With national poll looming next year- – and high possibility of late 2018, Finance Minister Arun Jaitley rolled out a budget which is seen as a “populous budget” by many whereas it is also called “poplar budget” by some. In the budget presented by the Finance Minister, farmers, villagers and companies dealing with agriculture, emerged as biggest winners while bond investors might be on the losing side.
The Indian economy registered the growth rate of 7.00% in FY 2017 but it is expected to decline its rate to 6.50-6.75% in FY 2018. The highest growth rate was witnessed in the 1st quarter of 2017 with 7.90% making India one of the prominent investing nations of the world. The CPI inflation declined to ~3.30% during FY 2017-2018 (April-December). India is undoubtedly one of the prominent investment options for all the MNCs in the world. The FIIs flow received was US$ 30.80 billion compared to US$ 3.20 billion in 2016. Because of governments positive impact and policies which helped in driving investors in the market, over US$ 7.80 billion in 2017 fueled the equity market.
Fiscal deficit and E-lobby
The Government of India announced INR 2.1 lakh crore in the form of bank recapitalisation scheme which will help in facilitating “credit growth” in India. The much talked about “Fiscal Deficit” gained a lot of attention in this year budget. With 3.50% fiscal deficit as a % of GDP, it became the talking point of the market and also brought in comments from all across the financial institutions. In FY 2019, the government is expected to bring in more strict laws against the defaulters and also bring in some of the laws related to labour and direct tax system. The most important thing that is looked forward for in FY 2019 is the reforms related to GST which will result in streamlining the process. E-lobby is the thing that grabbed my attention in one of the new channels interview that I was watching. E-lobby is basically the online way which will further raise the standard in ease of doing business in India. E-lobby will simplify and streamline various processes involved in the business. Right from obtaining license for doing business till progressing with the tender, everything will be done via electronic way. It will further lead to enhancement in e-governance lobby. My only take on e-lobby is the implementation and budget allocation that will take this thing to a whole new level. For many MNCs who had earlier tried or who have outsourced its business will find its way to have a grand entry in Indian market because of this e-lobby.
Estimated capital expenditure is forecasted to be close to 61.5 lakh crore rupees in the FY 2017-2018 whereas with a rise of nearly 3lakh crore rupees, revenue expenditure are expected to be at 22.10 lakh crore rupees. Receipts are expected to be increased by around 6 lakh crore rupees keeping the receipt total at around 84.25 lakh crore rupees. The major negative impact and news that led to many share prices to be witnessing a downward slope was the expected GDP growth rate. GDP is expected to be at 6.5% for FY 2017-2018 as compared to 7.1% for the previous FY.
While the tax slab in personal income tax is untouched by the finance minister. There is a standard deduction of about 40,000 rupees for salaried person. This will be in lieu to existing transport and medical allowance. This move is expected to ease the burden of around 25-30% of total taxpayers. But the news on the exemption suddenly took a negative side when the finance minister announced cess increment of around 1% which will be levied under the existing education cess. The total 4% Health and Education Cess is expected to benefit the government with a rise in amount of Rs 11,000 crore.
Senior citizens are the most helpful set of individual when it comes to this year’s budget. The interest income from bank deposits on which tax exemption is now raised to around Rs 50,000. Finance minister has also proposed to raise the deduction under health insurance premium under section 80D of the existing Income Tax Act to Rs 50,000/-. Pradhan Mantri Vaya Vandana Yojana has been extended till 2020 which assures return of 8% given by LIC. Also the existing limit of Rs 7.5 lakh has been enhanced to Rs 15 lakh.
I and my friend which is a CA were discussing whether the upcoming budget would see a cut in the corporate tax rate. My reason to show a positive indication to the reduction of the corporate tax was keeping a close eye on the Trump administration’s policy in the corporate tax structure of the USA. I won also but on the other hand it was a conditional winning by me. Finance minister announced that only companies with annual turnover of Rs 250 crore will now be taxed at 25%. After this news, according to him only 7,000 companies will remain in 30% tax slab. By this move there are still debates going around in many of the business news channels. A bitter pill by finance minister includes the return of “Long Term Capital Gain” (LTCG). LTCG exceeding Rs 1lakh arising from transfer of equity shares in a company or units of equity mutual funds or units of business trust will be taxed at 10%. Until now such investments were exempted from tax, while a flat rate of 15% was charged on STCG. Some sense of relief is provided by the finance minister. New tax slab is applicable to all the investments; however the reference price for the same will be the highest quoted price on January 31st 2018 or the cost of the acquisition, whichever is higher. “Taxing of long-term capital gains on listed shares and also a levy of DDT on equity-oriented MFs is likely to temper the return for high net worth individuals. But, grandfathering of gains accrued until January 31, 2018 will limit the adverse impact. Small investors, too, have been protected,” said Kuldip Kumar, leader, personal tax, PwC India as quoted in The Print (2nd February, 2018 edition).
Basic deduction by Rs2 is proposed by the union government on excise duty on petrol and diesel. However, a new road cess of Rs8 per litre will make the deduction in the budget for additional excise duty which is to be abolished as a duty on petrol.
FM kept Minimum Support Price (MSP) of kharif and rabi crops at one and a half times the production cost of the crops. This announcement had led to the perception of the people at large saying that the government has shown a green signal to the 2019 elections. Also there was allocation announcement of Rs2000 crore for the development of agricultural markets in the country. “Operation Greens” was launched by the finance minister, it led to announcement of Rs500 crore on the same lines of ‘operation flood’ to address price volatility of perishable commodities and to promote Farmers Producers Organizations (FPOs). National Bamboo mission was launched which showcased bamboo as “green gold” by the finance minister. Rs1290 crore was allotted for the National Bamboo mission. Rs10,000 crore was allocated for the fisheries and animal husbandry sector. Criticism by many statisticians and many market analysis professional was seen when the finance minister quoted that the India’s agri-exports potential is as high as 100billion$ against current exports of around 30billion$.
Railway Budget showed no excitement for the markets as it was a dull affair as quoted by many. Focus on modification and upgrading the current railway infrastructure was seen in the speech made and budget allocated by the Finance Minister. He announced the availability of Wi-Fi and CCTVs which will be made available in almost every stations and escalators will be provided for in stations with more than 25,000 footfalls. There will be also a special focus in order to uplift the railway system in city of Mumbai and Bengaluru.
In order to sustain the literacy rate, FM made the announcement of setting up of 24new government medical colleges and hospitals. The upgradation for the same has been announced.
Custom duty on mobile phones has been increased to 20%, making mobile phones costlier. The customs duty on cashew has been decreased to 2.5%.
“Modi Care” as told by many, government launched a flagship National Health Protection Schemeto cover 10 crore poor and vulnerable families. FM announced the allocation of upto Rs5lakh per family per year in secondary and tertiary care institutions. The FM also allocated Rs600 crore for nutritional support to all TB patients. At least one medical college for three parliamentary constituencies.The Jivan Bima Yojana has benefited 5.22 crore families. 187 projects have been sanctioned under Namami Gange. All 4,465 Ganga gram villages have been declared open-defecation free. The government has identified 115 aspirational districts and will invest in social services.
The government has earmarked allocation of ₹56,619 crore for SCs and ₹39,135 crore for STs in 2018-19
One of the reasons of Bitcoins prices that had slashed during the budget announcement day was the first time mention of the recent investment phenomenon in the Indian budget. “The government does not consider cryptocurrencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system,” Jaitley told parliament in his annual budget speech. However, the minister said, the government would explore use of block chain technology proactively to speed the move toward a digital economy.
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