Budget 2018 focuses on farm sector, gives little to middle class5 min read . Updated: 01 Feb 2018, 06:08 PM IST
Arun Jaitley unveils a slew of measures for agriculture as well as the rural sector and announced a new health insurance scheme for the poor, but provided little relief to the middle class
New Delhi: In his last budget before general elections, finance minister Arun Jaitley on Thursday unveiled a slew of measures for agriculture as well as the rural sector and announced a new health insurance scheme for the poor, but provided little relief to the middle class.
With chaotic implementation of the goods and services tax (GST) and demonetisation causing distress in the economy, Jaitley announced massive spending on rural and urban infrastructure as also lower tax rates for small and medium enterprises. While continuing the 10-15% surcharge on super-rich, he raised the health and education cess, levied on all taxable income, to 4% from 3% at present.
Keeping the income tax rates and slabs unchanged, he introduced a ₹ 0,000 standard deduction for salaried employees and pensioners in lieu of the present exemption in respect of transport and medical expenses. Presently, no tax is applicable on ₹ 9,200 of transport allowance and medical expenditure of up to ₹ 5,000. This has now been subsumed into the new Standard Deduction of ₹ 40,000 which may mean very little benefit in tax saving considering that health and education cess have gone up.
Senior citizens will get higher exemptions on income from interest on bank and post office deposits, health insurance premium and critical illness expense. Jaitley however made import of a host of products—from cellphone to perfumes and toiletry, from watches to parts of automobiles, sunglasses to truck and bus tyres, footwear to diamonds and edible oils to fruit juices—costly by raising customs duty.
Fourteen years after it was scrapped, he brought back tax on gains made from sale of shares to offset revenue losses. Capital gains exceeding Rs1 lakh from shares held for more than a year will be taxed at 10%. 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)—a same-day tax credit system that continues.
In the 110-minute speech, in which he kept switching from English to Hindi for wider mass appeal, Jaitley announced plans for agriculture, rural housing, organic farming, animal husbandry and fisheries with a total allocation of Rs14.34 lakh crore. “My government is committed for the welfare of farmers," he said announcing that his party’s election promise of fixing a minimum support price (MSP) at 150% of the cost will be implemented for all kharif crops this year.
Also, credit to agriculture would be raised to Rs11 lakh crore in the coming fiscal from Rs10 lakh crore and kisan credit card extended to fisheries and animal husbandry farmers. Rs2,000 crore will be provided for development of agri market and export of agriculture commodities will be liberalised.
In a bid to provide universal healthcare, he announced a ‘National Health Protection scheme’, providing a cover of up to Rs5 lakh per family per year for second and tertiary care hospitalisation to 10 crore poor and vulnerable family (about 50 crore beneficiaries). This, Jaitley said, will be world’s largest health protection scheme.
He committed an expenditure of Rs1.38 lakh crore on health, education and social protection. But to fund these, he let go of the fiscal consolidation roadmap. As a result, fiscal deficit for the current fiscal will be 3.5% of the GDP as against the previous target of 3.2%, and 3.3% in 2018-19, as opposed to 3% set earlier.
Fiscal deficit in 2016-17 was 3.5% of the GDP. Jaitley, who had in 2015 promised to reduce corporate tax from current 30% to 25% over four years, proposed lower tax rate of 25% for companies with turnover of up to Rs250 crore in 2016-17.
The Union Budget 2018-19 was the last full budget before the general elections next year, when a vote on account would be presented. The next full budget will be presented by the new government. With GST and demonetisation pulling down GDP growth rate in Asia’s third largest economy to its lowest level in three years, he said economic growth was picking up and “firmly on path to achieve 8% plus growth soon".
GDP is expected to grow at 6.5% to 6.75% in 2017-18. “Indian economy is now $2.5 trillion—seventh largest in the world. India is expected to become the fifth largest economy very soon," he said.
Prime Minister Narendra Modi termed the budget “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% tax deduction will be given for the first five years to companies registered as farmer producer companies with a turnover of Rs100 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 Rs21.57 lakh crore and projected Rs24.42 lakh crore expenditure in 2018-19. Railway capital expenditure has been put at Rs1.49 lakh crore in 2018-19. Gross market borrowing is seen at Rs6.06 lakh crore and net borrowing at Rs4.62 lakh crore in 2018. Government will also switch Rs28,000 crore of bonds next fiscal.
Customs duty on import of mobile phones is proposed to be increased to 20% from 15%, on some of their parts and accessories to 15% and certain TV parts to 15%.
Jaitley said measures to address bad loans of small and medium enterprises would be announced soon. He proposed setting up Rs3 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.
The process of strategic sale in 24 state-run companies including privatisation of Air India has begun and more exchange-traded fund offers including debt ETFs will come. Special schemes for states around Delhi will be implemented to address air pollution, he said adding removal of crop residue will be subsidised in order to tackle the problem of pollution due to burning of crop residue.