Union Budget 2018-2019 - Healthy Budget
Our Chamber welcomed the Union Budget 2018-19, the last full budget of the Finance Minister Mr. Arun Jaitley before the 2019 general Elections as a bSmart budgetb, balancing both the welfare and developmental agendas, interestingly without an excessive dose of subsidies and concessions.
The budget has to be presented amid various political and economic pressures and hence many of the announcements are on expected lines with few surprises b both good and not so good.
The strong inclusive agenda of the budget is underscored by the generous allocations and encouragement measures to the Agriculture and allied sector, boost to rural infrastructure, health care provision for the poor, and MSMEs. The largesse in favour of the agricultural, rural and underprivileged was not unexpected but the unprecedented Rs 5 lac medical insurance cover per family for nearly 10 crore poor families is innovative, though more clarity has to emerge on its delivery modalities.
The positive aspects in the budget include the momentum maintained by a huge allocation towards Education, rural infrastructure, expansion plans for more airports, though with an ambitious aim to make 1 billion trips per year and the Bharatmala project for better road connectivity.
The proposed merger of the three state-owned insurance companies could lead to the creation of a better capitalized organization and higher operating efficiencies with a national footprint.
The Chamber has always been advocating for reforms in education sector and enhanced support to education and skill development and it is welcoming that this was given an increased thrust. The Revitalising Infrastructure and Systems in Education (RISE) by 2022 is laudable and is in the right path. Employment augmentation being the need of the hour, some announcements in the budget like the EPF concessions etc may help to some extent, though large scale employment can happen only with more investments coming up and a conducive investment climate prevailing.
MSMEs and Indian middle class are often referred as the two pillars of our economy. While MSMEs have a lot to cheer for, in this budget on account of reduction in tax rate to 25% for small companies with annual turnover of up to Rs.250 crores and the expansion and deepening of bond market for corporate debts which would leave more funds with banks to lend to MSME sector, Middle class, especially the salaried class felt a little let down as there was no considerable benefit in the income tax provisions, barring a few concessions for the senior citizens.
The much awaited corporate tax gradual reduction for larger corporate also did not happen.
Our concerns also remain that the LTCG tax @10% on equity will adversely affect serious investors funding, especially without removal of Securities Transaction Tax (STT). The Chamber feels that multitude of taxes on investments may bring down the return on investments and could well be a de motivator for investments. Extension of Dividend Distribution Tax to Mutual funds will lead to double taxation, as the dividends that a mutual fund receives from a corporate would have already suffered taxation before. There is no reduction in Minimum Alternate Tax (MAT) rate which is also a concern.
The Industries tale of woe includes Cess on Customs which has been increased from 3% that could lead to inflation as input tax credit cannot be claimed. On a macro level, our concern is the increase in the Fiscal deficit (3.3% of GDP for FY2019) than the original target for FY2018, especially considering the projected GDP of 7.25 to 7.5% in the in second half of 2018 and similar expectation for FY2019.
However, on the whole the Chamber feels that the budget has done a reasonable job of balancing the welfare and growth orientation, giving weightage to both the social and economic infrastructure.
Industry and businesses were coping up with lot of challenges especially in the recent past with major reforms like demonetization and GST and have been responding fairly well despite the many odds. What we require now is the support and empathy of the policy makers and ensuring the ease of doing business, to take the positive sentiments arising from the current budget to a much objective levels of investment and gainful growth.
Letbs hope the Government is committed in implementing the budget proposals in letter and spirit to make India become the 5th largest economy from its current 7th position in the World.