The 2018 Budget goes back to first principles to shine light on some of India’s core sectors — agriculture, MSME and infrastructure. Improving road and rail infrastructure has been a recurring theme of this administration’s budgets, and 2018 saw a continuation of the same.
The Finance Minister allocated Rs 50 lakh crore to improve infrastructure, including roads, railways, airports, etc. This will be hailed as a welcome move. India needs better connectivity to knit its vast hinterland and bring manufacturing and consumption centres closer. The Budget’s focus on building more roads and transitioning the railways to broad gauge and electrification will go a long way in enabling higher efficiencies in freight and transportation.
Also welcome is the long-term plan to grow air capacities five-fold to enable 1 billion trips annually. This Budget stands out from earlier editions in terms of changes to the direct and indirect structure. With GST already rolled out, the minister made no major changes to indirect taxes. The highlight is the reduction of corporate tax from 30% to 25% for organisations earning less than Rs 100 crore. This move will particularly benefit the MSME sector. Another significant change is the 10% long-term capitals gain tax, by which the government hopes to leverage India’s equity markets to increase its revenues.
The strongest focus of the Budget is on India’s agricultural sector, with the minister stating that the intent is for farm incomes to double by 2022. Farm reforms have been a crying need for decades and this Budget aims to tackle one of the biggest issues faced by farmers — the disconnect between cost and income. The Budget has announced that minimum support pricing (MSP) of crops will be linked to production costs and fixed at 1.5 times the cost. This will help farmers earn a return on their investments, and be less vulnerable to weather and volatile market cycles.
Apart from these above, the Budget has taken a social stance by introducing health insurance coverage for all. The announcement of `5 lakh medical cover for 10 crore households is a huge positive step that will bring over 50 mn individuals under insurance coverage and provide them a much-needed financial net. There were other big social messages like free gas connections for about eight crore households.
Education got a special mention as Finance Minister stated the intent to bring more of India’s schools into the digital era. The overall theme seems to be inclusive growth – to support emerging sectors — small to medium scale enterprises, farms, animal husbandry units, textiles, leather, construction, etc. By infusing funds directly into these sectors, the Budget clearly hopes to boost jobs and revenues, and thus, trigger greater and more sustainable consumption patterns.
Kumar Mangalam
Birla Chairman,
Aditya Birla Group