Days before Finance Minister Arun Jaitley presented the Union Budget for 2018, speculation was rife that it would be a populist budget. And rightly so, for India goes to polls in 2019. While the budget of `24.42 trillion can certainly be termed as a ‘big spend’ budget with unambiguous political contours, the Finance Minister did a balancing act of walking the fine line between populism and development. He eschewed populist temptations and focused on consolidating the earlier gains and furthering the aspirations of a new India.
In his budget speech Jaitley said that the government had taken up programmes to direct the benefits of structural changes and good growth to towards farmers, the poor and other vulnerable sections of society, and to uplift the under-developed regions. He said this year’s budget would consolidate these gains and particularly focus on strengthening agriculture and the rural economy, provide health care to the economically less privileged, take care of senior citizens, foster infrastructure creation and help the states to provide more resources for improving quality of education in the country.
As is evident from the allocations, the thrust of the budget has been on agricultural sector, rural economy, healthcare, MSMEs and infrastructure. An analysis by Mint shows that the bulk of the minister’s 110-minute speech was devoted to addressing farm sector’s distress, the socially disenfranchised, affordable healthcare, improving education and encouraging the small-scale sector (accounting for 72 of the 165 paragraphs of the speech).
To address distress in the farm sector, which employs one in two people in the country’s workforce, Jaitley announced a hefty increase in minimum support price for the upcoming Kharif crop, and at the same time extended this price guarantee to all crops. At the moment it is restricted to select crops such as wheat and rice. The mechanics of this ambitious scheme would be determined by NITI Aayog, sections of which are rooting for the model adopted in Madhya Pradesh. Under the Pradhan Mantri Krishi Sinchai Yojna – ‘har khet ko pani – 96 deprived irrigation districts will be taken up with an allocation of `2,600 crore. The Centre will work with state governments to facilitate farmers for installing solar water pumps to irrigate their fields.
The Budget also recognised the importance of healthcare, or rather the lack of it, especially for the poor. Accordingly, Jaitley announced an extremely ambitious health insurance scheme that will cover 10 crore families living in poverty providing coverage of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation, effectively looking to bring 50 crore people under its purview. This ‘one of its kind’ National Healthcare Scheme promises to bring a transformational change in the arena of healthcare, covering almost one-third of India’s population.
The Budget also focused on bringing development to people, not through freebies but by creating an enabling environment. A raft of existing schemes targeting the poor such as Ujjwala, providing subsidised cooking gas; Saubhagya, enabling free electricity connection to poor households; and Jan Aushadhi Kendra, providing affordable medicines; got a big push. Referring to the measures taken for the benefit of lower and middle classes, Jaitley said that under Ujjwala free LPG connections will be given to eight crore poor women instead of the previous target of five crore women. Under Saubhagya Yojana, four crore poor households are being provided with electricity connection with an outlay of Rs 16,000 crore. To fulfill the target of housing for all by 2022 , more than one crore houses will be built by 2019 in rural areas, besides the already constructed six crore toilets under Swachh Bharat Mission. The strategy of the government is to make basic development affordable and accessible, thereby creating ‘ease of living’ a tangible metric.
Emphasising that infrastructure is the growth driver of economy, the finance minister estimated that investment in excess of Rs 50 lakh crore is needed to increase growth of GDP and connect the nation with a network of roads, airports, railways, ports and inland waterways. He announced increase of budgetary allocation on infrastructure for 2018-19 to Rs 5.97 lakh crore against the estimated expenditure of Rs 4.94 lakh crore in 2017-18.
Continuingon the path of fiscal reduction and consolidation, the Finance Minister projected a fiscal deficit of 3.3% of GDP for the year 2018-19. The revised fiscal deficit estimates for 2017-18 were put at Rs 5.95 lakh crore at 3.5% of GDP. He also proposed acceptance of key recommendations of the Fiscal Reform and Budget Management
Committee to bring down Central Government’s debt to GDP ratio to 40%.In fulfillment of the promise to reduce corporate tax rate in a phased manner, Jaitley proposed to extend the reduced rate of 25% currently available for companies with turnover of less than Rs 50 crore (in FY 2015-16) also to companies reporting turnover up to Rs 250 crore in FY 2016-17. This would benefit the entire class of micro, small and medium enterprises which account for almost 99% of companies filing tax returns. This lower corporate income tax rate would leave such companies with higher investible surplus and help to create more jobs.
On the indirect taxes side, this being the first budget after roll out of the Goods and Services Tax (GST), the proposals were mainly related to customs. The minister proposed changes in customs duty to promote creation of more jobs in the country, and also to incentivise domestic value addition and ‘Make in India’ in sectors such as food processing, electronics, auto components, footwear and furniture.