Budget 2018 Analysis

A Tactical Analysis and Summary of Budget 2018

    • Propose to increase the customs duty on mobiles from 15% to 20% and on some other mobile parts to 15%, and some parts of TVs to 15%


    • Propose to increase the health and education cess to 4%


    • Propose to tax long-term capital gains exceeding Rs 1 lakh in listed stock at 10%.


    • Rs 50,000 additional benefit to senior citizens for investment in the medical claim.
      A standard deduction of additional Rs 40,000 for salaried employees. This move will benefit 2.5 crore taxpayers. No changes in the structure of income tax of individuals.


    • Rs 7000 crore will be the revenue foregone for the reduced corporate tax on MSMEs.


    • I propose to extend the benefit of the reduced corporate rate of 25% for companies with a reported turnover of up to Rs 250 crore.


    • 100% tax deduction for the first five years to companies registered as farmer producer companies with a turnover of Rs. 100 crore and above.



    • 41% more returns were filed this year, which shows that more people have joined the tax net.


    • Demonetisation was received by honest taxpayers as ‘Imaandaari ka Utsav’.


    • Revised fiscal deficit estimate for 2017-18 is 3.5% of GDP, the fiscal deficit of 3.3% expected for 2018-19.


    • Automatic revision of MPs’ emoluments every five years, indexed to inflation.


    • Emoluments of President, Vice President and Governor being revised: Rs 5 lakh; 4 lakh; Rs 3.5 lakh per month respectively.


    • Exceeded the disinvestment target and collected Rs 1 lakh crore: FM.


    • The government insurance companies to be merged into a single entity, and subsequently listed in the stock exchange, as part of the disinvestment programme.


    • The government will assign every enterprise in India a unique ID on the lines of Aadhaar.
      The government has identified 372 basic business reform actions. Each state will take up these reforms.


    • We will explore the use of blockchain.


    • Rs 5.97 lakh crore allocated for infrastructure spending in India.


    • 5 lakh WiFi hotspots to be set up in rural areas to provide easy Internet access.


    • Redevelopment of 600 major railway stations has been taken up; Mumbai transport system is being expanded; the suburban network of 160 km planned for Bengaluru.


    • The government proposes to revamp the system of sanctioning of loans to SMEs. The information required for sanctioning the loan will be linked with GSTN and all required information can be fetched from GSTN Portal. It will help to grant the loans quickly and will help in reducing processing time.


    • UDAN will connect 56 unserved airports in India.


    • An institute is coming up at Vadodara to train people for the bullet train programme.


    • AMRUT programme will focus on the water supply to all households in 500 cities. Water supply contracts for 494 projects worth 19,428 core awarded.


    • Rs 1,48,528 crore is the capital expenditure for the Indian Railways for 2018-19… All trains to be progressively provided with WiFi, CCTV, and other state-of-the-art amenities.


    • Bharatmala project approved for better road connectivity at Rs 5.35 lakh crore.


    • Proposal to develop 10 prominent tourist destinations as Iconic tourism destinations.


    • Women’s contribution reduced to 8.33% towards PF in the first 3 years for new EPF accounts… The government will contribute 12% of EPF contribution for new employees in all sectors.


    • 70 lakh farming jobs have been created this year, shows an independent study.


    • Rs 3 lakh crore allocated for PM MUDRA Yojana.


    • The government is slowly but steadily progressing towards universal health coverage.


    • Announce allocation of Rs. 56,619 crore for SC welfare and Rs. 39,135 crore for ST welfare


Budget 2018

Budget 2018 – Expectations !!

The expectations are running high – what the Budget can or should deliver as it is the last full year Budget by the current government before May 2019 general election and post GST.

Budget 2018

Capital Market Response

Since 2010, the Sensex has gone up six times out of nine in the month after the Budget. Similarly, the benchmark index has also fallen eight out of nine times during the month prior to the Budget.

Though this time, we have not seen a significant correction ahead of the Budget, the chances of graph moving in the upside direction post Budget seems to be limited.

Receipts & Expenditure

  • FM Arun Jaitley has the unenviable task of balancing economic with politics. Fiscal deficit for FY18 could be 3.4% (below 3.5% for FY17) vs Budgeted 3.2% of GDP (a slippage of only 20 bps) due to higher divestment receipts and cutback in expenditure (mainly capital) offsetting the fall in GST collections and lower receipts from RBI.
  • Fiscal deficit for FY19 could be projected at 3.2% (thus being on the path to fiscal responsibility, though with some lag). For FY19, expenditure focus areas would be agriculture and housing.
  • In agriculture, the GoI would specialize in addressing the rural distress by subsidy mechanism wherever the market {price|market value|value} of crops fall below the minimum support price (MSP). Capex focus can be on irrigation, food provides chain, rural roads, and housing.

Common Man & General Business

On the taxes front, we have a tendency to expect to raise of exemption limits for people from ₹2.5 lacs presently to ₹3 lacs, company rate being cut to 25th for firms with annual sales up to ₹100 cr (vs ₹50 cr earlier), period of holding for LTCG being raised from this one year to 2 or 3 years, and no alternative major reliefs.

Budget 2018:  Lower corporate tax rate may  make all unhappy

Global Macros

If crude prices settle at $75+ in FY19 and/or GST collections do not grow robustly (leading to a further growth in GDP), then the stress on the fiscal deficit will become visible with its impact on inflation and interest rates.

Otherwise, CPI could hover @5% in H1CY18 and between 4 to 5% in H2CY18. The 10-year bond yields could remain in the 7.1-7.6% band for better part of CY18.

GST & Insolvency

Among indirect taxes, GST is the prerogative of the GST Council and hence apart from some policy direction, no changes in GST are expected out of the Budget. Some tinkering of import/export duty is possible.
GST collection growth and insolvency code progress are two major themes to follow in 2018.

Private consumption is expected to stay strong; 2018 monsoon could be a concern. Some populist giveaways are likely though without the major dent in the fiscal situation.

chartered accountant

Overall, we see fewer negatives from this Budget. Possibilities of an unexpected large positive are also limited.