Moves to boost the agricultural sector plus welfare measures such as health coverage for the poor were key elements in the 2018 Budget announced on Thursday by Indian Finance Minister Arun Jaitley.
Jaitley has proposed a fiscal deficit target of 3.3% of GDP for 2018-19, up from the 3% he set last year for the same period. This signals that the government is now willing to go easy on fiscal prudence.
The minister said the government would ensure that farmers get a better price for their produce. The government proposes to enhance minimum support price, build a Grameen Agricultural Market to help farmers sell their produce directly to buyers and increase allocation to food processing industry.
In a major step towards providing universal health coverage, the finance minister has announced a National Health Protection Scheme providing health insurance worth Rs 500,000 (US$7,835) for about 100 million poor families.
Despite widespread speculation during the run-up to the budget, there is little to cheer for the middle class as there was no change to the personal income tax structure.
However, the government reintroduced a standard deduction of Rs 40,000 ($627) for salaried employees in lieu of transport and medical expenses. The standard deduction is extended without asking for any proof of expense or investment. The employer can deduct tax at source after accounting for the standard deduction without much hassle.
In a move that could upset stock market investors, the government has introduced a long-term capital gains tax on the sale of listed securities on gains of over Rs 100,000 ($1,567). A tax of 10% will be levied if the gains exceed Rs 100,000.
Corporate tax of 25% will be extended to companies with a turnover of up to Rs 2.5 billion ($39.2 million) in 2016-17. At present, companies pay a base rate of 30% corporate tax, coupled with various surcharges and cess (a tax on a tax). The move is expected to provide relief for small industrial units, but not bigger firms.
The government has increased the target from disinvestment from state-owned enterprises to Rs 800 billion ($12.54 billion) for the financial year 2018-19, up by over 10% from the current year’s target.
Meanwhile, the government has made it clear that it does not recognize cryptocurrencies as legal tender and said it will take all steps to curb any such illegal transactions.