Budget 2022

Budget 2018 is pro-poor, agri-focused

Richa Mishra |K. R. Srivats | | Updated on: Feb 01, 2018
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Arun Jaitley levies long term capital gains tax on securities; standard deduction makes a comeback for salaried class, fiscal deficit for 2017-18 exceeds target to 3.5% of GDP

In what could be seen as adopting a middle path – bit of politics as well as economics – the Finance Minister Arun Jaitley’s Budget 2018-19 had a lot for rural India, providing much needed support to the distressed farm sector.

Farm focus

To ensure that the message reaches out to the right audience with general elections next year, the Finance Minister took to Hindi when talking about agriculture/farm sector. The farmers got a huge boost with government now promising to peg minimum support price (MSP) for kharif crops at 1.5 times the cost of produce for such crops.

SME gets a boost

Finance Minister Arun Jaitley, presented the last full fledged budget of Modi-government, went the extra mile to favour the small and medium businesses in terms of corporate tax rate reduction to 25 per cent. However, large corporates were left high and dry in terms of promised corporate tax rate reduction.

Sentiment dampener

Clearly, the sentiment dampener for investors and stock markets was the levy of long term capital gains tax, 10 per cent distribution tax for equity mutual funds and slippage in fiscal deficit targets.

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On the personal tax front, the Finance Minister while giving on one hand took away from the other by increasing the cess amount. At present there is a three per cent cess on personal income tax and corporation tax consisting of two per cent cess for primary education and one per cent cess for secondary and higher education. In order to take care of the needs of education and health of BPL and rural families he has increased the cess by one per cent. The existing three per cent education cess will be replaced by a four per cent “Health and Education Cess” to be levied on the tax payable.

Fiscal deficit target

As against the earlier announced fiscal deficit target of 3.2 per cent of GDP for 2017-18, the revised estimate data presented by Jaitley pegged the fiscal deficit at 3.5 per cent of GDP for current fiscal. For 2018-19, the fiscal deficit target has been pegged at 3.3 per cent instead of earlier envisaged 3 per cent.

The FRBM Act is proposed to be amended to put the fiscal deficit target at 3 per cent by 2021.

Marginal relief

Jaitley's budget speech had marginal relief for Salaried class with the reintroduction of 'standard deduction', which has been pegged at Rs 40,000.


Budget 2018-19 had clear message on Air India with government promising "strategic privatisation" of the airline. Thanks to the HPCL-ONGC deal, the Centre has comfortably passed the Rs 72,000 crore divestment target and poised to achieve Rs 1 lakh crore this fiscal. For the next fiscal, the target has been pegged at Rs 80,000 crore.

Debt market

Budget 2018-19 also had an emphasis on development of the debt markets in India. SEBI will now look at measures to ensure that listed corporates raise at least 25 percent of their resource requirement via debt markets.


Budget 2018: Resources transferred to States


Published on February 01, 2018

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