for the first three years of employment, subject to this salary cut-off.

The facility of fixed term employment — announced for the textiles and leather sectors earlier — has now been extended to all sectors, which would offer a degree of flexibility for employers to lay-off workers on a seasonal basis. The excise duty on petrol and diesel was cut by Rs 2 per litre each on four product categories and replaced by an equivalent road and infrastructure cess of Rs 8 per litre. This essentially means the share of cess in the government’s tax collections goes up while the divisible pool that needs to be shared with states comes down as proceeds from cesses are not shared with states.

The equity markets, which rose during the initial farm announcements, dropped 464 points down at the time that budget speech was wrapped up before making a sharp recovery to finally close down marginally in highly volatile trade on Thursday.

A top government official played down the slippage in the fiscal deficit target as largely “statistical” arguing that GST revenues had been factored in for just 11 months. Under the new regime, the last date for filing of GST returns remains the 20th of the succeeding month even on the last day of the financial year, which means that the tax receipts during the current year was only for 11 months, excluding the indirect tax receipts for March. This spill over, according to government officials, will result in an estimated loss to the Central Government’s tax kitty to the tune of between Rs 35-36,000 crore.

The fiscal arithmetic seems to bank heavily on the stabilisation of GST revenues next fiscal, with Jaitley stating that the Government has revised its fiscal consolidation glide path and that the fiscal deficit target for 2018-19 was now pegged at 3.3 per cent of GDP against earlier target of 3 per cent of GDP.

While Jaitley has budgeted Rs 20,000 crore additional revenue from the LTCG, an earlier study by the Bombay Stock Exchange had concluded that taxes on long-term capital gains could generate Rs 49,000 crore per annum.

There was a 21 per cent increase in infrastructure spending, with Jaitley announcing the expansion of airport capacity by five times to 1 billion trips per year. In November, the Civil Aviation Ministry had announced plans to expand air connectivity by establishing around 100 airports in the country, doubling the current number in 15 years. Jaitley said the Centre’s flagship regional connectivity scheme proposes to provide air connectivity to 56 unserved airports and 37 unserved helipads going ahead.

For all the latest Business News, download Indian Express App

  1. G
    Gangu Radhakishan
    Feb 2, 2018 at 10:15 am
    Ex PM Sri Man Mohan Singh talked how to cover the fiscal deficit but praised the budget as a bright picture for the country. EX FM Sri Chidambaram said that courage failed in planning , and as well every test failed in this budget. CM of AP is unhappy about this budget. FM of Telangana is unhappy about this budget and it is true that Telangana it at utmost bottom in bene ing from this budget. Sri Arun Jaitley should answer for all these and other opposition leaders views in a professional manner rather than bene ing politically, what the previous leaders in power usually do. As professional environment grows, definitely India will become bright in future years.
    (0)(0)
    Reply
    1. Michelle:: Vedic::human
      Feb 2, 2018 at 11:44 am
      The reason why centre govt is juggling with current budget defiancey is because of instability and imbalance and crooked financial mismanagement caused by the ruling govt than in power congress,--70yrs of misadventure cannot be made stable in just 3yrs,---for the financial balanced management for next budget to be stable, it will take a another 4yrs of BJP rule to clear the mismanagement and crooked imbalanced to bring down to stability, than from there on budget itself will start to settle down and roll on perfectly,--a another x 4 BJP govt of democratly elected is the need of the hour,----Jai hind.
      (1)(0)
      Reply
    2. H
      HG KETKAR
      Feb 2, 2018 at 10:11 am
      There are two things. First, if it is not your pre-election budget, then why these steps not taken in earlier years, atleast last two years, so that what you have expressed in this budget, some results have been achieved by this time. If it is prepared by taking consideration of last budget before the election, then, it seems that there is some doubt in your determination that you will come back in power, with your general terms and hence to attract agriculture sector, you have submitted some sort of facilities in this budget. Though, it is not corruption, but a tactics of attracting the dissatisfied people from your policies. Let us see if all the steps suggested, will be fulfilled during this year, indicating creation of jobs for 70 lakhs. It is surprising factor to be done in ONE year. May God shower blessings on your at ude and skill to perform such a huge achievement in one single year.
      (1)(0)
      Reply
      1. Keath Pactor
        Feb 2, 2018 at 10:06 am
        What Lutyens, Kannaiyyas, christian missionaries could not do for Congress, Arun Jaitley is doing it for them. Jaitley will sink BJP boat. The day he gave interview to Barkha inspite of she running viscious campaign against BJP, I understood the intentions.
        (0)(0)
        Reply
        1. Michelle:: Vedic::human
          Feb 2, 2018 at 10:04 am
          CARDINAL GEORGE ALENCHERRY head of Kochi-based Syro-Malabar Catholic Church one of 22 Eastern Catholic Churches in INDIA and world under Rome and is also archbishop of Ernakulam archdiocese and under Church and civil law for causing losses to the diocese, case also involves black money for Catholic Church in India. Alencherry is among the Indian cardinals eligible to elect Pope, report states, There is grave violation of the civil laws, which amounted to naked act of breach of trust and criminal misappropriation of properties. Total amount receivable according to 36 deeds is Rs 13.52 crore which is a serious offence as per the Income Tax Act, numerous instances of violation of civil laws, as the head of Syro-Malabar Church,priest Sebastian Va mpadan and finance officer Joshy Puthuva also prosecuted.Saju Varghese Kunnel of syro-MALABAR CATHOLIC CHURCH was kingpin in the deal and alleged that he enjoyed the confidence of the Cardinal and father Puthuva,--Jai hind.
          (4)(0)
          Reply
          1. G
            Gangu Radhakishan
            Feb 2, 2018 at 9:40 am
            Every budget focuses on few areas and lacks in some other areas. Oppositions definitely finds some loopholes/deficiencies either in local bodies or state or central governments. Of course the leaders who are in power, will praise the budget. They don't see any kind of weaknesses as they just highlights the strengths. At the end of 70 plus years of free India, it is still an average nation or a developing nation. Important things are to focus on wealth generation, utilizing every rupee optimally without wastage and see that it is useful to the beneficiary cent percent on sacred basis. Service and development should be of top quality that is provided by the governments. Truth and dharma of the land should be of top priority in implementing every program/schemes. Everyone should just focus on making our nation into a Developed, Powerful, Bright, Sacred INDIA.
            (0)(6)
            Reply
            1. Load More Comments
            Adda