Expectation across sectors: Budget 2018-19

We are only a day away from Finance Minister Arun Jaitley reading out the budget for financial year 2018-19. Indian economy post demonetisation and instability caused by implementation of the GST is expected to grow at 6.75 per cent in the current quarter of financial year 2017-18, which will be the slowest in the past three years since the change of regime in 2014. The Economic Survey, which was tabled in the Parliament on January 29, reiterated the importance of stabilising GST, completing the Twin Balance Sheet (TBS) actions, privatising Air India and staving off threats to the macro-economic stability as major actions for the upcoming financial year. Besides, the Economic Survey cautioned about the falling investments and distress in the agrarian sector.  

This budget will be the last full-fledged budget of the NDA government as the country heads to General Elections in 2019. The modest growth of the world economy, rising oil prices, fiscal deficit targets, slow down of investments and savings and the increasing domestic agrarian distress will all have a major mention in the budget 2018-19. Will the finance minister bite the bullet or will he go for a populist budget?

Amidst this conundrum, Outlook Money brings to you the expectations of the major sectors of industry from the Budget 2018-19.

Auto Industry:

• Incentive to replace older vehicles - 10/15 years old - will help both in protection of the environment and boosting the auto industry
• Measures to push the agrarian productivity, which will directly impact the rise in the sale of tractors and cater to the increasing agrarian distress
• Greater emphasis on public transport. For example- higher orders under JNNURM for bus manufacturers
• Incentive for electric vehicles manufacturers by lowering the GST on it (currently at 12 per cent)

Banking and Insurance:

• As stated in the Economic Survey, continuation of the actions taken for banks recapitalisation
• Merger of weaker PSU banks
• Tax deduction for NPA acquisition
• Separate tax exemption for term of life insurance

Capital Goods and Infrastructure:

• Higher investments in key government initiatives like Bharatmala (connecting east-west of India) and Sagarmala (upgrading the port and the connected infrastructure) projects
• Increase in investment in roads by 10-20 per cent (urban, rural and national highways)
• Higher investments in the Railways, especially for passenger safety and security

Commodities:

• Revival of rural economy by tax benefits and concessions alongside higher allocation for rural scheme, which will ultimately incentivise cement industry
• Increase of custom duty on Aluminium from 7.5 to 10 per cent – it will boost the Indian industries and reduce imports
• Removal of custom duty on coking coal
• Providing incentives for mineral exploration

Oil and Gas:

• Reduction in cess from 20 to 5-10 per cent on oil and gas production and exploration
• Natural gas to be brought under the ambit of GST (currently taxed at 20-25 per cent)
• Reduction/exemption of excise duty from city gas distribution companies
• Subsidise the companies selling kerosene and LPG at below market price

Real Estate:

• Extension of income tax exemption applicable to current affordable housing units up to 60 square meters carpet area to 150 square meters
• Single window clearance for real estate projectslike avoiding delay
• Make housing more affordable
• Creation of more demand in the real estate sector, which is has slowed down post the demonetisation.

Telecom Sector:

• Lowering of GST on the telecom sector, which is currently at 18 to 12 per cent
• Reducing custom duties on the equipment, which is currently placed at 29.8 per cent

Information Technology:

• Greater incentive to digital transactions, which has witnessed a slow growth since the shock effects of demonetisation have subsided
• Reduce the GST on mobile phones, personal computer and its accessories, which ranges from 12- 18 per cent, to boost digital India

Gold:

• In order to avoid smuggling, reduce the import tax on gold from 10 to 5 per cent.

Power:

PM Modi’s stand on promotion of clean and sustainable energy at the international forums and a special chapter dedicated to the climate change in the Economic Survey shows the increasing importance of precautionary measures against global warming.  

• In such a scenario, scaling down of clean energy cess is unlikely. But the dichotomy of slow growth of manufacturing can be considered
• Inclusion of electricity in the GST

Pharma:

• Incentive to invest in the Research and Development (to move ahead from the regular reverse engineering process)
• Incentive to the domestic manufacturers by implementing the reduction of the corporate tax

Quick Key Expectations:

•   One of the major initiatives expected out of this budget is focus on disinvestments. The Economic Survey has laid focus on the privatisation of Air India as a major challenge for future. The industry expects the necessary disinvestment to create demand and incentivise growth in the private sector
•    Increase in the MSP considering the agrarian distress
•   Use of Direct Benefit Transfer for all subsidy scheme to reduce corruption
•   Tax incentive for buyer of stressed assets
•   Incentives for MSMEs to carry out defence research and development
•   More relief on the individual income tax

Straight from the horse’s mouth:

Ranen Banerjee, partner and leader of Public Finance and Economics, PWC India, on the upcoming budget says: “The growth expectation in the next fiscal has been pegged at 7-7.5 per cent. Therefore, there is cautiousness on the upsides expected from GST on the economy in the next fiscal too. There has been a lot of stress on the agriculture sector and job creation has been a challenge given the global backlash and technological advancements. We, therefore, expect a lot of emphasis in the budget on the farm sector as well as job intensive sectors. The survey has hinted at a slower fiscal consolidation in a pre-election year. The fiscal deficit, therefore, is expected to be in line with the previous year without any further slippage and some token decrease optimistically.”