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Budget 2018 January 23, 2018

Budget 2018 will not be anything like its precedents

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The rail budget has already been subsumed in the union budget, and the distinction of plan and non-plan expenditure has come to an end with the introduction of revenue and capital expenditure and even the advancement of the date of the budget has already been accomplished in 2017. So, what are the other factors that can make the 2018 budget unique? Here’s a glimpse.

  1. Since GST has subsumed most of the taxes, budget cannot tinker with the same

Every year when the Finance Minister delivers his Budget speech, the most observed part – both by general public and media – is how changes in the central excise duty and service tax rates would impact the prices of goods and services. Thanks to the rollout of Goods and Services Tax (GST) where the GST Council is the decision-making body on rates, the Finance Ministry now stands to lose the monopoly over central taxes.

Given that prices which impact household budgets will not be the highlight of the last full budget of the BJP government, the document may not produce the same headlines it used to until now. At the most, the government can tweak basic customs duty in the upcoming budget, and this can affect prices of imported goods such as cellphones.

  1. Corporate tax rate cut expected

The finance minister has been talking of lessening the burden of direct tax on corporates, and the key highlight of his speech will be how this is implemented. Would he opt for rationalisation of exemptions and deduction allowed to taxpayers or is a direct cut in the tax rate on cards? Slabs for tax on individuals will also be revised to spur spending by making available more disposable income to taxpayers. 

  1. Tax net likely to be widened

The Part B of the budget will be focused on direct taxes, and it is to be seen how the government delivers on its call of increasing the tax net by bringing more individuals under it.

  1. Last one before the 2019 election, the budget is likely to be populist as against the reformist budget 2017

In the last year of its term, the election is likely to promote government to come out with a populist budget with number of incentives for rural population and farmers. Another dominant area where government is likely to focus in the budget is pushing infrastructure investment and measures for job creation. Looking at the sensitivity of the budget, it will be better if the government focusses on consolidating on the steps already taken.

However, PM Modi in a recent interview subtly hinted that common man does not want freebies. The meaning although will be clear only when the budget is out on Feb 1.

  1. The government is likely to breach the 3.2 percent fiscal target set in the budget 2017

Another aspect is the less-than-expected earnings from GST levies, compelling the government to breach the 3.2 percent fiscal deficit target set in the last budget. The next year’s fiscal deficit target will be closely monitored by not only domestic stakeholders but also by global credit rating agencies that might alter their forecasts and rating of the Indian economy in case the government diverges from its commitment to fiscal consolidation.

  1. More capital expenditure is expected

Budget is more a financial statement of the government, depicting clearly how the state will receive its revenue and how it will expend the collected amount. With economic growth stalled, credit demand subdued and job creation dull, more capital expenditure is expected by spending on sectors that can generate long-term earnings, besides creating ample jobs for the unemployed. (Also read: India’s First National Employment Policy)

Suvipra View:

The winter session of the Parliament could not be as productive as desired owing to repeated disruptions and adjournments. This year, the budget will be presented almost right after the winter session; hence the government will need to bring the opposition on board so that it is not criticised for clearing the budget without adequate debate and healthy discussion.

All in all, the budget 2018 will be an interesting watch, even if not as emotion-arousing (since prices of goods and services will not be much affected due to GST rollout) as it used to be.

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2 responses to “Budget 2018 will not be anything like its precedents”

  1. Kartik Nanda says:

    Last Budget before 2019, government will make sure it creates all the buzz necessary

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