Budget 2018-19

This contains tangible targets it aims to meet   The government will issue its ‘outcome budget’ later this week. This is to contain tangible targets, including output and outcome, that it aims to meet for all schemes and programmes it funds. Outcome-based budgeting began from the Union Budget 2017-18 . The idea is to monitor centrally sponsored schemes, partly funded schemes, loans, programmes and any other endeavour into which funds are pumped. Schemes were earlier monitored on three parameters — input, activity and output. They are now monitored on outcome and impact as well. For example, the Pradhan Mantri Fasal Bima Yojana saw Rs 90 billion allocated to it in 2017-18. With that sum, the Centre aimed to deliver insurance coverage to 40 per cent of the gross cropped area. The outcome it hoped for was risk minimisation by 60 per cent of about 60 million farmer households. Similarly, the urban component of the Pradhan Mantri Awas Yojana was allocated Rs 45 billio...

Arun Jaitley announcing during Union Budget speech that virtual currencies are no legal tender Budget 2018  : With Finance Minister Arun Jaitley announcing that virtual currencies are no legal tender and that the proliferation of its use for illegitimate financing will be curbed, industry experts urged him to regulate, not curb, them. "Cryptocurrencies are no legal tender and the government discourages its use. However, the government will look at the utilisation of Blockchain (a distributed digital technology that supports cryptocurrencies)," Jaitley said in his Budget speech in Parliament. Bipin Preet Singh, Co-founder of e-wallet MobiKwik, reacted that "the government should consider regulating cryptocurrencies than curbing their use entirely". Neither the government nor the Reserve Bank of India (RBI) has authorised any virtual currency as a medium of exchange till date but the momentum for such virtual currencies is catching up rapidly i...

Changes in FRBM Act, through Finance Bill, will also ensure govt does not have to report revenue deficit Budget 2018 : The Narendra Modi-led government is using the Finance Bill 2018 to insert provisions in the Fiscal Responsibility and Budget Management (FRBM) Act, in a move that will enable it to incur higher-than-mandated borrowing, and possibly spending, till the 2024 Lok Sabha election cycle. Moreover, a fiscally ideal situation in which tax and non-tax revenues are used for administrative expenses and capital receipts, including market borrowings, are used for infrastructure expenditure, is likely to be upended as well. Such a situation could also provide for further amendments proposing that the Centre be no longer obliged to report revenue deficit numbers. The Centre is looking to amend the FRBM Act to allow it to come down to a fiscal deficit target of 3 per cent of GDP by 2020-21, as opposed to 3.5 per cent in 2017-18. However, the debt limit of 40 per cent...

The move will primarily impact luxury car companies like Mercedes Benz, BMW, Audi and Volvo and bike brands like Triumph and Harley Davidson. Budget 2018 : Imported luxury cars and top-end bikes and those locally assembled with imported components will turn expensive after the Budget hiked customs duty on completely built units (CBUs) and completely knocked down (CKD) units of automobiles. In a push for locally manufactured auto components and tyres, customs duty on these was also hiked. The customs duty on CBU automobiles has been raised to 25 per cent from 20 per cent earlier, a move that will make these imported vehicles expensive by five per cent. The duty on CKD products have been increased from 10 to 15 per cent. The move will primarily impact luxury car companies like Mercedes Benz, BMW, Audi and Volvo and bike brands like Triumph and Harley Davidson. Roland Folger, Managing Director & CEO, Mercedes-Benz India said the increase in the basic customs duty...

The finance minister Arun Jaitley also introduced a 10% tax on long-term capital gains over Rs 100,000 Finance Minister Arun Jaitley presented the Union Budget 2018-19 on Thursday while dealing with multiple pressures. The current fiscal year, 2017-18, was a year of severe disruptions, including especially the introduction of the goods and services tax or GST, and Jaitley pointed out that he had lost at least a month of indirect tax revenue as a consequence. General elections are fast approaching, and the agricultural sector needed support. Jaitley thus chose to deviate from the path of fiscal consolidation to which he had previously committed; the fiscal deficit for the ongoing year will be 3.5 per cent of gross domestic product (GDP), and for the coming year is targeted to be 3.3 per cent of GDP as opposed to the original target of 3 per cent. The sovereign bond market reacted sharply as a result, with 10-year government securities spiking up by 18 basis points to 7.61 per c...

The National Health Protection Scheme is set to triple India's healthcare spend, apart from increase patient volumes and lowering costs The government's flagship National Health Protection Scheme will increase patient access and lower healthcare costs, but corporate hospitals will have to tweak their business models in order to tap the growth opportunity, say health sector analysts. Union finance minister Arun Jaitley, in his budget speech on Thursday, announced the National Health Protection Scheme providing hospitalisation cover of Rs 500,000 a year to 100 million families. Jaitley indicated that the scheme was the first step towards universal healthcare and could be extended to cover more families, based on success. Currently, most of the healthcare spend is out-of-pocket and only about 20 per cent of the population has medical insurance. "An increased insurance coverage by the government will mean higher volumes for hospitals, as affordability wo...

Markets will be focused on how much India widens its fiscal deficit beyond the 3 per cent of gross domestic product projected for 2018/19 Union budget 2018 : Since his election four years ago, Indian markets have welcomed Prime Minister Narendra Modi’s campaign to mend patchy public finances and develop new areas of growth in Asia’s third largest economy. To keep investors’ confidence, however, Modi’s government will need to be seen containing the fiscal deficit, while also increasing spending in key areas of the slowing economy. Markets will be focused on how much India widens its fiscal deficit beyond the 3 per cent of gross domestic product projected for 2018/19. A Reuters poll showed most economists expect a 3.2 per cent deficit as the government looks to increase investments in key areas such as agriculture to bolster its re-election prospects in elections due by 2019. A modest widening of that nature would calm investors worried that the government ...

The tax exemption limit is expected to be increased from Rs 250,000 per annum to Rs 300,000 or more, and there could be some changes to tax slabs to lighten taxpayers' burden The budget 2018-2019 , is likely to get some relief for everyone as it is the last full-fledged budget of the BJP-led government ahead of the general elections in 2019 and the government is expected to follow a please-all strategy. The government is diligently working on various permutations and combinations to arrive at the right mix which ensures that the tax burden is not unreasonable and at the same time enough resources are mobilized for infrastructure development. We expect that the finance ministry is working on a proposal to increase the tax exemption limit from INR 2.5 lakh per annum to INR 3 lakh or more and introduce some changes in the tax slabs to lighten the taxpayers' burden. The corporate India also has great expectations from the upcoming Union Budget 2018 as this would be th...

Defence allocation accounted for 17% of the central government budget (Rs 21.46 trillion) in 2017-18   India is the fifth largest military spender (2016) in the world and the largest importer of arms, accounting for 13% of the world’s total imports between 2012 and 2016, according to the Stockholm International Peace Research Institute, a think tank. However, over three years to 2017-18, there was a 9% decline in budget allocation for capital investments against requirements, or “projections” in officialese, a factor that could delay procurement and modernisation of the armed forces, according to a report by the Parliamentary Standing Committee On Defence 2017-18, an advisory body to the defence ministry, presented to the Lok Sabha (lower house of Parliament) on December 19, 2017. The air force capital budget was 46% lower than its requirements, the Army's was 41% and the Navy's 32%, the report said. The budget for defence expenditure–including revenue (sa...

Will the Modi govt's last full Union Budget before general decisions 2019 will be a populist one? Everyone's eyes are currently on FM Arun Jaitley's Budget discourse on Thursday As Finance Minister Arun Jaitley inspires set to introduce Budget 2018, the last full Union Budget of the Narendra Modi-drove focal government in its present term, there is a foresight that he will fairly shed his judicious position for a more populist position one. The view radiates from the way that this will be the back priest's last opportunity to satisfy the voters through a Budget 2018 preceding 2019 general races. Populism in the administration's yearly spending plan could expect arrangement choices like lower impose rate for the salaried class, bring down corporate duty rates tuned in to Trump's generosity for the corporate class in the US and enormous bonanzas for India's ranchers. In the event that the Economic Survey, arranged by Chief Economic Advisor ...

Centre is merely collecting taxes in a divisible pool on behalf of the states, and sharing it with them   Union budget 2018 : Quoting Rabindranath Tagore on how a self-sustaining village can make a mark in democracy, the Economic Survey, tabled in Parliament on Monday, has expressed concern over increased dependence on revenue devolution instead of self-generation. While previous government policy statements have focussed on a cooperative federalism, the underlying theme of goods and service tax (GST), the Survey this time talks about fiscal federalism. It acknowledges there is an important legal argument that resources received by the states as part of successive Finance Commission verdicts are not “devolved” resources, but shared. In this view, the Centre is merely collecting taxes in a divisible pool on behalf of the states, and sharing it with them. But, this position, the Survey says, must be assessed against certain realities. It is difficult to dispel the ...

The median forecast from over 40 economists polled Jan 24-29 was for India's government to borrow 3.2 percent of gross domestic product (GDP) in fiscal 2018-19.   Union budget 2018 : India is expected to unveil only modest stimulus at this week's budget, a Reuters poll of analysts showed, despite it being the last before the next election, with government spending likely limited by longer-term efforts to trim the fiscal deficit. Fiscal consolidation was first proposed by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) government in its maiden budget in fiscal 2014/15, aiming to break a long line of Indian governments that preferred to borrow and spend. But in following budgets, the timeframe for reaching a reduction to a 3.0 percent fiscal deficit target was pushed back. The latest Reuters poll shows the government is expected to delay the timeframe for hitting that target by another year, for the third year in a row, due to setbacks in the...

Conditions were different when report came out; Budget won't be outright populist, govt must show fiscal discipline, says CEA The recommendations of the fiscal responsibility and budget management (FRBM) panel, which had recommended a fiscal deficit target of 3 per cent of gross domestic product, for 2018-19, have been rendered obsolete by circumstances, Chief Economic Advisor Arvind Subramanian told Business Standard in an exclusive interview, a day after presenting his latest Economic Survey. Subramanian indicated that while the upcoming budget 2018-19 will not be an outright populist document, fiscal targets have to be realistic. “The FRBM Panel’s roadmap has been rendered obsolete. The conditions were quite different when the report came out,” he said. The panel, headed by 15th Finance Commission chairman N K Singh, and which included Subramanian as a member, had submitted its report in April 2017. It had recommended a fiscal deficit target of 2.5 per cent ...

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen   Businesses waiting for Indian Prime Minister Narendra Modi to follow through on a pledge to cut corporate taxes may need to wait a bit longer. In his last full union budget 2018 before 2019 elections, Modi is facing a revenue squeeze that may make it difficult to deliver on a promise to lower the basic corporate tax rate over time to 25 percent from 30 percent. It’s a catch-22 situation for the premier, who is also trying to lure foreign investors at a time when the US, UK and other countries are lowering business taxes. Here’s a look at Modi’s challenge ahead of the government’s budget 2018 on Thursday. Why Cut? Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen. It’s part of his mission to improve India’s investment climate: he ...

There are concerns that the huge build-up of positions in equity derivatives could pose a systemic risk   Union budget 2018 : Ahead of Budget 2018, market regulator Securities and Exchange Board of India (Sebi) and stock exchanges are taking precautions, anticipating a significant run-up in the equity market. Sebi has asked brokers to collect higher margins from those with sizeable positions in futures and options. These include foreign institutions, wealthy investors and proprietary desks. There are concerns that the huge build-up of positions in equity derivatives could pose a systemic risk. Stock exchanges have asked brokers to mop up extra deposits from clients with significant exposure to derivatives. “In the joint meeting of exchanges and Sebi, it has been decided that markets should be alerted at different levels of MWPL utilisation so that investors can make an informed decision on whether to hold or square off their existing positions well before regula...

There may be a meta-preference manifesting itself in fertility-stopping rules, contingent on the sex of the last child, which notionally creates 'unwanted' girls, estimated at 21 mn, the Survey says   The Economic Survey 2018 reveals that Indian parents, still keen to have more and more male children, continue producing “until they have the desired number of sons”. The survey calls this phenomenon the son meta-preference, which involves parents adopting "fertility-stopping rules”, or having children until the desired number of sons are born. The country’s sex ratio, skewed in favour of males, has led to the identification of “missing” women. But there may be a meta-preference manifesting itself in fertility-stopping rules, contingent on the sex of the last child, which notionally creates “unwanted” girls, estimated at about 21 million, the Survey adds. “Consigning these odious categories to history soon should be society's objective,” notes the Survey. ...

Domestic equities have risen sharply on expectations of strong corporate earnings   The Economic Survey 2018 sounded a note of caution on the high equity valuations and hasn’t ruled out a possibility of a correction. After a sharp 23 per cent rally this financial year, the benchmark Sensex is trading at 27 times its trailing 12-month earnings. The broader-market BSE Midcap and Smallcap indices, which have outperformed the benchmark in FY18, are trading at even higher valuations of 47 and 105 times, respectively. “Sustaining these valuations will require future growth in the economy and earnings in line with current expectations, and require the portfolio re-allocation to be semi-permanent. Otherwise, the possibility of a correction in them cannot be ruled out,” the Survey said. Domestic equities have risen sharply on expectations of strong corporate earnings. However, the earnings growth has been elusive so far, only to belie analysts’ expectations. “Expectat...

According to the Survey, the Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks (SCBs) increased from 9.6 per cent to 10.2 per cent between March 2017 and September 2017 The performance of the banking sector in general and those in the public sector, in particular, continued to be subdued in the current fiscal, the Economic Survey 2017-18 said on Monday. According to the Survey, tabled in Parliament by Finance Minister Arun Jaitley, significant progress has been made for the Corporate Insolvency Resolution Process (CIRP) to enable banks to realise their dues. The Survey states that 525 companies have been admitted under CIRP and the total underlying default is Rs 128,810 crore. According to the Survey, the Gross Non-Performing Advances (GNPA) ratio of Scheduled Commercial Banks (SCBs) increased from 9.6 per cent to 10.2 per cent between March 2017 and September 2017, whereas, their Restructured Standard Advances (RSA) ratio declined from 2.5...

Sales during the first half declined by over 38 per cent when compared with the same period a year earlier, while unit launches fell by over 56 per cent during the same period  Union budget 2018: India’s real estate sector hit rock bottom, falling to a five-year low in 2017-17, and a change in market sentiment to attract more foreign direct investment (FDI) would be required for a revival of the beleaguered sector, the Economic Survey 2017-18 notes. While residential real estate market saw sales of only 58,000 units in the first half of 2017, new home sales fell to a five-year low of about 101,850 units during this period. Sales during the first half declined by over 38 per cent when compared with the same period a year earlier, while unit launches fell by over 56 per cent during the same period, the Survey said. According to the Survey, the share of real estate sector, including ownership of dwellings, accounted for 7.7 per cent in India’s overall gross value added in 20...

This is the last full budget of the present government and the last opportunity for it to demonstrate its commitment to India's health and nutrition Union budget : Slow improvements in basic indicators of maternal and child mortality, double burden of communicable as well as non-communicable diseases, high out-of-pocket expenditure, a failing public sector and heavily commercialised private sector characterise the healthcare crisis in India. The year 2017 saw a number of incidents in the health sector across the country which highlight each of these issues. While the deaths of children in a public hospital in Gorakhpur due to alleged disruption of oxygen supply highlighted the systemic failures in public health provision, the cases of excessive billing and negligence in big corporate hospitals (e.g. the case of dengue death in Fortis Hospital, Gurugram) showed that the unregulated private sector is no solution to India’s healthcare problems. The protests agains...