Union Budget 2018-19 addresses the major pain points of the economy at the current juncture and would go a long way towards facilitating the path of 8+ per cent GDP growth rate, stated the Confederation of Indian Industry (CII). It takes forward the landmark reform measures of GST, Insolvency and Bankruptcy Code, bank recapitalization and so on taken by the Government through the last three years.
“The Budget provides impetus to the sectors of agriculture and rural economy with many significant measures which will add to overall consumption and demand and boost growth. The support to MSME sector through lowering of the corporate tax rate to 25 per cent, increase in access to finance, and addressing non-performing assets would help alleviate the stress in the sector,” stated Ms Shobana Kamineni, President, CII.
She added, “As in previous Budgets, the Finance Minister has introduced some innovative steps which will add comfort to citizens and strengthen key growth drivers.”
The Budget aims to mitigate agrarian distress and a directional change is seen in the Finance Minister’s statement that agriculture is being considered as an enterprise. Hence, 22,000 rural markets will be strengthened as Gramin Agricultural Markets with physical infrastructure and digital technologies, to be exempted from the APMC Act. This will eliminate bottlenecks in linking farmers to markets. Farmer incomes will also be supported by the increase in the minimum support price to 1.5 times of the cost of cultivation.
In another innovative move, the Budget introduces the National Health Protection Scheme to provide benefits to 500 million people with an annual limit of INR 5 lakhs for hospitalization. Considering that out-of-pocket expenses cause many households to slip back into poverty, this will impart a huge measure of security to lower-income families, said CII. It is indeed commendable that this is envisaged as the ‘largest government-funded healthcare program in the world.’
The education sector sees a new initiative of ‘Revitalizing Infrastructure and Systems in Education’ (RISE) which would increase research investments and infrastructure in higher education institutions with a significant outlay of INR 1,00,000 crore over the next four years. This is in line with CII’s recommendation to encourage research in academia. CII is also happy to see the launch of the Prime Minister’s Research Fellows Scheme to provide fellowships to 1000 engineering students. The stress on teacher training and technology is also most welcome as this will take education to the next level in terms of quality.
The Budget addresses job creation in a big way by extending Government contribution to EPF of 12 per cent of wages for all new employees for the next three years, and also reducing the contribution for women to 8 per cent. Extension of fixed-term employment to all sectors was a key CII suggestion. The relaxation in the conditions for claiming the tax deduction on additional employment will help to boost new job creation in the formal sector which was the need of the hour.
The MSME sector has received high attention in the Budget. Relief in corporate income tax rates to 25 per cent for companies with a turnover of below INR 250 crore will greatly ease the burden for smaller enterprises. Expanding of MUDRA Yojana, online loan sanctioning and use of FinTech are positive steps for the sector.
On the tax side, 100 per cent tax deduction to companies registered as farmer-producer companies with a turnover of INR 100 crore is another big step, which would boost the Operation Greens Mission of the Government.
Reintroduction of standard deduction on salaries and removal of TDS for senior citizens on FDs and post office deposits up to INR 50,000 is a welcome move, which would go a long way in raising the standard of living of the middle-class population.
Introduction of long-term capital gains exceeding INR 1 lakh at the rate of 10 per cent without allowing the benefit of any indexation may impact the market sentiments in the short run; however, the revenue realisation would contribute to Government resources.
Customs Duty on certain products, such as mobile phones and televisions, has been increased to provide a fillip to the ‘Make in India’ initiative. The timeline has been fixed for adjudication of cases by the departmental adjudicative authority.
Commenting on the Budget, Ms Kamineni complimented the Finance Minister on adhering to the path of fiscal prudence and inclusive growth.