All hopes traditionally ride high on the budget, and this one being the last full budget announcement before the nation goes into the 2019 general elections, made expectations rise a notch higher. While it is impossible to make everyone happy, the government delivered on some key themes and fell short on some others. Inclusion remains a consistent area of focus for the government as the Finance Minister laid emphasis on rural development, healthcare, job-creation and infrastructure.
A high-decibel announcement and a significant boost towards safeguarding farmers was the promise of increasing the minimumsupport price (MSP) for crops to 1.5 times the cost of production. While there are concerns that this might cause inflation to rise consi derably, experts predict that the connection between the two is weak.
On the healthcare front, the centre announced an ambitious health protection scheme with an allocation of INR 2000 crores and an aim of covering 10 crore families in need. If this takes shape, it will be the largest health protection programme in the world and an immense step towards strengthening rural India. The announcement was short on executional details, making critics ask some stern questions, but the very attempt towards universal health coverage for a country as large and diverse as India is a leap in the right direction.
Infrastructure development has long been a priority for the government and this year’s budget lived up to the expectations of the industry. Calling it a ‘growth driver’, Finance Minister Arun Jaitley announced the allocation of INR 5.97 lakh crores towards infrastructure spending, up by one lakh crore from the ongoing year. Focused development will have positive ramifications on connectivity, job creation and the digital initiative, making it one of the highlight announcements of budget 2018.
The middle class comprising mostly salaried folk, and the corporate sector were left more than a little disappointed as very few in itiatives came their way, and several key concerns of the cohort were left unaddressed.
Encouragingly, the reduction of corporate tax rate to 25% was a benefit that has now been extended to companies with a turnover of up to INR 250 crores. This announcement is massive primarily because it covers about 99% of companies that file their tax returns.
Unfortunately, that’s all there was to cheer for. On an individual level, there was no change in either income tax rates or slabs. The re-introduction of the abolished standard deduction for salaried individuals offered some relief, but got watered down by a marginally higher education cess on the amount of income tax payable.
Another dampener was the re-introduction of the Long Term Capital Gains tax (LTCG) on stocks for a period of one year. So for mid dle class Indians saving up for their children’s education, for example, this spells bad news if their LTCG is above INR 1 lakh in a financial year. Additionally, investors will now have to shell out 10% tax on distributed income from equity mutual funds. Considering the fast-growing popularity of mutual funds among consumers in the last year, this announcement is expected to put the brakes on this particular source of funds into the stock markets.
On the back of a revival in growth of the manufacturing sector and a growth of more than 8% in the services sector, Finance Minister Arun Jaitley said in his budget speech that India is well on its way to becoming the fifth largest economy in the world from its current seventh position. The big question that remains at the end of the budget announcements is whether all the measures announced are enough to propel India to over 8% growth in GDP.
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