10 biggest takeaways from Union Budget 2018
From a health insurance scheme that will be the largest of its kind in the world, to giving substantial relief to farmers with increased MSPs, we have a rather “populist” Budget from Union finance minister Arun Jaitley in an election year. Presented in Hindi and English, the bilinguality focused on reaching and directly addressing the target audience made an impact, as the pro-agriculture push, as well as important interventions in education, healthcare and modest relief to the salaried middle classes.
Union Budget 2018 has been an unabashed election push, and the question now is – how will the money to implement the grand schemes of Modi government be generated in a limited time? While FM Jaitley said that, at Rs 2.5 trillion, India is set to become the world’s fifth largest economy soon, what about wealth and income inequality?
That said, here the 10 biggest announcements and what they mean for the ordinary Indian.
1. Health insurance
Firstly, the National Health Protection Scheme, called the Ayushman Bharat scheme, that’s intended to cover 10 crore families with roughly 50 lakh individuals with Rs 5 lakh per year per family for secondary and tertiary hospitalisation – is a massive and ambitious announcement to create the world’s largest government-aided health scheme. When launched it will be bigger than US’ Medicare and the UK’s NHS. Rs 600 crore nutritional support to tuberculosis patients has also been announced. 1,200 centres to provide health services and essential medicines, equipment, etc will be set up as well.
However, given the falling indicators in the health sector, the incorrigible maternal/infant mortality rates, the latest big push begs the obvious question of how it will be financed. While the government has pitched a public-private partnership in achieving this, and the health stocks have gone up as a result, there’s still a huge question mark over its implementation.
2. Sops for agricultural sector
Finance minister Jaitley focused at length on the plight of farmers, reminding us of PM Modi’s 2014 election promise of doubling farmers’ income by 2022. This at a time when the Economic Survey 2018 made it clear that agro incomes have stagnated over the last few years.
Jaitley increased the minimum support price for kharif crops at 1.5 times the cost price, as well as suggested the “cluster model” of farming for horticulture, organic farming, and growing aromatic and medicinal herbs. In addition, digital mechanisms to improve demand forecast, expansion of warehouse facilities, focus on agro-exports, among others. Rs 2,000 crore has been earmarked for development of agro infra in 585 APMCs (agriculture produce market committees).
Also, 100 per cent deduction to small and medium farmer producer companies in agro produce with turnover of Rs 100 crore will be provided under “Operation Green”. This year, agricultural credit up to Rs 11 lakh crore would be given out, up from last year’s Rs 10 lakh crore. Moreover, there would be Rs 500 crore allocated for “agri logistics solutions”.
Moreover, PM’s pet schemes get some more money, with National Livelihood Mission getting Rs 5750 crore and Har Khet Ko Pani irrigation scheme getting Rs 2600 crore respectively in 2018-19. (Question: What about the diversion of waters of River Narmada in Gujarat? Paper/conditional promises, these as well?)
3. Corporate taxes
Income tax rates have been reduced to 25 per cent for small and medium companies with maximum Rs 250 crore, as a push to MSME sector, especially after the twin shocks of demonetisation and GST. Rs 3,794 crore has been given to MSME sector for credit support, capital interest subsidy, etc, evidently to mitigate effects of GST.
However, LTCG, or long-term cap gains tax at 10 per cent has been introduced on gains exceeding Rs 1 lakh, adding Rs 20,000 crore in first year to government exchequer. The LTCG tax announcement led to a market crash within minutes.
4. Fiscal deficit target
FM Jaitley has said that the fiscal deficit target for 2018-19 will be 3.3 per cent (instead of the expected 3 per cent), while in 2017-18, the fiscal deficit slipped to 3.5 per cent from 3.2, after three years of strong fiscal consolidation. While some have lamented the target breach as a mark of increased government spending in an election year, others have welcomed the move in national interest, saying the sectors wallowing in despair need urgent attention from the state.
5. Mixed bag for middle classes
Tax deduction of Rs 40,000 against travel and medical expenses for salaried individuals has been announced. In addition, senior citizens will pay no taxes on interest from fixed and recurring deposits or savings accounts up to Rs 50,000.
However, imported goods like high-end TVs and phones will get more expensive, since customs duty has been hiked on a range of sectors and consumer goods items. This actually flies in the face of PM Modi’s Davos speech against economic protectionism.
Income tax structure will remain unchanged from last year, except the added deductions. However, additional 1 per cent cess on health and education will be imposed, thereby taking it to 4 per cent now, which would bog the salaried classes down, offsetting the tax deductions.
6. Railway Budget
The railway budget has been allocated at a total of Rs 1,48,500 crore, with a focus on improving the exiting tracks, eliminated unmanned crossings with state-of-the-art amenities. Inter-coordination of railways, power and coal sectors through allocations has been announced.
Of particular note are the Rs 11,000 crore boost for Mumbai suburban railways — part of the Rs 40,000 crore outlay to enhance transport facilities in India's financial capital — and the Rs 17,000 crore set aside for improving the local railway network in Bangalore, the capital of poll-bound Karnataka.
In addition, the bullet train project will have an institute in Vadodara for training the specialised staff. However, much of the manufacturing and the work on the bullet train will be handled by Japan itself, making this a curious allocation in the first place. More questions will be raised as the Budget document is made online and is carefully scrutinised.
7. Disinvestment
Strategic privatising of Air India, as well as merging all the existing public insurance companies, including the LIC, into one mega insurance company will be undertaken as part of government divestment and eliminate burdensome spending. The grand merger of insurance companies is likely to lead to a net job loss, and might raise some hue and cry in the days to come.
8. Delhi air pollution
FM Jaitley devoted a section to addressing the major pollution crisis in Delhi-NCR and said the Union government would earmark an amount for coordination between Punjab, Haryana, Delhi and UP governments to mitigate the problem together. There would be subsidies on machinery required for in situ processing of crop harvest remains and stubble, instead of burning it in open fields.
9. Sops for women
FM Jaitley announced free gas connections for 8 crore rural women through Ujjwala Yojana. It was five crore BPL families last year. Loans to women self-help groups have been increased by 37 per cent, while women EPF contribution has been brought down to 8 per cent for the first three years of employment.
In addition, Rs 3 lakh crore has been added to the existing Mudra Yojana.
10. Education, infra and digital push
Rs 1 lakh crore in four years for higher educational premier institutes like AIIMS, IITs, etc has been earmarked. It’s important though that no education budget allocation was announced, indicating no net increase in education spending.
However, there's focus on tourist hubs, better airport connectivity, more helipads, national highways, etc.
The big words that were thrown around include blockchain technology, AI, big data, digital manufacturing, etc, indicating a reselling of PM’s Digital India push, though it only received Rs 3,000 crore in all in this Budget. FM Jaitley said “technology will be the big driver in improving quality”. However, FM Jaitley squarely announced that cryptocurrency isn’t legal tender in India, and will be penalised.
Postscript
Salaries of MPs will be reviewed every five years and has been doubled in this budget, while those of the president, vice-president and the governors have increased as well.
In a year of income stagnation and wealth gap, this might stick out like a sore thumb.
Also read: Why 63 million women and girls are 'missing' from India’s population