Budget 2018: Harmonising Populism and Pragmatism

-

While FM must have an eye on the LS elections  and also the impact of the low vote share % in Saurashtra, one thing which must be applauded that there were no giveaway subsidies and no loan waivers which has been very common in the past.

Currently the government is facing number of constraints and challenges like:

1. 40% increase in oil prices over last 6 months
2. Slowdown in growth
3. GST impact
4. Inadequate private investment and distress in agriculture

This is a pro Rural, pro Agriculture and pro Woman budget. While the middle class might be disappointed, we must accept the fact that we need to take care of the 90% of the population which lags behind.

The fiscal deficit target has been eased at 3.3% of the gross domestic product to accommodate higher demand for expenditure against the earlier target of 3%. While this might disappoint many, one needs to understand that the higher target is set in a country which has introduced bank re-capitalization, GST implementation and still absorbing slowdown due to demonetization.

 The major focus for this year budget is on:


Key Numbers


  • India’s Economic Size: USD 2.5 trillion
  • GDP Expected: 6.5%
  • Total expenditure of this year’s Budget: ₹ 24, 42,213 crore
  • Fiscal Deficit: 3.5% of GDP
  • Current Account Deficit: 1.2% of GDP
  • CPI: 4.88%
  • WPI: 3.93%
  • Forex Reserve: $409 Billion


WORLD'S LARGEST HEALTH PROTECTION PLAN

This is one of the most audacious step in the budget. A new Flagship National Health Protection Scheme, providing health insurance cover of ₹5 lakh per family per year. The Scheme will cover 10 crore vulnerable families, with approximately 50 crore beneficiaries.

DOUBLING FARMS INCOMES BY 2022

This seems fanciful and unrealistic, simply because it would mean growing the agriculture sector annually at 12%. The agriculture growth rate hovers between 2-3%. Instead, FM should have set realistic target of doubling the growth rate itself to 6%.

SOPS TO MSMEs

Companies with turnover of up to ₹ 250 crore to be taxed at 25 per cent. In-fact the corporate tax should be further reduced overall as our cost of capital is very high. That is needed if India has to grow at 8% annually.

LONG TERM CAPITAL GAIN TO BE TAXED

Long-term capital gains (LTGC) tax is back. The long-term capital gains tax will now be taxed at the rate of 10%, if your cumulative capital gains exceeds ₹ 1 lakh in a year. While the good news is that this is not retrospective i.e. all the gains up to 31 January 2018 would be grandfathered. I believe in coming years there might be tax slabs for LTCG as well.

WOMEN

Finance Minister has announced that the Centre intends to increase free LPG connections to 8 crore women living below poverty line. Also this Budget has reduced the rate of Employee Provident Fund for new women employees for the first three years of their employment to 8% and thus it increases the take home salary for new women employees.

BIG AGRICULTURAL & RURAL BOOST

The Minimum Support Price (MSP) for notified kharif crops would be 1.5 times of the cost incurred by farmers for production. There might be an inflationary impact of this, prompting the RBI to consider tightening its monetary policy. Also FM has extended the facility of Kisan Credit Card to animal husbandry, thereby providing farmers a much-needed cushion to meet short-term credit requirements. The government has also extended the 100% tax deduction to Farmer producer company having 100 crore turnover. Overall, budgetary allocation for the agriculture ministry has gone up by about 15%.

CRYPTOCURRENCY

India’s government wants to kill bitcoin, but it loves blockchain. While bitcoins will be banned, government will explore use of blockchain technology proactively for ushering in the digital economy. Andhra Pradesh government is working with Swedish startup ChromaWay to set up a blockchain-based land registry system that allows people to collateralise property, get loans, and invest against that asset

The economy has shown signs of recovery in the second half of the year. Industrial production for instance has picked up after bottoming out in June 2017. In November, IIP growth surged to a 25-month high on the back of a manufacturing boost. With this budget aimed at inclusive economic development, there seems to be an overall balancing act with something for all sections of the society, particularly the farmers and poor households. A cautiously populist budget in a pre-election year. 




Comments

Post a Comment

Popular posts from this blog

HR - Shared Service Center - An Introduction

-
Image
Shared Services is a way of organizing administrative functions to optimize the delivery of cost‐effective, flexible, reliable services to all “customers”. According to Wikipedia: Shared Services refers to provision of a service by one part of an organization or group where that service had previously been found in more than one part of the organization or group.  Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider. The key is the idea of 'sharing' within an organization or group. When transitioning to a HR shared services model, organizations should structure the shared services center (SSC) to most effectively meet business objectives. Multinational organizations should determine whether shared services are most effectively delivered through a number of centers based on business groups and regions, or through one global center. Further, while implementing SSCs, organizations s
Read more

The Rebellious Future of HR - Blockchain Technology & Chatbots ?

-
Image
The next Evolution in HR Technology will be far more rebellious than the milder revolutions in the previous historical periods. No new technology since the dawn of the internet has captured the imagination like Blockchain and Chatbots. Imagine your TA team asks SIRI to find the next applicant for a certain role or ability of SIRI to do a compensation analysis based on your voice commands. Imagine you know for sure that each and every word written in a person’s resume is 100% correct and it’s next to impossible to counterfeit Resumes. Things are indeed moving ahead towards these directions. In fact, Recruit Technologies and Ascribe announced in April 2016, a strategic alliance to bring Blockchain Technology to the Human Resources industry to increase transparency and in turn address fraud in HR credentials. They are investigating the possibilities and practical uses of how Blockchain Technology can be applied to the human resources sector; they will begin by developing a
Read more

Demystifying “Intellectual Property”

-
Image
According to World Intellectual Property Organization (WIPO) intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, and symbols, names and images used in commerce. IP is an intangible asset to a company. It gives business partners and financial institutions the confidence to invest in or collaborate with the organisation. Non-lawyers often think that a same law applies/governs to patent, trademark, copyright etc. Well the truth is although all fall under a common umbrella called IP however these laws originated separately, evolved differently and covers different aspects. In Richard M. Stallman's article "Did You Say “Intellectual Property? It's a Seductive Mirage" he mentions that for instance, Copyright law was designed to promote authorship and art, and covers the details of expression of a work. Patent law was intended to promote the publication of useful ideas, at the price of giving t
Read more