From the world's largest healthcare programme, to massive spending on rural infrastructure, Jaitley's budget focuses on agriculture, and achieving high growth rate. In his last full year budget before the 2019 national election, Indian Finance Minister Arun Jaitley spoke about a massive funding for rural infrastructure and win over votes from the villages. It is evident that general budget 2018-19 focuses on faster growth. Presenting the budget in the Parliament, Jaitley said that the Indian polity, society, and economy had shown remarkable resilience in adjusting with structural reforms.
In his first bilingual speech, he reiterated Modi government's promises. “Four years ago, we pledged to the people of India to give this nation an honest, clean, and transparent government. We promised a leadership capable of taking difficult decisions and restoring strong performance of Indian economy. We promised to reduce poverty, expedite infrastructure creation and build a strong, confident and a New India.” He added, “When our government took over, India was considered a part of fragile, a nation suffering from policy paralysis and corruption. We have decisively reversed this. The government, led by Prime Minister Narendra Modi, has successfully implemented a series of fundamental structural reforms. With the result, India stands out among the fastest growing economies of the world.
This year's budget, he said, will consolidate these gains and focus in particular on strengthening agriculture and rural economy, provision of good health care to the financially challenged, taking care of senior citizens, infrastructure creation, and working with the states to provide more resources to improve quality of education.
WORLD'S LARGEST HEALTHCARE PLAN
In a national healthcare scheme that is set to give the much-talked about Obamacare a complex, Jaitley announced an Ayushmann Bharat for over half a billion of India's poor citizens in a massive giveaway to voters. Jaitley said India's most vulnerable families would be able to access up to Rs 5,00,000 a year for hospital cover through the initiative. The government currently provides Rs 30,000 towards healthcare for poor families, an amount that is insufficient to cover most medical procedures. The country spends a little over one per cent of its GDP on public healthcare, one of the lowest proportions in the world.
“This will be the world's largest government-funded healthcare programme. The government is steadily but surely progressing towards a goal of universal health coverage,” Jaitley said. The scheme would take public healthcare in the country “to a new aspiration level.” Adequate funds, the FM said, would be provided to roll out the insurance programme to 500 million of India's poorest nationwide. He said the government was “seriously concerned” that millions of Indians had to borrow or sell assets to receive adequate treatment in hospital.
AGRICULTURE: OPERATION GREENS AMONG SLEW OF MEASURES
Jaitley has outlined a slew of measures to boost agricultural production and the rural economy, extending an enhanced support for the existing schemes to the tune of Rs 14.34 trillion in the Union Budget. The first subject touched upon by the minister in his speech, he said, “The focus of the government next year will be to provide maximum livelihood opportunities in rural areas by spending more on livelihood, agricultural, and allied activities and construction of rural infrastructure.” He added, “In the year 2018-19, for the creation of livelihood and infrastructure in rural areas, the total amount to be spent by ministries will be £143.4 billion from extra budgetary and non-budgetary resources.”
Efforts will be made to link small and marginal farmers to markets, in order to get adequate remuneration for their produce. One of the steps include setting a minimum support price at 1.5 times the cost of production of Kharif corps. Another step include an increase in agricultural credit to Rs 11 Trillion. Other measures include development and upgradation of 22,000 rural markets at a budget of £200 million, and provision of £50 million for 'Operation Green' to promote agriculture logistics.
Ahead of the national elections, the government will make efforts to link villages and rural roads to agriculture markets, secondary schools, and hospitals, under the Pradhan Mantri Gram Sadak Yojna (PMGSY). The corpus of funds available to women in self-help groups was £4.20 billion in 2016-17, Jaitley said, adding that this would be increased to £7.50 billion by March 2019. An increase in funds for the National Rural Livelihood Mission has been announced under the Rural Ministry to £575 million in 2018-19, from £450 million last year. Jaitley also announced an allocation of £260 million to ensure irrigation facilities in 96 irrigation deprived districts, besides funds to boost fisheries and animal farming.
RAILWAYS AND TRANSPORT
An all-time high allocation to rail and road sectors is committed to further enhance public investment. Modi himself reviews targets and achievements in infrastructure sectors on a regular basis. Railways Capital Expenditure has been pegged at £14.85 billion. Four thosand km of electrified railway network is slated for commissioning during 2017-18. Work on Eastern and Western dedicated Freight Corridors is in full swing. Adequate number of rolling stock- 12,000 wagons, 5,160 coaches, and approximately 700 locomotives are being procured this year.
A target of track renewal of over 3,600 km has been made, and redevelopment of 600 major railway stations is being taken up. The infamous Mumbai local train network will have 90 km of double line tracks at a cost of over £1.10 billion, 150 km of additional suburban network is being planned at a cost of over £4 billion, including elevated corridors on some sections. Also, a suburban network of approximately 160 km at an estimated cost of £1.70 billlion is planned to help boost the Bengaluru metropolis.
GOVT MISSES FISCAL DEFICIT TARGET
The fiscal deficit target for 2018-19 has been set at 3.3 per cent of the gross domestic product (GDP) to accommodate higher demand for expenditure against the earlier target of 3 per cent. Modi government also revised deficit target for the year ending in March 2018 to 3.5 per cent of GDP from the targeted 3.2 per cent. Jaitley, in his last full budget, accepted key recommendations of the NK Singh Committee on fiscal discipline to reduce debt-to-GDP ratio to 40 per cent by 2024-25 from 50.1 per cent in 2017-18, and has consequently, introduced amendments to the present Fiscal Responsibility and Budget Management Act.
A fiscal deficit occurs when a government's total expenditures exceed the revenue that it generates, excluding money from borrowings. Deficit differs from debt, which is an accumulation of yearly deficits.
The Modi government now aims to reduce its debt-to-GDP ratio to 48.8 per cent in 2018-19, 46.7 per cent in 2019-20, and 44.6 per cent in 2020-21, while fiscal deficit as a percentage of GDP is targeted to be reduced to 3.3 per cent, 3.1 per cent, and 3 per cent respectively. Jaitley has also marginally increased its borrowing programme to Rs 6.06 Trillion for the next fiscal from Rs 6.05 Trillion in the current fiscal year.
While the budget estimate of fiscal deficit for 2017-18 was 3.2 per cent of GDP, the revised estimate is now 3.5 per cent, the same as 2016-17. The government achieved the fiscal deficit target of 3.5 per cent of GDP after cutting down capital expenditure by £3.60 billion in 2017-18. Jaitley pinned the slippage to the government receiving GST revenue for 11 months in 2017-18 and facing a shortfall in non-tax revenue due to lower receipts from spectrum auction. He added that part of the shortfall was met through higher direct tax collections and disinvestment.
EXPERTS REACT: BUDGET STRIKES A FINE BALANCE
In the annual announcement and reveal of the Budget this year, four different sectors namely health, education, agriculture and infrastructure were the focus areas. FM Arun Jaitley also called the country's cleanliness campaign as “one of India's biggest success stories”.
Experts from different fields covering issues from toilet construction, to air pollution, weighed in on the announcement.
Modi's Swachh Bharat Abhiyan was launched in 2014, when toilet access was promised to every citizen of India. As many as 60 million toilets have been built in the last three years, and the target for this year remains 20 million toilets. However, the budget has reduced the sanctioning amount to £1.69 billion from last year's £1.92 billion. Mamata Dash, Campaign Manager at WaterAid India said, “My reaction was a rather disappointing one. If you calculate then by March 2019 India will have a total of 80 million newly built toilets and the government’s overall target is 110 million by October 2019. Building the rest of the toilets within those few months is a big question mark.”
She added, “This is absolutely regressive. Although fund isn't the only vital aspect of the mission. The government also needs to monitor if the funds are getting utilised. Questions like how much of last year's Swachh Bharat budget has been used needs to be answered.”
Indoor and OutdoorPollution
Jaitley called air pollution in Delhi NCR “a cause for concern”, adding that “special scheme will be implemented to support Haryana, Punjab, UP, and Delhi NCT” to address the issue. He spoke about the Ujjwala Yojana, which aims to reduce indoor air pollution faced by women from burning firewood for cooking. Anumita Roychowdhury, Executive Director, CSE, said, “Addressing the huge problem of crop burning is definitely the need of the hour. Giving subsidies to farmers will hopefully bring down the pollution levels. But one needs to remember here that pollution isn't limited to northern regions of India, it is a national crisis.”
She said indoor pollution is a very serious health concern. “Providing clean energy via preventing firewoods is a significant move. This needs to be scaled up across India.”
Keeping the aching agriculture sector and its farmers this year, Jaitley's budget has promised the country's backbone a minimum support price (MSP) that will be 1.5 the production cost of crops to honour BJP's promise of implementing the MS Swaminathan report. The decision has been hailed by experts. Prof Satish Verma of Reserve Bank of India chair at Centre for Research in Rural and Industrial Development, Chandigarh, called the move appreciable and that it reflects the Centre's intent to implement the Swaminathan Commission's recommendations.
“Even if the government tries to achieve this with steps to reduce cost of production, it's a win-win for the farmers,” he said. Dr Subhash Sharma, director, Centre for Economic Policy, said the government had taken a revolutionary decision to link the MSP calculation to cost of production. “Till now, farmers used to complain that the MSP increase was not in sync to the increase in production cost.”
Managing Partner at Head-Tax and Regulatory services, BDO India, Milind Kothari commended the Budget announcement relating to the area of healthcare. “The announcement in the area of healthcare is clearly path-breaking for the sheer size, coverage, and the amount committed per family. This ushers India firmly in the next generation of social security as India moves aggressively towards a progressive developing economy.
Antony Jacob, CEO, Apollo Munich Health Insurance, said, “ The world's largest government's funded healthcare program - National Healthcare Protection Scheme (NHPS) announced by our FM, with approximately 500 million beneficiaries, an insurance scheme of up to Rs 5,00,000 per family per year for secondary and tertiary care hospitalization is a welcome move not just to maintain a healthy India but this I believe will also create several new jobs in the country as new healthcare facilities will come up in smaller districts and villages. This move will go a long way in empowering India's poor and underprivileged.”
MAJOR INDUSTRIAL PLAYERS RESPOND TO THE UNION BUDGET
Vice President of business consulting firm Frost & Sullivan, Mamta Wadhwa said, “The impact of 2018 budget is positive for Agriculture and Food Processing sector, affordable housing sector, health insurance industry and the textile sector. Demand for agriculture-related products such as fertilisers, crop protection chemicals, micro irrigation equipment will go up. Since the focus will be on technology and modernisation, warehousing and logistics industry will also get benefitted. The affordable housing sector will continue to grow in the coming years. We will see increased growth in low income/ small budget houses in tier 1 cities, and growth in housing in tier 2 and 3 cities.”
She added, “This will boost the health insurance sector, health service providers, and also the pharmaceutical sector in general. Overall healthcare expenditure will get a boost. Share prices of most of the sector in general. Overall healthcare expenditure will get a boost. Share prices of most of the sector in general. Overall healthcare expenditure will get a boost.”
Hemal Zobalia, partner at Deloitte India, said, “Budget 2018 demonstrates the Finance Minister's intent to boost investments in rural development, education, healthcare and social sectors. The budget recognises the role of “Infrastructure sector” as growth driver of the economy with an estimated investment requirement of a massive £500 billion. All time high allocation has been made to rail and road sector. The Finance Minister has again shown interest to develop smart cities and bullet trains, but more action is expected at the ground level.”
Kunal Bahl, Co-founder & CEO, Snapdeal, hailed the budget saying, “We commend the focus on growing the digital footprint, providing better physical infrastructure, and improving not just the ease of doing business but also ease of living in the country. The enhancement of digital infrastructure with more broadband access in rural parts, unique ID to companies, record allocation to building national highways and railways, and multifold increase in airports will go a long way in broad-basing growth in the economy.”
CONG UNIMPRESSED WITH THE BUDGET, SAYS GROUND REALITIES DIFFERENT
The main Opposition party has called the Union Budget a “big let down” and “defeatist”, accusing the Modi government of throwing in the towel instead of making belated efforts to solve problems. Party president Rahul Gandhi tweeted, “4 years gone; still promising farmers a fair price. 4 years gone; fancy schemes, with no matching budgets. 4 years gone; no jobs for our youth. Thankfully, only one more year to go.”
Former finance minister P Chidambaram said the government failed to boost exports, agriculture, healthcare, jobs, investment and provide tax relief. He said health insurance was a welcome step but much will depend on implementation. “The government has run out of ideas to boost exports. The finance minister has imposed additional customs duties to restrict imports. The Prime Minister’s speech at Davos has been forgotten within a few days.” He added, “There is nothing to indicate that farmers' real income will rise. Farm sector distress will continue and deepen, putting in peril the lives of a majority of people primarily dependent on agriculture.”
Meanwhile, BSP leader Mayawati has called the Budget anti-poor and pro-capitalists. She has stated that the government showed little concern for the poor, labourers, farmers, and the working class, which is why unemployment is rising and the gap between the rich and poor is increasing.
Former prime minister Manmohan Singh said tall promises were made in the budget, however, ground realities were different. Singh raised doubts on whether the Modi government had the money to back its budgetary announcements. In a meeting of opposition parties, he said the government could not achieve the growth it had projected in the budget. He said to double the income of farmers, as promised, agri growth will have to touch 12 per cent which was not possible. He said the budget's objective painted a bright picture but did not appear to be supported by the reality of fiscal arithmetic.
Jaitley's budget hiked custom duties on several products that are imported in the country. Following are a list of things that will make a hole in your pocket this year.
Imported products that will become costlier
Cars and motorcycles, Mobile phones, Silver, Gold, Vegetable, fruit juices, including orange and cranberry, Sunglasses, Miscellaneous food preparations other than soya protein, Perfumes and toilet waters, Sunscreen, suntan, manicure, pedicure preparations, Preparations for oral dental hygiene, denture fixative, pastes and powders; dental floss, Pre-shave, shaving or after-shave preparations, Deodorants, bath preparations, depilatories, perfumery, Scent sprays and similar toilet sprays, Truck and Bus radial tyres, Silk Fabrics, Footwear, Coloured gemstones, Diamonds, Imitation jewellery, Smart watches/wearable devices, LCD/ LED TV panels, Furniture, Mattresses, Lamps, Wrist watches, pocket watches, clocks, Tricycles, scooters, pedal cars, wheeled toys, dolls’, carriages, dolls, toys, puzzles of all kinds, Video game consoles, Articles and equipment for sports or outdoor games, swimming pools and paddling pools, Cigarette and other lighters, candles, Kites, Edible/vegetable oils such as olive oil, groundnut oil
Products that will become cheaper
Raw cashew nuts, Solar tempered glass or solar tempered glass used for manufacture solar panels/modules, Raw materials, parts or accessories used in making cochlear implants, Select capital goods and electronics such as ball screws and linear motion guides.