BUDGET 2018 19 OVERVIEW OF THE ECONOMY T he GDP grew at 6.3 per cent in the second quarter of 2017 18 and is expected to grow at 7.2 7.5 per cent in the second half of 2017 18. Indian economy is now 2.5 trillion dollar economy seventh largest in the world. India is expected to become the fifth largest economy very soon. On Purchasing Power Parity (PPP) basis, we are already the third largest economy. Growth for 2018 19 is forecasted at 7.4 per cent by the International Monetary Fund (IMF). Exports are expected to grow at 15 per cent in 2017 18. Fiscal deficit target for 2018 19 is set at 3.3 per cent of the GDP. Fiscal deficit for 2017 18 is revised at 3.5 per cent of the GDP. GS M EN TO RS 011 27607070, 7840888777/666 Budget 2018-19 1
RS TO EN M GS GS MENTORS An Institute of Top IAS Trainers 011 27607070, 7840888777/666 Budget 2018-19 2
RS TO EN TAXATION PROPOSALS No change in tax slabs for the salaried class / individuals Standard deduction of Rs. 40,000 re introduced for salaried employees in lieu of transport and medical expenses. Education cess of 3% now increased as health & education cess to 4%. Budget proposes to tax long term capital gains (LTCG) exceeding Rs. 1 lakh at 10 per cent without indexation benefit. Electronic IT assessment will be rolled out across the country, leading to greater efficiency and transparency. For senior citizens, GS M Exemption of interest income on bank deposits raised to Rs. 50,000/ from 10,000/. Deduction of health insurance premium increased to Rs. 50,000/ from Rs. 30,000/ Deduction limit increased to Rs. 100000/ for specified diseases from Rs. 60000/. To keep Mutual Funds on par with LTCG on sale of shares, Budget proposes to introduce tax on distributed income by equity oriented mutual funds at 10 per cent. Custom duty increased on Mobile phones, Television sets, Footwear, Truck & Buses Radial Tyres, etc. Education Cess and Secondary and Higher Education Cess on imported goods will be abolished and will be replaced by a Social Welfare Surcharge at the rate of 10 percent of the aggregate duties of customs. The name of the Central Board of Excise and Customs (CBEC) to the Central Board of Indirect Taxes and Customs (CBIC). Reduced tax rate of 25 per cent will be extended to companies which have reported a turnover of up to Rs 250 crore during 2016 17. This move is expected to benefit all the MSMEs operational in the country. 011 27607070, 7840888777/666 Budget 2018 19 3
AGRICULTURE 1. MSP at 1.5 times of the cost Minimum Support Price (MSP) for all unannounced kharif crops will be at least one and half times of their production cost, similar to the majority of rabi crops. Cost of Cultivation The cost of cultivation of major crops was estimated using the cost concept defined by Commission of Agricultural Costs and Prices (CACP). These cost concepts are explained below: Cost A1 = All actual expenses in cash and kind incurred in production by the producer. The items covered in cost A1 are costs on: (i) hired human labour, (ii) hired bullock labour, (iii) owned bullock labour, (iv) home produced/purchased seed, (v) plant protection chemicals, (vi) home produced/purchased manure, (vii) fertilizers, (viii) insecticides and pesticides, (ix) depreciation on farm machinery, equipment and farm building, (x) irrigation, (xi) land revenue, land development tax and other taxes, (xii) interest on working capital, (xiii) interest on crop loan, and (xiv) miscellaneous expenses. Cost A2 = Cost A1 + Rent paid for leased in land Cost B1 = Cost A1 + Interest on value of owned capital assets (excluding land) Cost B2 = Cost B1 + Rental value of owned land (net of land revenue) and rent paid for leased in land Cost C1 = Cost B1 + Imputed value of family labour Cost C2 = Cost B2 + Imputed value of family labour Cost C2* = Cost C2 estimated by taking into account statutory or actual wage rate which ever is higher Cost C3 = Cost C2* + 10 per cent of Cost C2* to (on account of managerial functions performed by farmer) C2 = A1 (All actual expenses in cash and kind) + Interest on value of owned capital assets + Rental value of owned land + Rent paid for leased in land + Imputed value of family labour (FL) For rabi crop the government is using 50 per cent margin of cost A2+FL 2. Operation Greens It has been launched on the lines of Operation Flood with an outlay of Rs 500 Crore Operation Greens aims to promote farmer producers organisations, agri logistics, processing facilities and professional management. The operation aims to aid farmers and help control and limit the erratic fluctuations in the prices of onions, potatoes and tomatoes. It may help in doubling the income of farmers by the end of 2022. 3. Gramin Agricultural Markets (GrAMs) To develop and upgrade existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs) It will take care of the interests of more than 86% small and marginal farmers These GrAMs, electronically linked to e NAM and exempted from regulations of APMCs will Provide farmers the facility to make direct sale to consumers and bulk purchasers. Agri Market Infrastructure Fund with a corpus of Rs.2000 crore will be setup for developing and upgrading agricultural marketing infrastructure in the 22000 Grameen Agricultural Markets (GrAMs) and 585 APMCs. 4. Re structured National Bamboo Mission The Finance Minister termed Bamboo as Green Gold and launched Re structured National Bamboo Missionwith anoutlay of Rs.1290 crore to promote holistic growth of bamboo sector by adopting Budget 2018 19 4 An Institute of Top IAS Trainers 011 27607070, 7840888777/666
area based, regionally differentiated strategy and to increase the area under bamboo cultivation and marketing. India has the second largest reserves of bamboo in the world. Leveraging this can spur gainful employment and income generation especially in states like Assam and the rest of North East India, which has 66% of India s bamboo reserves and where bamboo is an intrinsic part of the local culture. 5. Irrigation The Centre will work with the state governments to facilitate farmers for installing solar water pumps to irrigate their fields. Scope of the Long Term Irrigation Fund (LTIF) set up in NABARD for meeting funding requirement of irrigation works would be expanded to cover specified command area development projects Under Prime Minister KrishiSinchaiYojanaHarKhetKoPani (Ground water irrigation scheme) 96 deprived irrigation districts will be taken up with an allocation of Rs 2600 crore 6. Fisheries and animal husbandry The government also proposed to extend the facility of Kisan Credit Cards to fisheries and animal husbandry farmers to help them meet their working capital needs. A Fisheries and Aqua culture Infrastructure Development Fund (FAIDF) and an animal Husbandry Infrastructure Development Fund (AHIDF) will be started with a total corpus of Rs 10,000 crore. 7. LiberalisingAgri Exports India s agri exports potential is as high as US $100 billion against current exports of US $30 billion and to realize this potential, export of agri commodities will be liberalized. He also proposed to set up state of the art testing facilities in all the forty two Mega Food Parks. 8. Pollution Control A special Scheme to support the efforts of the governments of Haryana, Punjab, Uttar Pradesh and the NCT of Delhi to address air pollution in the Delhi NCR region by subsidizing machinery required for in situ management of crop residue. 9. Organic Farming Organic farming by Farmer Producer Organizations (FPOs) and Village Producers Organizations (VPOs) in large clusters, preferably of 1000 hectares each, will be encouraged. Women Self Help Groups (SHGs) will also be encouraged to take up organic agriculture in clusters under National Rural Livelihood Programme. Allocation of a sum of 200 crore to promote cultivation and associated industry of highly specialized medicinal and aromatic plants which are used to manufacture perfumes, essential oils and other associated products 10. Institutional Credit Increase in rural institutional credit to Rs 11 lakh crores would increase the volume and penetration of institutional credit and reduce the debt trap of small and marginal farmers by money lenders. However, challenges include timely availability, eliminating middle men between bank and farmer and inclusion in formal financing system and availability of credit without collaterals for marginal and small farmers. HEALTH SECTOR 1. Ayushman Bharat Programme Government has announced two major initiatives (Health and Wellness Centres and National Health Protection Scheme) as part of Ayushman Bharat programme to built a New India by 2022. Budget 2018 19 011 27607070, 7840888777/666 5
Health and Wellness Centres The National Health Policy, 2017 has envisioned Health and Wellness Centres as the foundation of India s health system. Under this 1.5 lakh centres will bring health care system closer to the homes of people. These centres will provide comprehensive health care, including for non communicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. The Budget has allocated Rs. 1200 crore for this flagship programme. Contribution of private sector through CSR and philanthropic institutions in adopting these centres is also envisaged. National Health Protection Scheme (NHPS) NHPS (Ayushman Bharat Scheme) dubbed Modicare will cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage upto 5 lakh rupees per family per year for secondary and tertiary care hospitalization. NHPS will have 50 crore beneficiaries, making it world s largest government funded healthcare programme to provide quality health cover to population larger than combined citizenry of US, UK, Germany and France. The Centre had drawn up health plan for the scheme in which 40% of fund for the scheme has to come from state. Under it, the central government will contribute Rs 2,000 crore to scheme out of a total cost of Rs 5,500 6,00 crore the remaining amount is to be paid by the state governments. 2. Nutritional support to TB patients Rs. 600 crore allocated as nutritional support for all TB patients at the rate of Rs. 500 per month for the duration of their treatment. 3. Enhanced accessibility of quality medical education and health care 24 new government medical colleges to be set up by upgrading existing district hospitals. At least one medical college every 3 parliamentary constituencies and at least 1 Government Medical College in each State of the country. EDUCATION SECTOR 1. Improvement in quality of teachers An Integrated B.Ed. programme to be initiated for teachers, to improve quality of teachers. The Right to Education Act has been amended to enable more than 13 lakh untrained teachers to get trained. Technology will be used to upgrade the skills of teachers through the recently launched digital portal DIKSHA. Government has proposed to increase the digital intensity in education and move gradually from black board to digital board. 2. Eklayva Model Residential School To provide education to tribals in their local environment by 2022, every block comprising more than 50 per cent of tribal population and at least 20,000 tribal people will have an Eklayva Model Residential School These schools will be on par with NavodayaVidyalayas. It will have special facilities for preserving local art and culture besides providing training in sports and skill development. 3. Revitalising Infrastructure And Systems In Education (RISE) RISE scheme aims to lend low cost funds to government higher education institutions. Budget 2018 19 6 An Institute of Top IAS Trainers 011 27607070, 7840888777/666
It will be launched with a total investment of Rs. 1 lakh crore the next four years. It will be financed via restructured Higher Education Financing Agency (HEFA), a non banking financial company. Under it, all centrally funded institutes (CFIs), including central universities, IITs, IIMs, NITs and IISERs can borrow from a Rs 1,00,000 crore corpus over next 4 years to expand and build new infrastructure 4. Setting up two new Schools of Planning and Architecture (SPAs) The Centre has proposed setting up two new full fledged Schools of Planning and Architecture on challenge mode in the Union Budget 2018. The further proposed to establish 18 new SPAs under Indian Institutes of Technology (IITs) and National Institutes of Technology (NITs) as autonomous schools, also on challenge mode. 5. Atal Tinkering Labs (ATLs) and Atal Innovation Mission (AIM) Encouraging budding young innovators with Atal Tinkering Labs (ATLs) ATLs are innovation play work spaces for students between class VI to XII. Atal Innovation Mission (AIM): 2441 schools selected by AIM to establish ATLs and 700 + teachers trained. 6. Prime Minister Fellowship Scheme: 1,000 best B.Tech students each year from premier institutions will be identified and facilities to do Ph.D in IITs and IISc, with a handsome fellowship will be provided. 1. Rural Electrification RURAL DEVEVLOPEMENT A new scheme PradhanMantriSahajBijliHarGharYojana Saubhagya to ensure electrification of all willing households in the country in rural as well as urban areas. The beneficiaries for free electricity connections would be identified using Socio Economic and Caste Census (SECC) 2011 data. However, un electrified households not covered under the SECC data would also be provided electricity connections under the scheme on payment of Rs. 500 which shall be recovered by DISCOMs in 10 installments through electricity bill The Rural Electrification Corporation Lim ited (REC) will rem ain the nodal agency for the operationalisation of the scheme throughout the country. 2. Rural Housing Prime Minister Awas Yojana Govt. has fixed a target that every poor of this country may have his own house by 2022. For this purpose Prime Minister Awas Yojana has been launched in rural and urban areas of the country. Affordable Housing Fund (AHF) Government to establish a dedicated Affordable Housing Fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India. 3. Rural Sanitation Gobar DhanYojna (Galvanizing Organic Bio Agro Resource Fund Scheme): The government announced a new scheme Gobar Dhan (Galvanizing Organic Bio Agro Resource Fund) scheme under its efforts to improve the lives of the villagers. The Government said that under this scheme, solid waste of dung and fields will be changed into compost, biogas and bio CNG. He said that under the vision of inclusive society formation, the government has identified 115 districts for development. Budget 2018 19 011 27607070, 7840888777/666 7
Bio CNG is a purified form of biogas with over 95% pure methane gas. It is similar to natural gas in its composition (97% methane) and energy potential. While natural gas is a fossil fuel, bio CNG is a renewable form of energy produced from agricultural and food waste. Bio CNG is being looked at as an environmentfriendly alternative to diesel. MEDIUM, SMALL AND MICRO ENTERPRISES AND EMPLOYMENT 1. Energizing Small Businesses for New India Rs. 3794 crore to MSME Sector for giving credit support, capital and interest subsidy and innovations. Allocated Rs. 200 crores to support small and cottage industries manufacturing perfumes, essential oils and other associated products (because our ecology supports cultivation of highly specialized medicinal and aromatic plants) 2. CRISIL SIDBI MSE Sentiment Index CriSidEx, India s first sentiment index for micro and small enterprises (MSEs)developed jointly by CRISIL & SIDBI: CriSidEx is a composite index based on a diffusion index of 8 parameters and measures MSE business sentiment on a scale of 0 (extremely negative) to 200 (extremely positive). The parametric feedback was captured through a survey of 1100 MSEs in November December. CriSidEx will have 2 indices, one for the survey quarter and another for the next quarter once a trend emerges after few rounds of the survey, providing independent time series data. The crucial benefit of CriSidEx is that its readings will flag potential headwinds and changes in production cycles and thus help improve market efficiencies. And by capturing the sentiment of exporters and importers, it will also offer actionable indicators on foreign trade The first reading of CriSidEx stood at 107, indicating mildly positive sentiment during October December (or the survey quarter ). For January March 2018 (or the next quarter ), the sentiment is expected to be more positive. 3. Simplifying sanctioning of loans to MSMEs The government has proposed revamping the Trade Receivable Discounting System(TReDS) of sanctioning loans to SMEs by linking it with the GST Network (GSTN). This will help MSMEs with better management of working capital and faster discounting of the bills. Further, since the banks will have access to information on cashflows of MSMEs, they will pro actively provide loans as there will be no risk of fake bills. 4. Relief in NPAs treatment of MSMEs RBI has issued a notification allowing MSMEs borrowers to delay their loan payments up to 180 days, which is twice the mandated period, without being categorized as NPA. This measure will address the cash flow issues of MSMEs and meeting repayment obligations with banks and NBFCs. 5. Tax deductions Corporate tax rate reduced to 25% for companies which reported a turnover up to 250 crores in the FY 2016 17. Reduction will benefit macro, small and medium enterprises which account for 99% of companies filing their tax returns. 6. Defence Production Policy 2018 to promote MSMEs An industry friendly Defence Production Policy 2018 proposed to promote domestic production by public sector, private sector and MSMEs. Budget 2018-19 8 An Institute of Top IAS Trainers 011 27607070, 7840888777/666
7. Skill development and employment opportunities National Apprenticeship Scheme with stipend support to give training to 50 lakh youth by 2020. Setting up of model aspirational skill centres in every district of the country under Pradhan Mantri Kaushal Kendra. Proposed outlay of Rs. 7148 crore for the textile sector in 2018 19 to boost employment. Government will contribute 12% of the wages as EPF in all sectors for the next 3 years. TRANSPARENCY IN PUBLIC FNANCE 1. Public Financial Management System (PFMS) The Department of Expenditure is administering the Public Financial Management System (PFMS), which is an end to end solution for processing payments, tracking, monitoring, accounting, reconciliation and reporting. It provides the scheme managers a unified platform for tracking releases and monitoring their last mile utilization. Government has decided to universalise the use of PFMS to cover all transactions/ payments under the Central Sector Schemes. The complete monitoring of these schemes will require mandatory registration of all Implementing Agencies (IAs) on PFMS and mandatory use of Expenditure, Advance & Transfer (EAT) module of the PFMS by all IAs. PFMS will progress towards a Government wide Integrated Financial Management System (GIFMIS) being administered by Controller General of Accounts, as a comprehensive Payment, Receipt and Accounting System. 2. The Government E Marketplace (GeM) The Ministry of Commerce & Industry has launched third version of the Government e Marketplace (GeM 3.0) in January 2018. The earlier version GeM 2.0 was launched as pilot project in August 2016. Government e Marketplace (GeM) is an Online Market platform to facilitate procurement of goods and services by various Ministries and agencies of the Government. It has been envisaged as National Procurement Portal of India. It aims to enhance transparency, efficiency and speed in public procurement of goods and services and eliminate corruption. It functions under Directorate General of Supplies and Disposals (DGS&D), Ministry of Commerce and Industries. It is completely paperless, cashless and system driven e market place that enables procurement of common use goods and services with minimal human interface. GeM 3.0 will offer standardised and enriched catalogue management, powerful search engine, real time price comparison, template based Bid and RA creation, demand aggregation, e EMD, e PBG, user rating, advanced MIS and analytics and more. INFRASTRUCTURE 1. Road Infrastructure Ambitious Bharatmala Pariyojana has been approved for providing seamless connectivity of interior and backward areas and borders of the country. NHAI will consider organizing its road assets into Special Purpose Vehicles and use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs). Toll Operate Transfer (ToT) Model Under the TOT model, stretches of national highway already constructed by the NHAI or a concessionaire will be bid out to the private sector. The NHAI can securitise the toll receivables by collecting upfront the concession fee. The private party (infrastructure developers, private equity, institutional investors like pension, wealth funds) will operate and collect toll on the stretch during the concession period. An Infrastructure Investment Trust (InvITs) is like a mutual fund, which enables direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return. InvITs work like mutual funds or real estate investment trusts (ReITs) in features. InvITs can be treated as the modified version of REITs designed to suit the specific circumstances of the infrastructure sector. Budget 2018-19 011 27607070, 7840888777/666 9
2. Railways Increase in use of technology like Fog Safe and Train Protection and Warning System and to eliminate 4267 unmanned level crossings in the broad gauge network in the next two years. Allocation of adequate funds under Rashtriya Rail SanrakshaKosh ( Safety First Policy) During the current fiscal year, over 3600kms of track targeted for renewal. First set of modern train sets with state of the art amenities and features will be commissioned during 2018 19. Government has taken steps to set up a specialized Railways University at Vadodara and institute of eminence. 3. Airways Regional connectivity scheme of UDAN (UdeDeshkaAamNagrik) to connect 56 unserved airports and 31 unserved helipads across the country. NABH Nirman: Airport Authority of India (AAI) has 124 airports. Government proposes to expand airport capacity more than five times under a new initiative. Disaster Resilient Infrastructure: To set up a Coalition on Disaster Resilient Infrastructure for developing international good practices, appropriate standards and regulatory mechanism for resilient infrastructure development are moving well. Rs. 60 crores given to kick start this initiative in 2018 2019. 4. Defence Sector Government is developing connectivity infrastructure in border areas: Rohtang tunnel has been completed to provide all weather connectivity to the Ladakh region. Contract for construction of Zozila Pass tunnel of more than 14 kilometer is under process. Construction of tunnel under Sela Pass is in proposal. 5. Digital Sector A national program will be initiated by NITI Aayog to increase efforts in the area of artificial intelligence. Mission on Cyber Physical Systems will be launched by the Department of Science & Technology under which centers of excellence for research, training and skilling robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things will be established and promoted. 500,000 Wi Fi hotspots will be set up by government to provide internet connectivity to over 5 million rural citizens. Every individual enterprise in India will be assigned a unique ID. 6. National logistics Portal The logistics department under the department of commerce is developing an online National Logistics Portal. This will address the long pending issue of gaps among the stakeholders such as logistics service providers, buyers, customs, railways, ports, airports, hinterland waterways, coastal shipping etc. The portal, if implemented successfully, will bring the relevant stakeholderson a single online platform and could reduce the logistics costs up to around 10%. PRAGATI (Pro Active Governance and Timely Implementation): PRAGATI is a multi purpose and multimodal platform aimed at addressing grievances of common man. It also aims at simultaneously monitoring and reviewing important Union government programmes and projects as well as projects flagged by State Governments. SOCIAL SECTOR 1. EPF contributions from women employees brought down from 12% to 8% for first 3 years. 2. All 16 crore accounts under PM Jan DhanYojana will be included under micro insurance and pension schemes. Budget 2018-19 10 An Institute of Top IAS Trainers 011 27607070, 7840888777/666
3. A New Gold Policy is in the anvil whereby women can deposit their gold in the bank and earn interest in the range of 2.25% to 2.5%. 4. Pradhan Mantri Vaya Vandana Yojana (PMVVY): The budget 2018 19 proposed to open this scheme for investment till March 2020. Apart from extending the scheme s investment duration, the investment limit is also increased to Rs15 lakh from 7.5 Lakh per person. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a Pension Scheme announced by the Government of India exclusively for the senior citizens aged 60 years and above. The Scheme can be purchased offline as well as online through LIC. Scheme provides an assured return of 8% p.a. payable monthly (equivalent to 8.30% p.a. effective) for 10 years. The scheme is exempted from Service Tax/ GST. On death of the pensioner during the policy term of 10 year, the purchase price shall be refunded to the beneficiary. On survival of the pensioner to the end of the policy term of 10 years, Purchase price along with final pension installment shall be payable. Loan upto 75% of Purchase Price shall be allowed after 3 policy years (to meet the liquidity needs). Loan interest shall be recovered from the pension installments and loan to be recovered from claim proceeds. The scheme also allows for premature exit for the treatment of any critical/ terminal illness of self or spouse. On such premature exit, 98% of the Purchase Price shall be refunded. Budget 2018-19 011 27607070, 7840888777/666 11