Analysis by Shyam S Kaggod€¦ · •Modicare-mother of all schemes? •Customs Duty hike •Corporate Tax •LTCG reintroduced •MSME sector •Subsidies •Jobs •Infrastructure

Analysis byShyam S Kaggod

Points to be covered• Situation of the economy at the juncture of the budget

• Important areas• Agriculture

• Modicare-mother of all schemes?

• Customs Duty hike

• Corporate Tax

• LTCG reintroduced

• MSME sector

• Subsidies

• Jobs

• Infrastructure

• Financials-Disinvestment, Fiscal Deficit, Revenue Deficit

Situation of the Economy• EoDB report

• SCR upgrade

• IBC one year

• Recapitalisation of the banking sector

• Demonetization

• GST

• Slowdown in the economic growth

• Investment lower

• Increasing crude oil prices leading to worries in inflation

Agriculture

• MSP (will it become a political trap?)

• Farmer Producer Organizations

• Institutional Credit

• Operation Greens

• GrAMS (Grameen Agricultural Markets)

• Green Gold

• KUSUM (Kisan Urja Suraksha evam Utthaan Mahabhiyan)

MSP

Social Sector

• National Health Protection Scheme

• Develop 150,000 rural care centers

• Ekalavya Model Residential Schools

• Revitalizing Infrastructure and Systems in Education (RISE) by 2022

Jobs

• Package for textile sector

• Contribution of women employees to EPF

• Credit support, capital and interest subsidy and promotion of innovations

Industries

• MSME sector

• Merger of three insurance companies• National Insurance Co• Oriental Insurance Co• United Assurance Co

• Customs duty hike

• EoDB

Taxation• FPOs-100% tax deduction

• Health and Education cess - 4%

• A Standard Deduction of ₹ 40000

• CBEC to CBIC

• Corporate tax reduced to 25% for companies reporting a turnover of up to ₹ 250 Cr

• LTCG on stocks reintroduced

Corporate Taxes

New Definition for MSMEs – Revenue Based• Micro - Up to ₹ 5 Cr• Small - above ₹ 5 Cr and Up to ₹ 75 Cr• Medium - above ₹ 75 Cr and Up to ₹ 250 Cr

Long Term Capital Gains (LTCG) Tax• LTCG on stocks was scrapped in 2004-05

• Investors will have to pay 10 per cent tax on profit exceeding ₹ 1 lakh made from the sale of shares or equity mutual fund schemes held for over one year

• Grandfathering clause applicable for the investments made till 31st Jan 2018 (Fair Market Value - acquisition price or closing price whichever is higher)

• LTCG only if the profits are higher than ₹ 1 lakh

• Will come into force from 1st April 2018

Long Term Capital Gains (LTCG) Tax

Infrastructure

• Infrastructure financing needs of ₹ 50 lakh Cr

• New generation of Airports for Bharat (NABH)

• Ten prominent tourist sites into Iconic Tourism destinations

• Bharatmala Pariyojana

Subsidies

Disinvestment

Deficits

N K Singh Committee Recommendations

• Draft Debt Management and Fiscal Responsibility Bill, 2017

• Debt to be used as the primary target for fiscal policy

• Autonomous Fiscal Council

Deficit

Year Debt to GDP FD

2018-19 48.8% 3.3%

2019-20 46.7% 3.1%

2020-21 44.6% 3.0%

Growth Expectations

• GDP growth of • FY18-6.5%

• FY19-7.2%

• Having said so, there are some concerns• GST related issues

• Monsoon

• Rising oil prices

• Capital flows

ConclusionThe budget scores in

• Agriculture sector

• Health sector

• Corporate taxes

• Disinvestment targets

The budget falls short in

• Job creation

• Fiscal deficit and revenue deficit

• Promotion of make in india though customs duty hike

• Revival of capex