Finance Minister Arun Jaitley unveiled the government’s last full budget before the general elections of 2019. Here's how India Inc is reacting to itWaman Parkhi, Partner, Indirect Tax, KPMG in India
Union Budget 2018-19 was expected to have lot of SOPs, however no such SOPs were announced which means that economic rationale has been preserved even in the last Budget before the election. The speech highlights what the Government has done and would do for the rural economy, infrastructure, employment generation, MSME, backward castes, health and education. The Budget highlights a rural thrust - allocation for affordable rural housing, electricity connectivity, special focus on rural infrastructure including roads, increased allocation for bamboo mission and special thrust on rural employment, Swachh Bharat including conversion of human and animal waste in bio energy/fertilisers.Dhiraj Relli, MD & CEO at HDFC Securities
Budget 2018 has focussed on agriculture and rural economy, health, infra, senior citizens and aims to work towards improving living standard in India. FM Jaitley has tried to deftly balance economics with politics. Rural focus would lead to alleviation of rural distress, while urban populace may have a mixed reaction on budget. LTCG exemption was an attraction for new investors into equity/equity mutual funds and brought funds from other low paying avenues. Rising interest rates domestically and tax on LTCG could result in minor reversal of this trend. Reaction of FPIs and the bond markets locally to the 3.3% fiscal deficit proposed in FY19 will be keenly watched in the background of rising rates abroad.Ratnesh Jha, Managing Director, Cambridge University Press, South Asia
This is a balanced budget as far as education is concerned. While on the one hand the government has rightly focused on improving educational infrastructure in the country, there is also a clear intent to strengthen capacity building through improvement in teacher training. The decision to treat education holistically without any segmentation is a welcome move and will lend greater synergy in planning and execution of important schemes and programmes. This is also expected to help smoothen the process of mapping learning outcomes with curriculum across all levels. It is also heartening to see a greater emphasis on the all-important area of teacher training which will help in achieving the target of training all teachers by 2019. With focus on increasing digital intensity in education, the budget is quite futuristic as it looks to address the needs of today’s India emerging as a powerful knowledge economy.Anuj Puri, Chairman – ANAROCK Property Consultants
All eyes were on the Finance Minister as he delivered his fifth full Union Budget – the last one before the general elections in 2019. As expected, the budget turned out to be populist and sounded excessively cautious while the need of the hour was to provide a positive boost to the economy, which is reeling under the pressure of structural changes and policy reforms.
The Budget did not offer any substantial incentives to individual taxpayers, with slabs remaining constant. A change in the standard tax deduction in lieu of transport and medical expenses, which now stands at INR 40,000, was the only gift to the salaried class. There was no change in tax savings on home loans, nor were the 80C limits raised. While this put paid to any hopes for significantly increased home buying appetite, there were some notable announcements with positive implications for the real estate sector:
• The continued push for affordable housing: As many as 51 lakh houses in rural areas are to be built in 2018-19. Also, a dedicated Affordable Housing Fund was announced in this Budget. These are the right moves towards achieving the vision of Housing for all by 2022.
• The Budget addressed the anomaly under Section 43 CA to tax real estate transactions at their real value rather than the value arrived at by applying artificially higher circle rates. As per new announcement, if the circle rate does not exceed 5% of transaction value, no adjustment is required towards the capital gains on a real estate transaction. It will help in terms of some extra savings if there is parity between the market rates and the ready-reckoner rates. Cities which are not under the heavy influence of real estate investors and where prices are rational may benefit from this announcement.
• Improvement in regional air connectivity: The regional air connectivity scheme to connect 56 unserved airports is a good news for business growth and office space demand in smaller cities, with a natural spinoff demand for housing on the back of job generation.
• Curbing cryptocurrencies: The Government is landing down heavily on cryptocurrencies such as Bitcoin. There was conjecture that cryptocurrencies would find their way into Indian real estate, as it has in developed countries, effectively becoming the 'new black money' in the sector. With the Government committed to taking all necessary steps to eliminate the use of cryptocurrencies in India, people who were looking at them as a get-rich-quick route will have to look at traditional asset classes and investment routes again.
• Increase in taxpayers: With the massive crackdown on black money, the taxpayer base has increased significantly. This is, at least indirectly, good news for the real estate sector as seeking home loans is now going to be easy for a larger set of individuals.
• Allocation of INR 1 lakh crore to update education infrastructure over the next four years may result in the development of new education institutes. In addition, if the Government emphasizes more on a definitive student housing policy, a new avenue will open up for the real estate sector.
• The allocation of INR 5.97 lakh crore on infrastructure spending is a welcome move, though we need a massive push to ensure that the country’s infrastructure meets global standards.
In a nutshell, while there were not many takeaways for the individual taxpayers, the Budget also did not seem to favour any particular sector. With fiscal deficit slipping to around 3.5% of GDP in 2017-18, the Government seems to be on the right path of taking charge of things and ensuring that the fiscal deficit target of 3.3% of GDP for 2018-19 is achieved.Sapan Gupta, National Practice Head - Banking & Finance, Shardul Amarchand Mangaldas
Under the current Bankruptcy regime, the law does not make a distinction on the basis of size of the loan except a fast track process for small companies. A separate approach on MSME within the current framework will require further changes in the Bankruptcy regime and will be a welcome step. MSME NPA requires a different approach compared to large accounts specifically on debarment of promoters.Nilaya Varma, Partner and Head, Government and Healthcare, KPMG in India
The Union Budget 2018-19 focusses on an integrated social reform agenda. Proposals on agriculture, gender, rural infrastructure, when implemented can help bridge the income and gender divides. While people can have views on the long-term implications of demonetisation, the 12.6 per cent increase in direct tax collection with 85 lakh new tax payers added, is a good sign and can help deepen the direct tax base.Ashok Hinduja, Chairman, Hinduja Group of Companies (India)
The budget is bold and path-breaking and will make the country participate and enrich the upsurge in the growth of global economy. The focus on development of agriculture, healthcare, education, employment generation and infrastructure with an innovative approach should comfortably place the economy in the growth trajectory of 8-10% per annum and double its GDP by 2025.Navroze Dastur, Managing Director, NCR Corporation India
True to its expectations, Budget 2018 has spelt out roadmaps and allocations across various initiatives of the Central Government. I welcome the budget and appreciate the clear commitment shown by the Government towards fueling the growth of digital adaptation by focusing on technology. The Budget kept the agenda surrounded by themes of transformation and energization. In the direction of making India a digital nation a needful decision was made, with the focus rightly on digital India, the budget also gave boost to the FinTech and manufacturing sector through Digital India. However, along with increased push towards digitization, cash continues to remain the world’s most trusted and fastest form of payment and consumers still want to use cash and rely heavily on ATMs.
This budget has made special provisions to ensure greater financial growth, with emphasis on enhancing cyber security in the financial sector. Initiatives to upgrade digital infrastructure, especially with regards to the protection of data has also been addressed.
As the global leader in Omni-channel solutions, we belief that the initiatives taken by the Finance Minister holds huge potential for enhancing economic growth and the government’s policies will usher in a new era of prosperity providing stimulus to cash and digital payments alike. The budget holds great promise and will have a long term impact.Shishir Baijal, Chairman & Managing Director, Knight Frank India
The Union Budget 2018-2019 has predominantly focussed on revitalising the rural economy which is a good move. We also welcome the thrust on the healthcare, agriculture and infrastructure sectors outlined in this budget. Throughout last year, measures surrounding ‘Affordable Housing’ were the mainstay from the perspective of real estate industry. This was also evident in the Credit Linked Subsidy Scheme (CLSS) and the last Goods & Services Tax (GST) Council meet where they brought down the effective rate to 8% from 12%. A similar trend is visible in this budget where the ‘Affordable Housing’ fund under National Housing Bank (NHB) has been created as a part of the priority sector lending. However, there has been a silence in the budget on stimulating mainstream real estate demand. The sector grappling with the reforms-driven new order has been bereft of any meaningful interventions that could have been achieved through the budget.Ashutosh Dash, Associate Professor, Finance, MDI Gurugram
"The budget speech indicates government to focus on the rural sector to create more jobs by 2020. This will require more fund allocation towards the education sector and human resource development sector. The government should also continue creating the environment that ensures ‘ease of doing business’. This will lead to more investments by the private sector and create further jobs for the students completing their formal education."Sudhakar Shanbhag, Chief Investment Officer, Kotak Mahindra Life Insurance Co. Limited
The Union Budget 2018 was very important since the challenge faced was to address political compulsions since about eight states go to elections this year and another four in the first half of 2019 as also the general elections and there was a need to restore macroeconomic stability with increasing inflation, crude Oil prices, CAD and fiscal deficit under pressure while focusing on growth and address the stress on rural and farm sectors.
At the outset the finance minister has been able to address the stress in rural and farm sectors by making enough allocations and also taking structural decisions like making minimum support prices as 1.5 times the cost of produce. The health insurance scheme of Rs. 5 lakh cover per family for 10 crore families, focus on education, infrastructure, housing and senior citizens in particular are steps to bridge the urban rural as well as the rich poor divide in the country.
From a market perspective, the fiscal deficit number for FY18 at 3.5% was a bit higher than expected while the target of 3.3% for FY19 is on expected line of some consolidation over FY18. The introduction of long term capital gains tax at 10% as also a distribution tax on equity mutual funds is negative at the margin but the grandfathering of gains up to January 31, 2018 is a good measure to ensure no panic sales are done to realize gains.
The equity markets will now move back its focus on earnings, which are expected to be in mid-teens for FY19 and FY20. It will have to gauge the impact of flows in domestic markets due to change in LTCG while FII’s will continue to allocate. Debt markets over the next year will face the brunt of macro deterioration at a margin compared to FY18.Khushru Jijina, Managing Director, Piramal Finance & Piramal Housing Finance
The Union budget 2018 was a pragmatic one and focused on fortifying the economy as a whole. The Government’s endeavor to provide housing to every poor citizen by 2020 through the establishment of a dedicated affordable housing fund in the national housing bank, along with priority sector status being granted, is a commendable one. The government assuming ownership of NHB from RBI is also positive as it would translate into the focus of NHB shifting from regulation to development.
The reduction of the GST rate from 12% to 8% on affordable and low-cost housing units last week was a welcome reform. Building 31 lakh homes in 2018-19 in urban areas and a further 51 lakh in rural areas will go a long way in addressing primary housing demand.
Overall, the strong economic impetus provided in the budget will ultimately boost housing and real estate. The introduction of long term capital gains tax at 10 per cent on equities will also have an indirect impact on making investment in real estate (over listed stocks) more attractive than before. Tax breaks being granted to senior citizens and salaried employees will increase their disposable income available for making capital purchases. A push on infrastructure comprising public investment in the rural areas, agricultural marketing, urban connectivity, particularly Metros etc will also multiply investment prospects for real estate sector.Sarosh Amaria, Chief Operating Officer – Commercial Finance, Tata Capital
The budget has big positives for the MSME sector, with a reduced tax rate of 25% for companies with a turnover of up to Rs. 250 crores and the introduction of a capital subsidy and credit support fund of Rs. 37 billion. Further, the focus on online loan sanctions to MSMEs will ease availability of funds for this sector. At the other end of the corporate spectrum, timely follow up announcements from regulators to allow investments in rated bonds would help deepen the bond markets for mid & large companies.Rana Kapoor, MD & CEO, YES Bank
The FM has provided a panoptic flavor to the FY19 Union Budget. The admirable ‘All-in’ Budget has delivered beyond expectations in a bid to reinvigorate growth that is sustainable and equitable, leveraging fully on the available fiscal space.
In the backdrop of past reforms culminating into early green shoots for investments, a credible rise in allocation for infrastructure by 21,% accompanied by broadening of corporate tax relaxation for MSMEs, a chiseled focus on generating livelihood creation in agriculture and rural sectors via new Operation Green and National Health Protection schemes, incentives to enhance employment in labor intensive sectors of textile, leather and footwear will ensure a stronger consumption and investment impetus in FY19. In addition, the global economy led revival in exports will truly allow India’s growth to become multi-dimensional henceforth.
The fiscal strategy appears to be channelizing spending to sectors that have the potential to maximize backward and forward linkages in the economy through capacity enhancement and job creation. Notwithstanding the absence of fiscal consolidation in FY18 on account of GST implementation, the Government has committed to credible fiscal tightening in FY19 and to follow the path of fiscal prudence by accepting the recommendations of the FRBM Panel. In my view, the Budget transmits the right ‘economic signals’, and will definitely find favor among all economic stakeholders.
I would rate this Budget 9/10.Jinesh Shah, Partner, Tax, Deal Advisory, KPMG in IndiaMarginal relief for Companies under Insolvency Resolution process
Companies under insolvency resolution process go through debt restructuring and change of control. Budget has provided relief on tax arising due to book profit (MAT) on account of write back of debt. Currently in case of unlisted company any change of majority voting rights leads to lapse of carry forward losses. Budget has provided relief to allow carry forward of losses by companies under insolvency resolution process even if majority voting rights undergo change. Realignment of structure through transfer of securities between parent and its wholly owned subsidiary (‘WOS’) possible without tax implications
Transfer of securities between WOS and parent is not taxable in the hands of transferor company. However, the same was subject to tax in the hands of transferee company, if the transfer was for inadequate consideration.
Budget has provided relaxation to such transferee company. This would facilitate realignment of group structures for large corporate houses.Sapan Gupta, National Practice Head - Banking & Finance, Shardul Amarchand Mangaldas
“Capitalising on the block chain technology could open new ways of securing peer-to-peer lending transactions, boosting trade finance, fintech and information repository sectors. By segregating the use of block chain from crypto-currencies reflects the government’s intention to use the technology in a gradual and safer manner, before it gets into concepts like replacing currencies.”
“In the current stressed situation of banks, capital markets can mitigate the negative effects by providing access of finance to corporations. RBI and SEBI shall now take steps to promote bond financing.”Arun Singh, Lead Economist, Dun & Bradstreet- India
It is not surprising that this budget has turned out to be populous. The Union Budget FY19 has given more than what was initially expected as far as rural, social and infrastructure sector is concerned. Increased allocations and measures announced towards agriculture sector, rural infrastructure and social sector including health, if implemented timely and fully, have the potential to kick-start growth momentum in the economy. This was one of the most appropriate ways to provide some relief to these sectors which were highly impacted by two structural reforms i.e. demonetization and GST implementation. This would also address agrarian crisis and unemployment scenario to some extent. While the announcement to increase the minimum support price to 1.5 times of production costs is a good move towards increasing farm income, this will have some repercussion on the overall inflation rate going forward. However, we don't see a scope for an RBI rate cut. Further, deviation from the path of fiscal consolidation was widely expected and much warranted given slowdown in the investment activity. In addition, lowering of corporate tax, and measures to improve the capital and credit availability for MSMEs, are steps are encouraging steps.Rahul Munjal, chairman and MD of Hero Future Energies
I think it’s a sensible budget. Given the constraints that the finance minister had, he of course has an election coming up and at the same time, oil prices are going up. Oil prices have helped us so much in the last three years that we have forgotten what happens to our deficit when they go up to $80 or $100.
Given all that, he has kept his discipline and kept deficit target at 3.3, that’s a fantastic move. I think it’s achievable. You have to understand, the need of the hour is agriculture and healthcare. If you see, 50% of our country is living in rural areas. Most of our subsequent budgets till they meet a common minimum standard of living for the entire country, should focus on that. Budget is along expected lines except although I didn’t see anything for the renewable sector. But there is enough for the country as a whole. Naresh Trehan: chairman & managing director, Medanta
In one word, it is fantastic. Many time you don’t feel the excitement. Today, it is exciting. A lot of issues that have been lurking in the dark have been addressed in a positive and bold way. In healthcare, it is a giant step forward. We have always been talking about this dream of universal access to healthcare, this is a great kick start to that. We all have to put our heads together and make it happen because the delivery systems have to be aligned to the schemes, the schemes and costing have to be decided quickly. But my view is that, why waste time and let’s start work quickly. It is 10 on ten on health and very high on the rest of the budget. If you can assure one and half times the assured price to the farmer for his crop, you have already taken away his misery. He can also become a participant in the economic cycle of the country. There has also been address to the senior and senior citizens. The focus is largely on making India healthy and taking the weaker sections and giving them the means to become stronger. Sunil Munjal, chairman, Hero Enterprise
I think this has been a budget that has covered a very wide canvas. They have made a massive increase in infrastructure, healthcare and a big big focus on the rural economy including agriculture by assuring farmers fixed margin on their cost every time and ensuring MSP is paid to all farmers. I think that ensures a certain level of income. Our hope is that it will lead to less poverty, more consumption and better quality of life in the rural area and that can be a trigger for creating a virtual cycle in the overall economy. For the MSME’s he has reduced income tax. The hope was that it would have come for all of the industry because we are in a very competitive environment globally right now and the world is talking about is how far they can go below 20%. So we have a lot to catch up on that area. The addition of 4% cess wasn’t expected. But, barring all these minor things, it is a well-designed budget and a wide coverage of the budget in a difficult economy worldwide. Rakesh Mittal, Vice-Chairman of Bharti Enterprises
It is a realistic budget. The finance minister could have presented a populist which he has restrained. He had to do a fine balance on expenditure, fiscal deficit and on revenue. Clearly, the revised estimate on the fiscal deficit for FY-18 at 3.5% has gone up, given that there was more public sector spending. On the agriculture and social sector, he has done an outstanding job. New policies on MSP, all crops being brought under MSP is all good. I have seen that anything which gets in a mission mode, the government ensures that it happens. I believe that the policies that are announced, the farmer’s income will go up. The only thing is that private sector needs to do a large role now, and the various state and central governments need to devise policies so that private sector can come in and start investing in helping the farmers into high value crops, and get into food processing. All in all, we now need to see consumption and demand moving up so that Indian corporate sector also starts investing. Chandrajit Benerjee, Director general, CII
The Budget announced today had some excellent measures to ease the lives of the common people with emphasis on the farm sector, education, healthcare and social protection. Small and medium enterprises received a boost through tax measures as well as access to credit. Industry appreciates government’s efforts to increase employment and encourage entrepreneurship through various measures.
In a difficult year, the FM has done well to contain the fiscal deficit at 3.5% of GDP, a deviation of 0.3% from the Budget estimate. The plan to move towards fiscal consolidation in the coming year would maintain macro stability and enhance investor confidence. Many of the measures in the Budget are in line with CII recommendations such as incentives for new jobs, extending fixed term employment, enhancing quality of education including teacher training and addressing healthcare access. Overall, this is a balanced and prudent Budget that sets the foundation for future growth in the economy. Bipin Preet Singh, Co-founder, MobiKwik
A reformist budget for startups and digital India. Government’s impetus on digitizing the rural hinterlands, focus on smart cities and commitment to blockchain technology, will encourage the promotion of digital payments across the country, thereby making India truly digital. Further, disallowing cash payments beyond Rs 10,000 by trusts and institutions will boost digital payments.
I commend the government’s decision to reduce corporate tax to 25 percent and improve the ease of doing business by providing a unique ID for every company on lines of Aadhaar. These initiatives will benefit startups and MSMEs immensely and lay a string foundation for a progressive India.
However, the government should consider regulating crypto currencies than curbing their use entirely. Balram Singh Yadav, Managing Director, Godrej Agrovet
The Finance Minister has presented a good budget for Agriculture and related sectors. The Government has tried to address both short term and long term issues of Indian Agriculture. The formula for MSP of Kharif crops i.e 1.5 times the cost of production will immediately give relief to farmers reeling under low commodity prices.
Development of optimal farm price realisation through initiatives like eNam or other forms of Price Deficit Scheme through NITI Aayog and focus & support to the food processing sector will make agriculture sustainable in the long run.
Animal Husbandry is good for doubling farmer income. Allocation of Rs.10,000 crore fund for animal husbandry & fisheries, along with access to Kisan Credit Cards for animal husbandry farmers will provide much-needed impetus to these sectors and will create jobs in the hinterland.
Overall, we strongly believe that all initiatives envisaged in the budget proposal, if implemented well, will accelerate agricultural contribution to the GDP growth.Dilip Oommen, MD, Essar Steel
This is a good and inclusive budget. It seeks to resurrect rural uplift, which is critical in giving a boost to the economy, which in case of India is largely an agrarian one.
The focus on infrastructure, the MSME sector, rural electrification, rural housing, food processing and the Railways (through increased spending) is a definite positive for the Steel industry. We were hoping for reduction in duties/cess on some key raw materials used by steel producers, but unfortunately they have been left untouched.Vishal Jain, Partner Deloitte India on digital India/ cryptocurrency
The Union Budget 2018 continues to be carrying forward the government’s Digital India agenda. There is a vision to be ready for the future using digital technologies.
Intention to adopt Blockchain for payments ecosystem or going digital for toll collections shall mean that the existing technology infrastructure shall need to be upgraded and scaled up as more and more transactions move to this channel. On similar lines, the push towards increased penetration of fiber and WiFi will mean that the citizens shall have an easier access to internet & better connectivity, however people now need to be educated and awareness created to leverage this access. One of the positives of this enhanced connectivity shall enable the use of technology to increase the digital intensity in education both for teachers and children. Telecom shall be the key enabler facilitating the penetration of digital into the country. Telecom operators shall need to ensure security of the content delivered over their networks.
The announcement by the government to create Centers of Excellence and upskill people on new technologies like Artificial Intelligence, 3D printing, Robotics, IOT etc shows that the government is keen on using a combination of cyber and physical systems to enhance the way of life for the citizens of the country. While this is a good starting point however with such new digital technologies the threat surface shall also increase hence entities/ organization should come up on solutions which can safeguard and secure such deployments.
The focus on Smart Cities needs to continue whilst ensuring a secure environment. Digitalization of citizen services using new technologies and the announcement of setting up the 5G test bed shall position India as a front runner in embracing new technologies.
While not specifically outlined in the current budget, the government needs to increase focus on security and privacy of personal data. We have seen some concerns being highlighted in the recent past and the time is now ripe to have a strong framework around this for the future.
Overall the vision seems to be there and this now needs to be supported with diligent efforts to convert this into a reality. The budget signals to the investors that India is changing, however steps need to be taken to secure this digital journey to instill confidence in this digital way of life. Vivek Gambhir, Managing Director and CEO, Godrej Consumer Products Limited.
This aam aadmi rural focused budget to build ‘New India’, reinforces the Government’s pro-inclusivity, pro-growth, pro-reform agenda. It is largely positive for FMCG; proactive efforts to drive demand and increase consumption should revive growth. Over the last couple of months, as GST implementation is settling down, we are seeing FMCG growth come back on track and these initiatives will provide an additional fillip, especially to rural. However, the need of the hour is to ensure that these initiatives get translated into tangible results through faster implementation and better on-ground execution.
Improving income of agriculturists through initiatives such as MSP at 1.5 times the cost of produce, and Kisan Credit Cards for fisheries and animal husbandry, will help put more money in the hands of people in rural areas. Accelerating rural infrastructure projects will improve connectivity and thereby FMCG distribution networks. We hope to see much-needed job creation from increased infrastructure investments of 50 lakh crore rupees, boost to MSME and focus on skilling and education. Investments in women and child development and the potentially transformative introduction of a flagship National Health Protection Scheme will drive more inclusive growth. The standard deduction of 40,000 rupees for salaried tax payers will increase disposable income for the middle class and drive demand for mass products.Sumeer Chandra, Managing Director, HP Inc. India
The Government has taken a very balanced approach in Union Budget 2018 with a special focus on strengthening the rural economy, infrastructure development and helping small and medium businesses. Government’s vision to move from black board to digital board schools by 2022, revitalization and upgrading of education sector through increased fund allocation and focus on education related research will create a brighter future for the young. We are enthused by the government’s focus on skills development and empowering students with the right educational tools. We are also thrilled with the Government’s emphasis on promoting research and use cases for digital manufacturing and 3D printing. We believe this technology will enable speedy growth of the manufacturing industry and help India in becoming a major manufacturing hub.Vishwavir Ahuja, MD & CEO, RBL Bank
The budget has done a reasonable job of balancing populist imperatives and growth orientation. With its stated shift in focus from “ease of doing business to ease of living for poorest”, increased outlays on social objectives, including education, affordable housing, healthcare it has ticked all the right boxes in the pre-election year. Hosts of measures to support higher income for farmers, including MSP support, credit availability, agri market and infra fund, favourable tax arrangement for farmer organisations etc, will help boost rural economy and alleviate growth and employment concerns.
However, there is a slight divergence from our expectations on fiscal deficit levels for both FY18 and FY 19, government’s commitment to fiscal glide path needs to come out more clearly as that is necessary to help ease the prevailing worries in the bond market. The introduction of LTCG without indexation could have been avoided - the revenue expectation of Rs. 20,000 crore could be a steep ask.Govind Sankaranarayanan, Chief Operating Officer – Retail Business & Housing Finance, Tata Capital
“The Budget 2018 announcement seems to have struck a delicate balance between the populist demands and fiscal prudence, given the past year’s subdued economic growth. The world’s largest health care benefit programme could have dramatic and far reaching implications for the health & insurance industries. The setting up of a dedicated Affordable Housing Fund reinforces the government’s commitment to this sector, which should also provide an additional fillip to the real estate sector and financial institutions supporting the government’s Pradhan Mantri Awas Yojna scheme. Overall, the various initiatives should generate rural incomes and create jobs which should ultimately result in consumption.”
Aashish Kasad, Partner and Consumer Products and Retail Sector Tax Leader, EY India
The Budget 2018 has continued to deliver on the Government’s stated development agenda of enhancing the rural economy and doubling the farmers income, supporting the poor and underprivileged, developing the infrastructure, promoting digital economy and prudent fiscal management. There are several positive measures for boosting the agricultural economy including the food processing sector in terms of MSP for farmers for the Kharif crop to be increased to 1.5 times the cost of produce as well as Farmer-Producer Organisations to be entitled for a 100% tax deduction for the AY 2019-20 until AY 2024-25, if their total turnover is less than Rs 100 Cr in a year. Further to incentivise manufacturers of apparel, footwear or leather products to boost the employment generation, the employment day criteria has been relaxed for availing the tax deduction. The corporate tax rate has been reduced to 25% for companies having turnover less than Rs 250 cr in FY 2016-17 which should benefit smaller organisations in ploughing back profits to grow the business further. To further promote the “Make in India” initiative, customs duty has been hiked on import of several consumer products such as sunglasses, perfumes and make up, shaving and after-shave preparations, fruit juices and vegetable juices, edible oils of vegetable origin, watches, toys, etc. The expectation of altering the income-tax slabs for individuals which would have generated higher demand through more disposable income in the hands of the consumer, remains unaddressed. Overall, the budget has stayed the Government’s course of driving growth while trying to curtail the rise in fiscal deficit and inflation.Preetha Reddy, Vice Chairman, Apollo Hospitals
It is clear that India's macroeconomic situation has improved. The implementation of the GST and more tax payers entering the economy have helped Mr. Jaitley target a lower fiscal deficit of 3.3 percent for next year. The rollout of a national Healthcare policy covering 50 crore citizens is nothing short of path breaking. If implemented correctly, it can transform India’s health map. The FM providing more tax benefits to senior citizens experiencing rising inflationary costs is a step in the right direction. And the introduction of a Long Term Capital Gains Tax of 10 percent should be digested easily given the buoyancy in capital markets. A cut in corporate tax to 25% for companies with sales below `250 crore will help the mid cap sector flourish.Jaspal Bindra, Executive Chairman, Centrum Group
I see this budget as a balanced one from the perspective of covering all the key sectors. While major investments have been announced in the Social, Agriculture, Healthcare and Infrastructure sector, however the key takeaway for me was despite the huge capital Commitments the projected fiscal deficit is expected to be contained to 3.3% for FY19. Besides creating more job opportunities FM’s budget speech clearly emphasized focus on MSME sector including reduction of tax burden and significant corpus of Rs. 3 Lac Crores to be lent in FY19 under the Mudra scheme. In addition to this it was reassuring to hear that Government is considering proactive measures to curb the NPAs which should lead to bringing about much needed discipline in the MSME financing space.Arindam Haldar, CEO, SRL Diagnostics
The announcement of universal health insurance at Rs 5 lakh medical cover per year for 10 crore(s) poor families across the country, is an appreciable step. Also, the allocation of Rs 1,200 crore(s) for health and wellness centres clearly indicates that health sector has received utmost priority in this budget.
It would be a welcome step if out-patient diagnostics costs/coverage is covered in this limit. The absence of coverage for outpatient care and pre-existing diseases is an impediment to a comprehensive and affordable health insurance cover.
Also, specific focus on the diagnostics sector would have been of great benefit to supplement primary healthcare machinery. Nevertheless, we welcome the various health initiatives announced by the government in which limelight has been shed on the alarming rise of non-communicable and communicable diseases in India.Vijay Thadani, VC and MD, NIIT Ltd
It is a progressive budget with the right emphasis on training of teachers, use of technology and funding for research.
Among the positive steps for the education sector, Revitalising Infrastructure and Systems in Education (RISE) by 2022 with a total investment of Rs 1,00,000 crore in next four years stood out. The fact that the Higher Education Financing Agency (HEFA) would be suitably structured for funding this initiative is a much appreciated provision.
Increase in digital intensity in education and envisaging move from ‘‘black board’’ to ‘‘digital board’’; using technology to upgrade the skills of teachers through a digital portal "Diksha"; national program on artificial intelligence under the aegis of Niti Aayog; mission on Cyber Physical Systems and a test bed for 5G technology at IIT Chennai were among the other encouraging initiatives.Ameera Shah, Promoter and Managing Director, Metropolis Healthcare Ltd
Overall, this has been a pro-people and a pro-poor budget. For the first time, Universal Health Care has got the impetus it needs. I am quite happy with the government's plan to introduce 24 new medical colleges. That is the only way to address the glaring lack of talent in the industry. The 1.5 lakh centres which will provide free essential drugs and diagnosis is a welcome move and a step towards boosting the Government’s National Health Policy. The flagship national healthcare protection scheme which will cover 10 crore, underprivileged families, is a highly commendable initiative. Through the budget, the government has definitely shown its interest in making healthcare more accessible and affordable through the Ayushman Bharat programme.
Another highlight of the budget has been the focus on fighting the ever-growing hazards of pollution from crop burning, promotion of gas connection in houses using wood fire for cooking, among others. By not just talking about healthcare, but its indicators as well, the government is definitely on the right track towards improving the sector across the country.
We truly hope that going forward, the government also has plans for utilisation management, financial monitoring, audit mechanisms and accountability.Vishesh C Chandiok, National Managing Partner, Grant Thornton India LLP
Overall, Budget 2018 is very aligned to the macro global direction - reduction in Corporate Tax rate, protecting domestic industry by increasing Customs Duty, and supporting all major Government schemes including Digital India, Doubling Farmer’s Income by 2022, Make In India, Clean Ganga, etc. Health and Social security to take care of our weakest and tackling our toxic air pollution will truly transform India into a Vibrant Economy.Vishal Kampani - Managing Director, JM Financial Group
The budget has refreshing elements which will lay the foundation for new India. The measures taken towards enhancing rural incomes and cashflows via improved pricing and procurement, the plan to provide for the world’s largest health insurance program particularly deserve an applause. The budget also unveils measures to transform India into a digital nation. Incentives provided to MSMEs will unleash entrepreneurial zeal and will encourage job creation. The intent to contain the projected fiscal deficit to 3.3% is also laudable. Overall, a fine act of balancing populism with discipline.
Budget 2018: Asset monetisation path laid out for transport infrastructureAshish Bhasin, Chairman & CEO South Asia - Dentsu Aegis Network
The budget has focused on the right areas, particularly the rural and agricultural sector, which is definitely going to spur rural demand in the coming months and years. The rural economy needed a boost. I also like the fact that the Finance Minister has focused on Ease of Living rather than just Ease of Doing Business and has introduced Healthcare benefits which will benefit nearly 50 crore Indians. It is a landmark step.
The emphasis on Digital, particularly higher-end digital areas like Artificial Intelligence and usage of Block Chain shows that the government is committed to providing a further digital thrust. The steps being taken, like provision of free Wifi and other forms of internet to all parts of the country will be extremely beneficial in the long run for the digital sector. It will help agencies like ours who are partnering clients for Digital Transformation.
The introduction of the Long Term Capital Gains tax on equities will soon be digested by the industry I’m sure, but in some ways I see a missed opportunity because the simplification of GST processes for the services sector would have gone a long way to help the advertising industry. The advertising industry doesn’t mind paying the taxes but abhors non-productive, complex procedures including filing of hundreds of returns every year.
Over all I think the right sectors have got the incentives and therefore it should be good for the country. If it is good for the country, it will be good for the economy and once the economy grows, the advertising sector will benefit from it. Arun M. Kumar, Chairman and CEO, KPMG in India
Budget 2018 is a pro-growth one, aiming to achieve sustainable growth. Agriculture and the rural economy have received the attention they deserve. The proposal to promote cluster-based models for horticulture, raising of farmer MSP to 1.5 times the value, and stimulating agriculture exports by setting up food parks would add new growth dynamism to the sector. The 21 percent increase in infrastructure spending on the one hand will provide a much-needed impetus to the economy, while the reduction in corporate tax rate for enterprises with turnover of INR250 crore on the other, will facilitate investments and job creation. The new health protection scheme is a key milestone in India’s journey towards building a robust social security net. In sum, the Budget 2018 has brushed aside short-termism while giving more emphasis to long-term vision.
The Union Budget is to be applauded for its long term focus on investments in hard infrastructure such as smart cities, transportation and digital connectivity in both cities and rural areas, and in the soft infrastructure needed to provide healthcare and education. There is a focus on the common man, bringing to the fore a narrative of ease of living for all citizens that goes beyond ease of doing business. The corporate tax break to MSMEs is particularly welcome as these are the enterprises that have the potential to maximize employment generation.
With selective interventions, the Budget 2018-19 is growth friendly and largely centres around agriculture, education, healthcare and employment creation. The revised fiscal deficit target at 3.3% is credible and merited in order to give the economy the much required momentum. Also the large increase in direct and indirect tax payers is encouraging. The reduction in corporate tax for SMEs with turnover up to INR 250 core is likely to benefit India’s mid cap firms.Chandra Shekhar Ghosh, Managing Director, Bandhan Bank
This is a Budget for the people of India. It has sent all the right signals and focused on the relevant sectors -- health, education and rural distress -- in a big way. As a result of this, people in rural India will have more money in hand and spend for consumption. That, in turn, will help corporate India. We could not have a better budget than this.
The biggest beneficiaries of this Budget are the medium, small and micro enterprises (MSMEs) –the units which can create massive employment opportunities. Besides ensuring easy access to bank loans the government is working on measures to address the bad loans and stressed accounts of the MSMEs. The tax burden on this set of companies is also being reduced to 25%. Indeed, this budget will go a long way for job creation and addressing agrarian distress.
Finally, I must mention that the exemption on interest income on bank deposits (from Rs10,000 to Rs40,000 a year) and rise in the limit of health insurance premiums and medical expenditure will help senior citizens lead a dignified life.Umesh Revankar, MD & CEO, Shriram Transport Finance
Prime Minister Modi’s fourth budget is growth oriented and continues to strengthen the mission of rural and infrastructure development. The budget gives impetus on boosting farmer incomes and employment in rural areas.
Micro, small and medium enterprises (MSMEs) are the backbone of the economy and major contributors to the GDP. The Finance minister has rightly touched upon on the MSME sector and provided various measures to stimulate the sector. The government’s MUDRA Yojana has successfully benefitted not only the lower income groups but also encouraged women entrepreneurship. With continued thrust on the MUDRA scheme, the government is sure to achieve its objective to create much-needed employment.Peter Kerkar, Group, CEO, Cox & Kings
From a tourism standpoint, the government’s move to develop 10 prominent tourist sites as iconic tourism destinations is welcome as it diversifies our product offerings and creates tourism clusters. Along with this, the move to upgrade tourism amenities at 100 ASI managed monuments will enhance the visitor experience. All this will generate huge economic activity as it also involves infrastructure and skill development in the region. Tourism is the largest employment generator in India and this will open up huge employment opportunities.
The move to expand the UDAN (Ude Desh ka Aam Nagrik), to over 56 unserved airports and 31 unserved helipads will open up huge opportunities for the travel industry as connectivity will improve and people in these areas will be able to travel seamlessly within India and overseas, thereby giving a boost to domestic and outbound tourism.
Overall, the thrust of this budget is on infrastructure development, which is what the tourism industry has always represented to the government. New tourism circuits can only come up if there was adequate development and this budget lays emphasis on it. Finally, giving a boost to the rural economy will also enhance the purchasing power amongst those living in rural areas and this in turn will stimulate travel. We have observed this over the last couple of years.Shilpa Kumar, MD & CEO, ICICI Securities
Union Budget 2018-19 is a pragmatic blend of elements (fiscal prudence, social security, rural upliftment and infrastructure creation) which should go a long way towards achieving inclusive growth.
Prudent emphasis was laid on productive expenditure via social security schemes like farm insurance and National Health Protection Scheme (covering 10 crore poor and vulnerable families). Identifying MSMEs as the major engine of growth and employment, the government has provided a host of incentives to the MSMEs which would eventually help achieve the objective of employment generation.
Despite these all-encompassing steps, the government has managed to stay within the acceptable range of fiscal deficit target. Moreover, the broadening of tax was also achieved with a calibrated move of introduction of LTCG, with “grandfathering clause” imbibed to allay the market concerns.Ritesh Agarwal, Founder & CEO, OYO
This year's Union Budget stood for entrepreneurship, employment and quality of life. The announcements made today will benefit MSMEs, including small hotels. At OYO, we have a network of over 3500 exclusively controlled hotels in the MSME sector and we believe that the budget presented today will facilitate the growth of our partners. The Mudra Loan allocation of INR 3 lakh crore will help in enabling SMEs to generate more jobs while creating thousands of new entrepreneurs too. One major change which we were expecting was GST being levied on the actual price rather than the declared tariff for hotel accommodation. We'll continue to engage with the government to make this happen which will leave no room for litigation and benefit the hospitality industry.
The government's decision of developing 10 model destinations across India and investing in strengthening the country's airport network and infrastructure will boost the tourism sector.
The reduction of corporate tax is a welcome move but we are hoping the limit to be pegged higher than INR 250 crore so as to benefit more corporate entities. We appreciate the measures taken by the government to keep the alarming pollution levels in control. This is a major step towards ensuring the quality of life for citizens.Saugata Gupta - MD & CEO, Marico Ltd
The Budget for FY 2018-19 presented by the Honorable Union Finance Minister, Shri Arun Jetley has laid a strong foundation for fast-tracking India’s economic growth. It is all-inclusive, forward-looking and has a strong thrust on agriculture, rural, MSME, education, healthcare, infrastructure and employment, which augurs well for FMCG companies. One prominent nuance of this year’s budget speech has been the focus on digital transformation which is a significant step that reaffirms the Government’s impetus on building a digitally empowered country. This will also provide an opportunity to reach larger masses more effectively and economically. The initiatives if executed well, will improve the livelihood and disposable income in the hands of masses, especially in rural India. This, in turn, will help the consumer goods sector acquire new consumer franchise in the long run. Improved infrastructure will also help ease of doing business and lower cost of operations.George Alexander Muthoot, MD, Muthoot Finance
The budget has adopted simple strategies to keep the enthusiasm high. It focuses on doing business with much ease and in transparent manner, continued efforts to lower fiscal deficit to achieve lower interest rate scenario and continued thrust on MSME sector by providing easy access to credit.
The government has put in unwavering efforts to reach out to the underserved and provide them with financial services. The financial inclusion is on the right path with an environment of easy financing options.
The government has focused on key social spending like education and healthcare thereby improving the quality of life of lower income group. So in all the budget aims at inclusive growth with its reforms, generate employment and support the bottom of the pyramid entrepreneurs. The plan to revamp the Gold monetization scheme is a welcome move. There is 21,000 tons of gold with the general public. Through this process the idle asset at home will become productive, energizing the economy. This will bring in the household gold into the market. Thus reducing the need for import, and saving on valuable foreign exchange. T V Narendran, CEO & MD Tata Steel India
The FM has presented a budget which is both balanced and positive. Focus on rural infrastructure, agricultural output and farmer income will help reduce the agrarian distress and boost the rural economy . Emphasis on health, education and employment generation would promote inclusive growth.
Higher spending on infrastructure with a focus on airport capacity expansion and transportation especially de-bottlenecking of the railways will definitely boost steel demand as will the focus on affordable housing . We also believe that the spending on infrastructure will further help reduce the cost of doing business as it will drive greater efficiencies in logistics.Shriti Malhotra, Chief Operating Officer, The Body Shop India
With reduced and simplified GST on Cosmetics, the industry is upbeat and looking forward to policies that facilitate business. We are very optimistic of growth-enhancing measures for the Beauty sector specifically and positive changes in the overall economic scenario.
A hike in customs duty will definitely impact the sector negatively, however the exact implications will have to be understood, once the policy details are known.Santosh Dalvi, Partner, Indirect Tax, KPMG in India
Fiscal Budget 2018, being the last budget before the upcoming Lok Sabha elections, seeks to strike a balance between populism and growth agenda.
On the indirect tax front, the first budget after roll out of Goods and Services Tax, is largely as expected but for a few amendments in Customs. As all the GST related amendments are being taken care of by the GST Council from time to time, the Budget chooses to stay away from any GST related changes.
To incentivize domestic value addition, promote ‘make in India’ and encourage employment, the budget proposes to increase the rate of customs duty on products such as mobile phones, smart watches, LCD / LED panels, automobile parts, perfumes etc. with effect from 2 February 2018.
Further, the budget takes a bold step to withdraw the two decade old Education Cess and Secondary Higher Education Cess on imports and imposes a Social Welfare Surcharge shifting the focus from education to social welfare. This would not only result in increase in effective customs duty rates on import of goods into India but will also increase the cost of imports as the Social Welfare Surcharge may not be creditable in the GST regime.
Overall, the budget meets the expectations with a mild shock wave on Customs front.Vivek Gupta, Partner and Head, M&A Tax, KPMG in India
1. Today, foreign investors must invest in a restrictive environment - they can choose either to invest in a pure equity format or as pure debt. Not in an instrument that has characteristics of both. The FM's promise at the very outset of his speech that the government will comprehensively look at hybrid instruments for FDI is perhaps one of the most significant though underplayed announcements of this Budget. FDI investors, private equities and other institutional players aggressively look to invest through hybrid instruments - instruments that allow flexibility for equity and debt characteristics as appropriate in a given situation. Done well, this single initiative has the potential to cause significant capital flows in the economy since it will open up new categories of capital that were hitherto not available given our cross border capital restrictions.
2. While the long term capital gains tax and the additional cess are somewhat of a dampener, in light of the large spends planned on Modicare and the social sector, there was perhaps no other choice. There is also the argument that equity demands that all incomes suffer tax. The government's call obviously is that this tax will not cause the market to be disturbed to the point that it will disrupt investment flows or disinvestment targets.
3. The miss from a tax perspective is perhaps though that the opportunity to handle some of the unintended consequences of the anti-abuse provisions under section 56 has been entirely missed. Completely bona fide primary and secondary transactions in listed companies could under current law be subject to artificial tax under section 56, as an example. Hitesh D Gajaria, Partner, Tax, KPMG in India
In line with the policies highlighted in the Economic Survey, Union Budget 2018 focuses on agriculture, health, education and infrastructure with a benevolent eye on lesser privileged citizens. Tax proposals provide incentives targeted to create more employment and also favor more broadly agrarian and allied industries. While relief to the salaried class was anticipated (by way of increased exemption limits), the standard deduction of INR 40,000 only, reintroduced in lieu of transport and medical allowance, effectively affords only a token relief in terms of actual tax payable.
In the area of Long Term Capital Gains on listed securities and equity oriented mutual funds, while there has been no change in the shareholding period, a Tax of 10% (on capital gains exceeding INR 1 lakh) has been introduced, grandfathering all accumulated gains up to 31st January 2018. This introduction, without discontinuing the prevailing Securities Transaction Tax, may dampen investor sentiment in the short term, in an otherwise relatively buoyant Indian capital market.
While the reduced corporate tax rate of 25% being extended to companies having turnover of up to 250 crores is a welcome move, the expectation was a reduction in corporate tax rates for all companies. Moreover, increase in cesses by 1%, increases tax costs for all.
With e-assessments being proposed nationally, it is expected to assist in smoother tax assessments, minimizing time and efforts of both taxpayers and the Revenue authorities alike.
All in all, the Finance Minister, focusing his efforts on enhancing outlays for agriculture and providing the world’s largest medical insurance scheme, seeks to also keep global investors and credit rating agencies on his side by striking an optimal fiscal balance.Sachin Menon, Partner & Head Indirect Tax, KPMG in India
Budget 2018, is on expected lines with major thrust on Rural Economy, Agriculture, Infrastructure, Health, and Education. With GST collection showing an upward trend in the last month and moderate increase in customs duty, I hope the government will be in a position to mop up the revenue to support such significant spend while controlling inflation”
“Being the last full-fledged budget of Modi government, resembles an election budget with host of measures aimed at improving the livelihood of large population. The budget’s primary focus has been rural sector, infrastructure, agriculture, education and healthcare. Though with introduction of GST where decisions are largely taken by the GST Council, the government could not announce any big bang changes relating to GST. However, it is too early to conclude that there is no changes in GST, as the changes in the GST law could be introduced in the second budget session of the parliament, provided GST council takes a call on various pending matters in the next meeting.
In the customs side, government has made several changes in the customs duty primarily to reduce litigations and provide impetus to “Make in India” initiative of the government. The proposal to levy a Social Welfare Surcharge at the rate of 10 per cent on basic customs duty, will increase the cost of import of goods while the education cesses have been abolished. Basic customs duty rates have been increased for many goods which are also manufactured in India. Further, as a trade facilitation measure, the proposal to introduce the first ever program of pre-consultation before issuance of show cause notices is a welcome move. The failure of revenue officers to adjudicate notices within 6 -12 months will make the demand invalid - is a bold move. It is expected that these measures will improve the taxpayers’ experience. MS Sreedhar, MD and CEO, Royal Sundaram General Insurance Company Limited
The Union budget has set a positive tone overall and affirms the government’s continued commitment to push reforms and investments. The government seeks to bring greater focus on the rural and agricultural segments through positive initiatives and has proposed some far reaching reforms with a view to boost economic growth. The proposed National Health Protection Scheme is a timely move to not only make health insurance accessible but also offer wider coverage to manage critical illness. These initiatives would usher in a new era for the under penetrated general insurance industry. In addition, the increased limit for exemption under Section 80D for health insurance premium to Rs. 50,000/- and raising the limit on critical illness up to Rs.1 lakh (both for senior citizens) is a welcome move. However, introduction of tax on long term capital gain may be a dampener for the stock markets. Overall, we hope that this budget will aid in consolidating the reforms and steering the economy in the right direction.Ganesh Raju Partner and Leader startup PwC
Separate policy allowing Venture Capital firms to invest in hybrid instruments is a welcome move. Permitting issue of hybrid instruments such as redeemable shares, optionally convertible debentures etc will enable startup founders have greater control over the company rather than diluting their stake through equity funding in initial stages.Charu Sehgal, Partner, Deloitte India on Life Science and Healthcare Sector
Health cover of Rs5L/family for hospitalisation for 10cr families through schemes such as Rashtriya Samaj Bima Yojana is a welcome move, as it will put half a billion people within the ambit of government sponsored healthcare services. However, we hope that this budget announcement translates to actual allocation of funds on-the-ground, and does not remain on paper. Under the current budget for MOHFW 2018, allocation under RSBY scheme appears to have increased to only Rs. 2000 crore which is miniscule for the ambitious Health protection scheme. Moreover, while demand will see a surge subject to proper enrolment of beneficiaries, the supply ecosystem will need to be geared up to ensure on-the-ground delivery. Implementation of smooth payment mechanisms to private providers and checks to ensure there is no misuse of the scheme will be key to this successful collaboration between government as a payer and hospitals (private sector/ not for profits) as provider.
The move to setup 24 new medical colleges (1 per every 3 parliamentary constituencies) will go a long way to give a fillip to availability of medical talent as well as supply of hospital services. In addition, increase in deduction on taxable income for health premium and expenditure for senior citizens will also give a boost to adoption of medical insurance and make health services more affordable. Setting aside Rs. 1200 crores for 1.5 lakh health and wellness centres highlights the shift in focus to include preventive health and last mile delivery, which is the need of the hour. Once operational, the free drugs and diagnostics provided in these centres will also result in improved access and affordability while providing a boost in demand for the pharma and medical devices industry. TB and its dreaded multi drug resistant forms which have been greatly debilitating productivity of our work force has been addressed partly by providing for a Rs.600 crore corpus fund for nutritional support to TB patients. The details of the roll out plan will be crucial in the success of this initiativeHemal Zobalia, Partner, Deloitte India on Infrastructure & Energy sector
Budget 2018 demonstrates the Finance Minister’s intent to boost investments in rural development, education, healthcare and social sectors. The Budget recognizes the role of “Infrastructure sector” as growth driver of the economy with an estimated investment requirement of massive INR 50 lakh crore. All time high allocation has been made to rail and road sector. The Finance Minister again shown interest to develop smart cities and bullet trains, but more action is expected at the ground level. Provision for rationalizing linkages of coal to power to railways have been made to make it more efficient. As a welcome step, move to shift from ‘AA’ to ‘A’ grade ratings corporate bonds as eligible for investments will provide additional avenue to the corporate to raise funds for the infrastructure projects.
On the direct tax front, the infrastructure sector did not get any relief on its long term standing demand of abolishing MAT or introducing group taxation provisions. However, 25% corporate tax rate has been extended to companies having turnover upto INR 250 crores in FY 2016-17. The benefit of lower corporate tax rate is curtailed by increase of cess rate from 3% to 4%. Also, long-term capital gains tax on equities at rate of 10% has been proposed which would impact Infra/energy companies planning IPO.
On the indirect tax front, Social Welfare Cess of 10% has been proposed on import of goods by replacing existing Education Cess of 3%. For oil and gas industry, rationalization in duty and cess structure has been proposed for petrol and high speed diesel. To promote renewable energy sector and provide impetus to indigenous manufacturing of solar panels, cells and modules, it has been proposed to fully exempt customs duty on import of solar tempered glass including anti-reflective coated solar tempered glass. For ease of doing business, a single point of reference has been proposed to be established for importers, exporters and officers for regulating customs matters. A new Customs Advance Ruling Authority with Appellate mechanism has been appointed which will be useful for avoiding unnecessary litigation.Anindya Mallick, Partner, Deloitte India on Education & Skill Development sector
While education and skill development remains a key focus in every budget, in view of the findings on learning outcome from the recently conducted national survey the focus this year is on improving the quality of imparting education. Various measures announced includes training programs for in-service teachers on modern teaching concepts, increasing use of digital technologies for improving learning outcomes through “blackboard to digital board” initiatives, etc. In consultation with the states, a district wise holistic strategy for entire pre-nursery to class XII eco-system is proposed to be undertaken for improving learning outcomes. Revitalization of infrastructure and facilities at our education institutions still remain a priority with a Rs 1 lakh crore infrastructure fund to be spend over 4 years proposed through the Higher Education Finance AgencyHemant Joshi, Partner, Deloitte India on Telecom Sector
Overall the Union Budget 2018 is good for the telecom Industry. The setting up of 5G center in collaboration with IIT Chennai would help India being early adopter of the next generation technology rather than being a laggard. This could be a boon for the telecom industry and guide the telecom operators to move to next-gen networks efficiently and effectively. This center could also work on development of Internet of Things and Machine to Machine applications which are relevant and best suited for India. India could take lead in setting up standards for next generation technologies, and in turn help in boosting Make in India initiative.
Rollout of 5 lakh Wi-Fi hotspots through a budget of INR 10k crore could be an excellent move for improving connectivity in rural areas and hence bringing them under the ambit of applications and services rolled out under Digital India. Increase in customs duty on mobile phones from 15% to 20% will delay the adoption of affordable smartphones in India until the manufacturing of these handsets starts in India.Rajeev Singh, Partner, Deloitte India on Automotive Sector
Increased allocation for infrastructure projects such as National highways (target completion in FY17-18 is -9000 KMs) and Bharat Mala project (target completion of 35,000 KM in Phase 1 at cost of Rs 5.35 lakh crore)for seamless connectivity in the union budget should give much needed push to the sector especially M&HCVs (Medium and Heavy Commercial vehicles). Good rural focus (credit for agricultural activities increased from Rs 10 lakh crore to 11 lakh crore )will primarily help to boost retail growth in rural market and thereby bring more growth in auto industry. For example the Min purchase value for khariff crops 1.5 times the cost will boost rural income thus driving demand for 2 Wheelers, farm equipment’s and LCVs (light commercial vehicles) in Rural areas. Other transformational initiatives such as focus on building 3.71 lakh rural roads, mandatory introduction of Fasttags in all new vehicles from Dec 2017, National Policy on “Pay as you use” model, will help in providing seamless connectivity between cities / towns and hassle free travel on National highways. The Finance Minister’s decision to promote skill development in the industry by announcing a National Apprentice scheme to train 50 lakh youth by 2022, increased allocation of Rs 3794 crore towards MSMEs credit support, increasing the turnover range of MSME companies from 50 crore to 250 crores to pay a standard corporate tax rate of 25 percent will benefit nearly 8000 auto component players, as nearly 90 percent of these fall under MSME category.Anil Talreja, Partner, Deloitte India on Consumer and Agriculture Sector
The Finance Minister has, in his speech, laid out a powerful report card by referring to the commitments made by him with regard to the farm and consumer sectors in the earlier years and not only giving the status of the outcome of various measures but also announcing various measures to promote this key sector. He has re-iterated the Government’s promise of doubling the income of the farmers by 2022 and also announced various additional allocation and funds in this sector. With 150% increase in MSP for crops, support to organic farming, doubling the expenditure allocation to INR 1,400 crores for food processing sector, state of the art facilities to 42 food parks, liberalisation of agricultural exports, allocation of INR 10, 000 crore to fisheries, animal husbandries and related infrastructure, this budget is in true sense a Roti-Kapada and Kisaan budget. Perhaps for the first time there is a special attention to the ancillary sector including infrastructure which will help the overall consumer and farm sector. The focus of these measures to ensure that the farm produce reach the ultimate consumers from the farms with maximum returns for farmers, introduction of facilities and technology leading to reduction in wastage in the sector, a boost to the fishery, aquaculture and animal husbandry sectors.
The Finance Minister also made a special mention of measures to promote the food sector. His prediction is that the food processing sector is going to grow at an average of 8% per annum. To achieve this target, he has proposed various fundamental measures thereby provide fuel to grow in this sector. Among the announcements include amendments are being made to the Reserve Bank of India Act, capital structure of the Food Corporation of India – these measures will stand no short of providing support and strengthen the consumer economy thereby achieving this targeted growth. This will also lead to a fillip for food and retail companies and will result in quality produce and at attractive prices for consumers. This means that a ‘New India’ has arrived and we can clearly see the birth of this. It only needs to be ensured that the resources allocated are used for the purposes they are assigned. Arindam Guha, Partner, Deloitte India
The Budget talks about linking Minimum Support Prices (MSP) to cost of production – what would be important is to incentivize the right crop mix such that farmer income is maximized. We should be careful about not incentivizing production of crops which are not profitable for farmers. Right focus on “moving from blackboards to digital boards”. This could be the only solution to (a) increase outreach particularly to rural areas overcoming constraints on teacher availability etc. and (b) standardize teaching content and ensure consistent quality. However, the success would depend on effective implementation and leveraging the technologies and skill sets already existing in the public sector.
It is encouraging to note the focus on new generation technologies like robotics, artificial intelligence, analytics etc. as far as skill building initiatives go. It remains to be seen how partners from the private sector eco-system with knowledge & expertise in these areas get involved in this initiative. Investments in rural wi-fi infrastructure will be a good complement to the Bharat Net initiative which provides connectivity till the Gram Panchayat level – this should facilitate online public services delivery in rural areas. As expected, the Budget has announced upcoming regulation for governing cryptocurrencies and usage of Block chain based technologies for land registration and other public services.
Budget 2018-19 continues to focus on infrastructure development through schemes like UDAN, AMRUT, Smart Cities Mission etc. in addition to focussing on the rural and agriculture sector. While earlier budgets have focused on investments in development of Industrial Corridors, this year’s budget also talks about a corridor / cluster focused on Defence-related production, including softer elements like a Defence Procurement Policy encouraging in-country manufacturing. Using digital and financial inclusion for economic development and improving public services continues to be one of the central themes for Budget 2018-19. While the Budget mentions using technology for increasing outreach of education, public health could be the other key beneficiary of this strategy through e-health and telemedicine services using the hub and spoke model. With GST falling into place thereby easing inter-border movement within the country, the proposed National Logistics Portal is expected to further streamline goods movement both within and outside the country. Countries like Singapore and South Korea have already benefitted significantly from similar initiatives. However, success would depend largely on implementation including integration with existing systems like Customs IceGate and putting in place the right institutional coordination and oversight mechanisms. Vishwas Udgirkar, Partner, Deloitte India on Railways and Transport Sector
Measures announced on Railways investment in this Union Budget are laudable, with focus on capacity creation, passenger safety, doubling of lines, and electrification. Specific mention of improving suburban train system in Mumbai is heartening announcement. Specific attention on Mumbai sub-urban rail and Bengaluru Metro Rail are welcome steps. However, we expected more on measures to encourage public transportation in budding cities for sustainable mobility.V Ramakrishnan, CFO, TCS
This is a forward looking, growth-oriented budget with a focus on the rural economy, healthcare for the poor, investments in infrastructure, Digital skilling, education and jobs creation. Several programs announced in the budget represent big strides in building a Digital India: the outlay for the smart cities program; the plans to explore blockchain technology; the national program for adoption of artificial intelligence and for research, training and skilling in cyber-physical systems; the innovative use of technology to digitally reimagine agricultural markets to empower small and marginal farmers; and the extending of broadband access to 5 crore rural citizens to bridge the digital divide. Lastly, having partnered the State Bank of India in their highly successful and seamless merger with six associate banks, we are excited about the planned merger of the three public sector insurance companies. I would rate this budget a score of 8 out of 10.K.G Krishnamoorthy Rao, Managing Director & Chief Executive Officer - Future Generali India Insurance Company Limited
The Budget was a clear reflection of government’s focus of increasing affordability in healthcare and housing, coupled with availability of necessary services and ensuring ease of living for senior citizens.
The launch of National Health Protection Scheme is a welcome move and the industry will surely look forward to its implementation.
Raising the limit of deduction for health insurance premium and/ or medical expenditure to INR 50,000/- under section 80D will push senior citizens to avail policies with higher limit and better coverage.
With raise in limit of deduction for medical expenditure for certain critical illness to INR 1 lakh for senior citizens will encourage people to avail for better healthcare services.
Merger of three PSU insurance firms is definitely a positive move for the entire insurance industry. Just like a whole is greater than a sum of individual elements, the merged entity will have higher scalability and lower operational costs. From the industry’s perspective, it will lead to healthy competition which will ensure innovation in product offerings and better customer service.
Expanding airport capacities more than five times to handle a billion trips a year will boost the travel insurance sector.
The establishment of affordable housing fund is a positive move for the retail housing sector, which will in turn amplify the importance of home insurance.
Lastly, the credit support provided to MSMEs will provide the required impetus to insurance for fire and allied perils and indemnity cover.More to come...