Analysis of Union Budget February 02, 2018

Transcription

1 Analysis of Union Budget February 02, 2018 Budget snapshot (Rs. In crores) Particulars FY15 FY16 FY17 FY18 (RE) FY19 (BE) Revenue Receipts (a) 11,01,472 11,95,025 13,74,203 15,05,428 17,25,738 Tax Revenue 9,03,615 9,43,765 11,01,372 12,69,454 14,80,649 Non tax revenue 1,97,857 2,51,260 2,72,831 2,35,974 2,45,089 Capital Receipts (b) 5,62,201 5,95,748 6,00,991 7,12,322 7,16,475 Market Borrowing (net) 4,45,137 4,04,050 3,49,657 4,02,394 3,90,120 Disinvestments 37,737 42,132 47,743 1,00,000 80,000 Small savings (net) 32,226 52,465 67,435 1,02,628 75,000 Total Receipts (a+b) 16,63,674 17,90,773 19,75,194 22,17,750 24,42,213 Revenue Expenditure (c) 14,66,992 15,37,761 16,90,584 19,44,305 21,41,772 Interest payment 4,02,444 4,41,659 4,80,714 5,30,843 5,75,975 Subsidy 2,58,258 2,64,106 2,34,809 2,64,125 2,92,825 Capital Expenditure (d) 1,96,681 2,53,022 2,84,610 2,73,445 3,00,441 Total Expenditure (c+d) 16,63,673 17,90,783 19,75,194 22,17,750 24,42,213 Revenue Deficit 3,65,519 3,42,736 3,16,381 4,38,877 4,16,034 Gross Fiscal Deficit 5,10,725 5,32,791 5,35,618 5,94,849 6,24,276 Fiscal Deficit as a % of GDP Union Finance Minister Arun Jaitley presented the Union Budget in Parliament on Thursday 1 st February, This budget was FM s fifth and the last full budget of this NDA government before India goes to polls for the General Elections due to take place in This is the first budget after big-ticket economic reforms such as the Goods and Services Tax (GST), dynamic fuel pricing, mega PSU bank recapitalisation and more. The Union Budget 2018 also includes the Railway Budget, the latter was presented separately till it was decided to present a joint annual budget in This budget session kicked off on January 29 when Chief Economic Adviser Arvind Subramanian tabled the Economic Survey in the Lok Sabha. The survey predicted India s economy to revive after the slowdown of 2017 and pegged India s GDP growth rate forecast at per cent. From to , the average GDP growth rate was 7.3 per cent. The survey also found that the tax net widened in the 2017 fiscal with a huge increase in individual taxpayers, rollout of GST and demonetisation. Fiscal situation and targets GST revenue will be collected for 11 months and that would impact balance sheets. Rs lakh crore transferred in the form of net GST against the predicted Rs lakh. Government aims for s fiscal deficit target of 3.3 per cent of GDP. Revised fiscal deficit for was Rs 5.95 lakh crore or 3.5 per cent of GDP. Agriculture and rural economy The Finance Minister 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, 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 agri 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 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.

2 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 farm sector. He also announced a special scheme to manage crop residue. Social protection and security 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. 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, target for loans to 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 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 country to be treated without segmentation from KG till class 12. Aim to move from black board to digital board with push for digital technology and e-education. By 2022, every block with over 20,000 tribals and over 50 per cent STs will have a special Eklavya school. As many as 10 crore people to get Rs 5 lakh health coverage for hospitalisation every year. 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 establishment of two new Schools of Planning and Infrastructure. To address brain drain issue in country, a new scheme to identify bright students studying B Tech in top engineering schools and allow them 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. In the past, 1.26 crore bank accounts opened under the Sukanya Samriddhi Scheme. Allocation of Rs crore for social inclusion of scheduled castes is proposed in the budget. Industry Mass formalisation of MSME industry after GST and demonetisation. The Finance Minister allocated Rs 3,794 crore capital support and industry subsidy by 2022 for the MSME sector. Under Mudra Yojana, FM set a target of Rs 3 lakh crore. The finance minister said Rs 4.6 lakh crore was sanctioned under Mudra Yojana.

3 Consumers will 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. Railways 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 have a footfall of 25,ooo passengers will now have escalators. To provide connectivity on the go, all trains will soon be equipped with CCTVs and WiFi. Allocations for Mumbai rail network was pegged at Rs 11,000 crore and for Bengaluru Metro, Rs 17,000 crore was allocated. Fiscal targets Government aims for s fiscal deficit target of 3.3 per cent of GDP. Revised fiscal deficit for was Rs 5.95 lakh crore or 3.5 per cent of GDP. Taxation The government proposes no change in personal income tax rates for salaried class. The Finance minister said in his speech that there has been a 12.6% growth in direct taxes in ; 18.7% growth in indirect taxes in As many as lakh new taxpayers filed their tax returns in , as against lakhs in The number has increased from 6.47 crore in to 8.27 crore by end of The Finance Minister 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 and Corporate tax reduced has been reduced from 30 per cent to 25 per cent for companies with turnover up to Rs 250 crore, move to boost MSME sector. The finance minister has proposed 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. 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 per cent on investments over Rs 1 lakh. Short term capital gains tax to remain unchanged at 15 per cent. For senior citizens, the Finance Minister 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 per cent tax on distributed income by equityoriented mutual funds as well as 100 per cent deductions for cooperative societies. In the realty sector, the Finance Minister proposed that were to be made when circle is at or below 5 per cent of sale consideration. In terms of revenue loss, the Finance Minsiter 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. Infrastructure The Finance Minister 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. Trade Customs duty on mobile phones, TVs hiked for providing fillip to Make in India initiative. Government also proposes 10 per cent social welfare surcharge on imports.

4 Budget for employees Government pledges contribution of 12 per cent 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 per cent. Defence 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. The Finance Minister expressed his intention to boost manufacturing in defence sector and asserted the need to strike a balance between foreign procurements to meet immediate needs and Make in India initiative for defence sector. During the course of this government, emphasis was given on modernisation and enhancement of operational capabilities of the armed forces. Government will bring a new industry-friendly defence production policy 2018 for giving a boost to domestic production for private sector, public sector as well as MSMEs. Jaitley said that the government will take measures to develop two defence industrial production corridors. 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. 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 many set the path for public banks to lend an extra Rs 5 lakh crore. Aviation 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. Ajcon Global view on Union Budget We believe the Finance Minister cheered the masses by focusing on the core aspects of the economy and providing relevant allocations. However, the equity markets did not like the introduction of Long Term Capital Gain tax. Investors have taken the Union Budget as a bitter pill. However, the Finance Minister has managed to achieve a fine balance between the needs of growth, social development, and investor confidence by focusing on rural and infra sectors, MSME, salaried, and retired classes - while staying on course with fiscal consolidation. We also like the government announcement of a new health protection scheme and allocating Rs 52,000 crore to the sector in the Budget which was also lauded by the WHO which also said they were "significant" steps towards Universal Health Coverage (UHC), something the global health body has been advocating for. We believe that this Budget has holistically addressing the various priorities of the Indian economy and would be very good for the economy as rural India will have more disposable income in their hands which would spur up the consumption indirectly supporting corporate India. The biggest beneficiaries of this Budget are the medium, small and micro enterprises (MSMEs) the units which can create massive employment opportunities,

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