From essential commodities to tax slab, what you can expect from Jaitley

The financial budget is all set to be announced on Feb 1, so before you get the inside detail of the upcoming budget here we bring to you the possibilities of what you will get.

As the union budget, 2018 is going to be announced by our Finance minister Arjun Jaitely in the hope of some betterment. The financial budget is all set to be announced on Feb 1, so before you get the inside detail of the upcoming budget here we bring to you the possibilities of what you will get. Needless to say, the budget will always hold importance in the life of middle class and lower class people the most. So keeping them as our target audience lets take a look at few important aspect of people's life which will be affected by the upcoming budget. Having earlier said that by our honorable Prime minister Narendra Modi that this year's budget would fulfill the expectations of common people, following which the commoners have a high expectation from the current government. Talking about the upcoming budget, it is being said that there is a lot of surprise in the store for the common people. From tax slabs to essential commodities the government has paid an extra attention to the important sectors.

Let's take a look at what to expect from 2018 Budget
Revision of Tax Slab: People are eagerly waiting for the government to raise the income tax limit from Rs 2.5 lakh per annum to Rs 3 lakh. Arun Jaitley has hinted at some relief for taxpayers. Recently talking in an event, Jaitley said, "In income tax, the base has become larger. It is bound to enlarge. And, therefore, charging higher rates from few selected groups - which has traditionally been done - is an area which has been changing," reports a leading news portal.
Focus on sectors like agricultural and infrastructure: Budget 2018 could see the announcement of more road, railways, seaport and airport projects. Apart from the infrastructure, Jaitely also holds special importance in the area of Agriculture. There might be hope for the rural class to taste the victory as the 2018 budget is expected to be growth accelerated, employment generated. It will also improve the agricultural income.

Some of the major highlights are:
1- Establish a fund to guarantee credit to encourage investment in the agriculture sector
2- Allocate more funds for crop insurance schemes
3- Reduce fertiliser subsidies
Positive push to the gems and jewelry sector: There is an expectation to give a positive push to the gem and jewelry sector. Several media reports suggest that there is a hope to reduce the import duty on Gold by 4 percentage.
Others sectors to get benefit this financial budget: Apart from the agricultural and rural, economic sectors like healthcare, education and housing will also get some much-needed boost for their respective field.
GST rate revision: The upcoming budget will be crucial post the implementation of GST (Goods Service Tax), so people especially from the electrical sector seeking some positive response from the finance minister by increasing the cash purchase limit and GST rate revision on gold. The electrical industry feels that the GST rate of 28 percent will be revised to 18 percent considering products like TV, Refrigerator are no longer lies in the Indian luxurious households.

Click here to read → Budget 2018

Budget 2018: India Inc wants GST reforms, friendly-business policies

For the real estate sector, long pending demand of its recognition as industry, increase in tax rebate limit and single window clearance are among key expectations of the leaders

 

 

Tabled in Parliament on Monday by Finance Minister Arun Jaitley, the Economic Survey has estimated that the Indian economy will grow by 7-7.5 percent in 2018-19, re-establishing India as the world's fastest-growing major economy.

Every budget rides high on the expectations of taxpayers and the finance minister has a challenging task of balancing tax cuts and increased revenues and here's what India Inc expects from Budget 2018:

"Considering the government's vision to achieve Housing for All by 2022, we believe affordable housing development requires a long-term perspective supported by easy home finance at very affordable interest rates. It is therefore, the honourable finance minister must offer sizeable support to the urban middle-class population in terms of higher limits of exemption on home loans in the Budget 2018-19. The housing finance companies like us have a key role to play in boosting the government's efforts towards affordable and low-cost housing in metros as well as in tier-II and III cities," said Monu Ratra, ED and CEO, India Infoline Housing Finance Limited.

For the real estate sector, long pending demand of its recognition as industry, increase in tax rebate limit and single window clearance are among key expectations of the leaders.

Getamber Anand, Chairman, CREDAI and CMD, ATS Infrastructure Ltd. said, "The real estate opportunity to boost GDP mustn't be missed by the Finance Ministry in this budget. We expect government to increase the exemption limits for deduction of interest from the income of the middle class and salaried homebuyer. Also the interest rates must further be rationalised as must tax rates as the burden is ultimately passed onto the consumer."

He further elaborated, "On the supply side, we respect the changes that the government brought in last year into the sector by giving it "Infrastructure status for affordable housing", but RBI has not given any directions to the banks per se on reducing cost of capital for projects which qualify as infrastructure. Also under section 80 IB, the push for smaller houses is welcome but we have requested the government to increase the size from 30 and 60 sq. m. to 60 and 90 sq. m. because this is a practical size which is even aspirationally more attractive to the homebuyer."

"Also for smaller towns the condition that 80 percent of FSI must be achieved is not practical and should be reduced to about 50 percent. Having said that we are very hopeful that the government in its wisdom like last year will bring in some new exciting announcements for the real estate sector this year too," he added.

"We expect the honourable finance minister will announce increased tax rebate limit, so that the consumers may find more disposable income to buy their chosen dream homes. He should also give a sympathetic ear to the long pending demand of introducing single window clearance system in this budget to help the developers fulfil their promises to home buyers and ensure timely delivery of projects. We also expect the government to grant industry status to real estate sector to facilitate ease of doing business and access to construction loan at a cheaper cost. At Solitaire Group we aim to develop a slew of international quality residential projects and industry status, if granted, will surely become instrumental in turning our dreams into reality," said Arjunpreet Singh Sahni, Executive Director, Solitaire Group.

Click here to read → Budget 2018

Budget 2018 LIVE: Will Jaitley, Modi take India's growth story forward?

Will the Modi govt's last full Union Budget before general elections 2019 will be a populist one? All eyes are now on FM Arun Jaitley's Budget speech on Thursday

 

 

As Finance Minister Arun Jaitley gets set to present Budget 2018, the last full Union Budget of the Narendra Modi-led central government in its present term, there is an anticipation that he will somewhat shed his prudent stance in favour of a more populist stance one. The view emanates from the fact that this will be the finance minister’s last chance to please the voters through a Budget 2018 before 2019 general elections.

Populism in the government’s Annual Union budget 2018 could assume policy decisions like lower tax rate for the salaried class, lower corporate tax rates in tune with Trump’s benevolence for the corporate class in the US and big bonanzas for India’s farmers.

If the Economic Survey, prepared by Chief Economic Advisor Arvind Subramanian and his team is anything to go by, Jaitley has all the ammunition that he needs to sound the election bugle for 2019 with this Budget. All he needs to do is lock, load and fire.

ALSO READ: No tax relief, spending spree due in budget 2018 before elections: Poll

Click here to read → Budget 2018 

India's spending on R&D reduces against rising per capita income

CEA Subramanian bats for private push in research

India’s spending on research and development as a percentage of gross domestic product fell against a rising per capita income in recent years, contrary to China and select advanced economies in comparison, the analysis presented in the economic survey has demonstrated.

India spent only 0.7% of its GDP on R&D in 2016-17, got only a fifth of its filed patents granted in 2016 and filed only six patents per million people.

Though R&D spending in India (% of GDP) grew faster than China at a time when their per capita incomes were comparable, China’s spending rate outpaced India’s when the former’s income levels rose.

This reinforces the direct relationship between improved incomes and scientific prowess when we consider this fact: private funding has contributed to scientific progress more than government efforts in advanced economies.

Comparing India with China, Israel, South Korea, Japan and the United States, the survey has found India as an outlier in the pattern of R&D funding: while R&D spend in India is led by the government, that in the countries in comparison has been led by private investment.

The economic survey for the financial year 2017-18 was tabled in the parliament by chief economic advisor Arvind Subramanian on January 29, 2017. While it proposed better private-government coordination, it also laid down potential missions on subjects like dark matter, genomics and cyber-physical systems.

Corporates in China spent $ 286 billion in 2015 on R&D, comparable to $ 341 billion by counterparts in the US. India corporates spent a mere $17 billion (Chart 1).

Though India ranks sixth in global scientific publications, the survey quotes a study to note that promotion in research jobs acts as an incentive rather than the research objective. It also notes India’s lag compared to China, specifically in the period that saw the economic boom.

“If journal publications reflect a country’s prowess in science, patents reflect its standing in technology”, the survey said.

In terms of patents applications filed, India and China were comparably negligible in front of the advanced economies prior to 1990. While China filed twice the number of patents as that of India, India led in the number of patents granted (Chart 2).

China eventually took the lead in the 1990s and India’s contribution became increasingly negligible in the 2000s and more so in recent years.

Click here to read → Budget 2018

Budget 2018: Revenue shortfall put corporate tax cuts on hold

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen

Businesses waiting for Indian Prime Minister Narendra Modi to follow through on a pledge to cut corporate taxes may need to wait a bit longer.

In his last full budget before 2019 elections, Modi is facing a revenue squeeze that may make it difficult to deliver on a promise to lower the basic corporate tax rate over time to 25 percent from 30 percent. It’s a catch-22 situation for the premier, who is also trying to lure foreign investors at a time when the US, UK and other countries are lowering business taxes.

Here’s a look at Modi’s challenge ahead of the government’s budget 2018 on Thursday.

Why Cut?

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen. It’s part of his mission to improve India’s investment climate: he is also reducing red-tape, spurring the liquidation of assets to speed-up the recovery of bad loans, and introduced a national sales tax last year to cut down business costs. India is ranked 119 out of 190 countries when it comes to ease of paying taxes, according to the World Bank’s Doing Business index.

While those reforms have helped India win a credit rating upgrade and record foreign direct inflows last year, Modi needs to keep investment going to help support an economy that’s set to expand at its slowest pace in four years.

Tax competition around the world is heating up. The US lowered corporate taxes by 14 percentage points to 21 percent, with companies like Apple Inc, Wal-Mart Stores Inc and JPMorgan Chase & Co announcing plans to raise investment, hiring or wages.

“The US has made corporate tax rates competitive and India needs to respond,” said Jayesh Sanghvi, a tax partner at EY in Hyderabad. If it doesn’t, companies will examine arbitrage opportunities given the 10-15 percentage point difference, he said.

After reducing the rate last year to 25 percent for small companies with a turnover of up to 500 million rupees ($7.9 million), businesses are expecting Finance Minister Arun Jaitley to move again this week. Half of the 120 professionals surveyed by Deloitte expect the rate to be cut to 25 percent for all companies. Rakesh Nangia, head of tax advisory firm Nangia & Co, warned of a “flight of capital” if tax rates aren’t reduced.

Can India Afford It?

Modi is in a fiscal bind. Revenue collection remains under pressure following the chaotic roll-out of a national sales tax, and with an eye on next year’s election, his spending priorities may turn to the distressed rural sector, putting pressure on the budget deficit.

The government signaled on Monday it may slow the pace of fiscal consolidation after pledging to narrow the budget gap to 3 percent of gross domestic product in the year beginning April 1 from an estimated 3.2 percent this year. Chief Economic Adviser Arvind Subramanian told lawmakers that setting “overly ambitious targets” may undermine the credibility of fiscal policy.

Abhishek Gupta, a Mumbai-based analyst with Bloomberg Economics, expects the budget deficit to come in at 3.4 percent of GDP this year. The median estimate in a Bloomberg survey of 18 economists is for 3.5 percent this year and 3.2 percent next year.

Political considerations may also prevent Modi from reducing corporate taxes now, said Shailesh Kumar, a senior analyst at Eurasia Group in Washington.

“In addition to concerns that a reduction will further widen the deficit, a move by Modi to cut corporate rates ahead of next year’s election would expose him to opposition criticism that he is a crony capitalist who only wants to help friends in the business sector,” he said.

Click here to read → Budget 2018 

No tax relief, spending spree due in last budget before elections: Poll

The median forecast from over 40 economists polled Jan 24-29 was for India's government to borrow 3.2 percent of gross domestic product (GDP) in fiscal 2018-19.

India is expected to unveil only modest stimulus at this week's budget, a Reuters poll of analysts showed, despite it being the last before the next election, with government spending likely limited by longer-term efforts to trim the fiscal deficit.

Fiscal consolidation was first proposed by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) government in its maiden budget in fiscal 2014/15, aiming to break a long line of Indian governments that preferred to borrow and spend.

But in following budgets, the timeframe for reaching a reduction to a 3.0 percent fiscal deficit target was pushed back.

The latest Reuters poll shows the government is expected to delay the timeframe for hitting that target by another year, for the third year in a row, due to setbacks in the economic outlook.

The median forecast from over 40 economists polled Jan 24-29 was for India's government to borrow 3.2 percent of gross domestic product (GDP) in fiscal 2018-19.

"As the current government will present its last full-year budget before the 2019 general elections, many in the market expect a heavier dose of populism. However, the government has limited financial resources to propose any targeted scheme for the poor," wrote Gautam Duggad, head of research at Motilal Oswal Securities, in a research note.

"We also do not expect much relief on the tax front, except some reduction in the corporate tax rate for medium-sized companies."

The government's own economic survey presented to parliament on Monday suggested that pushing further out the fiscal deficit target would give the economy some momentum.

For the current fiscal year, the target is 3.2 percent and the government is unlikely to meet that as it has already overshot its full-year goal. With less than one quarter of the fiscal year left, the government is unlikely to meet its deficit target.

Three-quarters of the 40 economists polled, based in India, Singapore and Europe, said that fiscal consolidation is likely to be Finance Minister Arun Jaitley's dominant theme when he unveils his budget on Thursday.

Just under 10 percent of survey respondents said he will focus on boosting subsidies while about 18 percent expect a significant increase in borrowing and spending.

Among those expecting a more populist budget are economists that say the government will announce new subsidies, such as loan waivers for farmers, an increase in healthcare spending, a cut to taxes on fuel and a ramp up in rural housing schemes.

Click here to read → Budget 2018

 

Economic Survey sounds a note of caution on the high equity valuations

Domestic equities have risen sharply on expectations of strong corporate earnings

The Economic Survey 2018 sounded a note of caution on the high equity valuations and hasn’t ruled out a possibility of a correction. After a sharp 23 per cent rally this financial year, the benchmark Sensex is trading at 27 times its trailing 12-month earnings. The broader-market BSE Midcap and Smallcap indices, which have outperformed the benchmark in FY18, are trading at even higher valuations of 47 and 105 times, respectively.

“Sustaining these valuations will require future growth in the economy and earnings in line with current expectations, and require the portfolio re-allocation to be semi-permanent. Otherwise, the possibility of a correction in them cannot be ruled out,” the Survey said.

Domestic equities have risen sharply on expectations of strong corporate earnings. However, the earnings growth has been elusive so far, only to belie analysts’ expectations.

“Expectations of earnings growth are much higher in India. Indeed, it was such expectations that lie at the origin of the stock market boom. In early 2016-17, signs emerged that the long slide in the corporate profits-to-GDP ratio might finally be coming to an end. Investors reacted to this news with alacrity, bidding up share prices in anticipation of a recovery they hoped lay just ahead. Accordingly, the ratio of prices-to-current earnings rose sharply,” said the report.

The lackluster earnings trajectory has been largely on account of policy disruptions such as implementation of the goods and services tax (GST) and demonetisation. The Street is expecting a turnaround in earnings.

“There is exuberance in broader market valuations, largely on account of earnings revival expectations. Therefore, if earnings disappoint or if there is a drop in incremental flows, we could see a sharp correction,” said Gautam Duggad, head of research, Motilal Oswal Institutional Equities. What has kept stock prices afloat despite lack of earnings momentum, is the availability of abundant liquidity — both globally and domestically.

According to the Survey, low interest rates, globally have resulted in a fall in the equity risk premium (ERP). Low ERPs have led to a shift in portfolio allocations from debt to equity.

Click here to read → Budget 2018

Economic Survey 2018 may not shape Budget, but it is a treasure of insights

Since demonetisation, 10.1 mn new taxpayers have filed returns, versus an average of 6.2 mn in the prior 13 months

The Economic Survey (ES) is not really a precursor to the Union Budget; that is, its projections and recommendations might not shape the Budget. However, it has become a treasure trove of insights about the economy, based on data sets not generally available to those outside the government. The themes it explores are novel, relevant and well researched. This year’s document is no different.The analysis of trends under the goods and services tax (GST) is the most important and timely. Given the prevailing confusion outside (and even inside) the government, it is comforting to see the 50 per cent improvement in number of indirect tax assessees. Now, 9.8 million enterprises are registered: Though only 13 per cent of total non-agricultural enterprises in India, they account for 93 per cent of revenues. Less than 10 per cent of GST filers (revenues more than Rs 50 million) contribute to 85 per cent of GST collected.Interestingly, the GST tax base (excluding exports), at around Rs 70 trillion, is close to that estimated by the Revenue Neutral Rate (RNR) committee, which had recommended a GST rate of 15 per cent. The first few months of data suggests a weighted average rate of 15.6 per cent, implying GST is already helping tax collections, and should comfort those worried about near-term fiscal health.

In fact, it estimates revenue from GST in FY18 should be 12 per cent higher than indirect tax growth last year.The ES uses GST data for some other useful insights as well: Inter-state trade is as high as 60 per cent of GDP (last year’s ES used other metrics to arrive at 54 per cent). That Maharashtra, Gujarat, Haryana and Tamil Nadu are large “net exporter” states is not surprising, but 26 per cent of Maharashtra’s GDP and 20 per cent of Gujarat’s being net exports is remarkable. Similarly, it finds GST registered enterprises employ 51 per cent of the non-agricultural workforce, and combining this data with pension fund data could be useful in assessing and then expanding the breadth of India’s social security net.

Click here to read → Budget 2018

Economic Survey 2018: Indians go on producing children till they have sons

There may be a meta-preference manifesting itself in fertility-stopping rules, contingent on the sex of the last child, which notionally creates 'unwanted' girls, estimated at 21 mn, the Survey says

The Economic Survey 2017-18 reveals that Indian parents, still keen to have more and more male children, continue producing “until they have the desired number of sons”. The survey calls this phenomenon the son meta-preference, which involves parents adopting "fertility-stopping rules”, or having children until the desired number of sons are born.

The country’s sex ratio, skewed in favour of males, has led to the identification of “missing” women. But there may be a meta-preference manifesting itself in fertility-stopping rules, contingent on the sex of the last child, which notionally creates “unwanted” girls, estimated at about 21 million, the Survey adds. “Consigning these odious categories to history soon should be society's objective,” notes the Survey.

mong the startling facts revealed by the Survey is that the sex ratio of last birth (females per 100 births) has come down by 40 basis points from 39.4 per cent in 2005-06 to 39 per cent in 2015-16. The Survey suggests that women making their own income has seen no change in 10 years between 2005-06 and 20015-16. Only 13 per cent more women are getting educated – up from 59.4 per cent 10 years ago, to 72.5 per cent now.

Another startling observation in the Survey is that fewer women are now involved in decisions related to contraception.

Also noted is the fact that women’s employment has declined over time. “Another such area is in the use of female contraception: nearly 47 per cent of women do not use any contraception, and of those who do, less than a third use female-controlled reversible contraception. These outcomes can be disempowering, especially if they are the consequence of restrictions on reproductive agency”, noted the survey.

Poonam Mutreja from the Population Foundation of India (PFI), It is no surprise given that we are still focussing on sterilisation. Supply of care healthcare to provide sterilisation is dismal. It is ridiculous that we have not used 40 per cent of the budget for family planning remains unutilised. Making contraceptives available is very important and not yet available fully.

Click here to read → Budget 2018

 

Some Populist Steps Expected for Various Sectors in Budget 2018

Although keeping in mind the fiscal compulsions and recent statements made by FM Arun Jaitley and also PM Narendra Modi himself it is given that the Budget 2018-19 is not going to be overly populist

The Budget 2018-19 will be the last full Budget before the Lok Sabha elections in 2019. Also before the said elections there will be assembly election in eight states in 2018 namely Meghalaya, Tripura, Nagaland, Karnataka, Mizoram, Chhattisgarh, Madhya Pradesh and Rajasthan. As a result both Political compulsions and opportunism is expected to play out in the Budget 2018-19. Although keeping in mind the fiscal compulsions and recent statements made by Finance Minister Arun Jaitley and also Prime Minister Narendra Modi himself it is given that the Budget 2018-19 is not going to be overly populist in nature. During a recent media interaction Prime Minister Narendra Modi has stated that the common man doesn’t want freebies and sops and that his government is committed to reforms, fiscal targets and prudence. Elsewhere he has also stated that he isn’t sure whether corporate India will like him after the Budget 2018 or not. Having said that the results of the recent Gujarat assembly elections indicated electoral losses for the government due to rural distress; thus to address the said issue and to reward people for shouldering the pain of demonetization and other reforms some populistic measures are expected in the Budget 2018. Some expected measures are listed below.

Cut in Personal and Corporate Tax Rates – It is widely expected that there would a revision in the tax slabs and an increase of exemption limit for personal income tax in the Budget 2018. Tax exemption limit which is currently 2.5 Lakhs is all but expected to be made 3 Lakhs. Industry leaders from various sectors and bodies such as CII and FICCI have also recommended that said step to the FM to increase disposable income of the middle class to fuel demand and growth. Other that raising the tax exemption limit existing tax slabs may also be tweaked to provide relief to tax payers. Corporate India is also optimistic that the corporate tax rate may see a cut from the current 30% to 25%. But given the recent statements by the FM and fiscal challenges the said move may or may not be made by the government in the Budget 2018. Some corporates may receive some tax relief and incentives though.

Other Tax Sops – Some other tax sops for individual tax payers are also expected in the Budget 2018. At present a maximum tax benefits of 1.5 Lakhs is allowed under Section 80C on various tax saving schemes such as PPF, EPF, ELSS, NSCs, life insurance and more. This said is also expected to be raised by 50000 so that individuals can avail deduction of a maximum of 2 Lakh rupees. An increase in the limit of deduction for medical insurance and health checkups under Section 80D is also expected. Additional tax benefits on insurance policies and investments in to mutual funds has also been desired by the insurance and finance sector but will the FM heed to their demands is something we have to wait and see.

Pensioners and Senior Citizens – Pensioners and senior citizens have emerged as a big block of voters and it is quite likely that the government will try and woo them with sops. In the Budget 2018 the Government is expected to make retirement benefits as tax free. Higher tax exemption for pensioners and senior citizens is also on the cards in the Budget 2018. It is believed that the government is seriously considering a proposal made by MP Shashi Tharoor that pension up to Rs 5 Lakhs should be made tax free. In the Budget 2018 there also may be sops for early retirees between the age of 55 and 60. Easier tax compliance through separate process and grievance redressal system is also believed to be under review.

Click here to read → Budget 2018

Ways to Stimulate Employment Generation in Budget 2018

Employment generation is one of the key challenges before the government in the Budget 2018-19.

Employment generation is one of the key challenges before the government in the Budget 2018-19. Modi Government had promised 1crore jobs every year for the youth but 3 years in to power what we have seen is a marginal rise in the unemployment rate. No wonder that the government came under severe criticism from all quarters for failing to create jobs. Unemployment rate of 5 - 6.5% for a young country like India where 65% of the population is below the age of 35 is alarming. Also now with advent of automation and AI, many sectors such as Information Technology and manufacturing may in fact see job losses. Over the last decade the GDP growth of the country has mostly remained a jobless one. Right for the UPA era to current times there has been a number of steps that the successive governments have taken such as MNREGA and Mudra Yojana to address the issue but the impact of the same has remained modest as best. Now with disruptive reforms such as demonetization and GST the situation has gone from bad to worse and urgent steps in the Budget 2018 are required to address the issue of employment generation. Some of the bold steps and reforms that the government can contemplate upon in Budget 2018 are mentioned below.

Step to Revive Private Investment – Along with increase in Public investment, the government needs to revive private investment too and steps for the same will have to be taken in the Budget 2018.Tax sops are being touted as one of the ways to improve sentiments and thus improve private investment in various sectors. It is believed that the government is mulling an investment allowance in terms of tax benefits to already existing businesses for further investment and expansion of their manufacturing plants and capacity. The government believes that it will help boost employment and increase capacity. This coupled with more money in the pocket of middle class through tax cuts will boost demand and provide the required impetus to the economy. Other steps that the government can take in the Budget 2018 are to ensure long term policy consistency, cutting of red tape and further improvement in ease of doing business and climate for investment.

National Employment Policy – It is expected that the government may announce India’s first National Employment Policy (NEP) in the Budget 2018. The policy will lay down a roadmap and steps that the government intends to take for employment generation through various economic and labour policies and reforms. In the said policy the government is expected to incentivize job creation by corporate and provide the required support structure for small and medium sized enterprises which are real job creators in the country. The NEP will also lay down guidelines for employment and protection of employees through addressing issues such as guarantee of minimum wage and social security. The government believes that National Employment Policy (NEP) will be a game changer as far as employment in the informal sector is concerned. Niti Aayog has stated that substantive reforms and changes are required in the Indian job market which is currently dominated by low-wage jobs. It further stated that these issues and other tricky issue such as that of labour reforms can be addressed through a well-planned NEP.

Stimulus for Employment Intrinsic Sectors – Many sectors such as manufacturing, agriculture and others are employment driven and thus experts believe that the FM should have a special focus on the said sectors in the Budget 2018. Tax rate cuts and sops are expected for these sectors in the Budget 2018. Bulk of India’s workforce is involved in the informal sector, the government would want to reverse this trend and increase employment in the formal sector. Banking sector especially Public Sector Banks (PSBs) have been a major employment generator in the past with banking reforms and proper tweaks the sector has the potential to be a major employer once again. New age sectors such as ecommerce and app based taxi services and more have been in the forefront of job creation in the recent years and the trend is likely to continue. Thus the said sectors also expect a special treatment from the FM in the Budget 2018.

Policy for Ease of Business – Experts believe to encourage employment generation the Government’s reform agenda should continue and in fact must gather pace. Clear cut long term policy formation, simplification of tax and other laws and codes, easier processes to start or shut down businesses such as single window clearance and more can go a long way in improving sentiments thus will have a positive impact of employment generation. Another sticky issue is that of impending labour reforms that will enable contractual hiring and firing of employees. Experts believe that this will lead to increased employment generation but will thin the social security and job security net for the employees. Thus a balanced approached is required, the government should work will various trade unions and industries to chalk out a middle path.

Skill Development and Entrepreneurship – The government is likely to continue and in fact scale up its flagship programs such as Skill India and others to improve employability of the existing workforce. As per World Bank more than 30% of India's population between the age group of 15 and 29 years are NEETs (Not in education, employment or training). Add to that in the past only around 12% of more than 550,000 workers trained by the National Skill Development Corporation have landed a job. To address the said issues the government needs to generate 10 to 12 million jobs a year and also further improve employability. Although government actions such as the MUDRA Yojana and others have shown that it wants to encourage entrepreneurship but much is still required to be done on the said front too. Thus further steps to boost startups and encourage scale ups should also be accommodated in the Budget 2018.

Click here to read → Budget 2018

Budget 2018: Economic Survey 2017-18 out today- Were past editions accurate?

Business Standard looks at past surveys to analyse what their priorities and challenges were

After the 2009-10 economic survey, which projected economic growth on the dot for 2010-11, most surveys in succeeding years have been off track in predicting growth. Surprisingly, the only other exception was the survey of 2015-16 that pegged economic growth in a range of 7-7.75 per cent for 2016-17 and actual growth was indeed 7.1 per cent. The growth fell in the range predicted by the survey despite the year witnessing demonetisation. The major setback in terms of prediction could be the survey of 2010-11, which had forecast growth to be nine per cent for 2011-12 (plus or minus 0.25 per cent) but growth fell down to just 6.5 per cent. Nine per cent growth has remained wishful thinking in recent times even after the change in the GDP computation methodology, which many say overestimates the growth. 

Let us now see the focus of the four surveys presented under the Modi government, three of which were authored by Chief Economic Advisor (CEA) Arvind Subramanian's team. The first one was authored by a team led by another Arvind -- then economic affairs secretary Arvind Mayaram.

The Economic Survey, 2013-14:

The 2013-14 survey focused on reviving investment. It said this required a three-pronged approach that worked through improving India's long-term growth prospects. This strategy was to work through ensuring low inflation by putting in place a framework for monetary policy, fiscal consolidation, and food market reforms. It called for tax reforms through goods and services tax (GST) and direct taxes code. While GST came over three years later, direct taxes code was shelved a year after. Only in 2017, the government appointed a committee under Central Board of Direct Taxes member Arbind Modi to redraft direct taxes.

ALSO READ: Budget session begins today, eyes on Economic survey & top 10 developments

The Economic Survey, 2014-15:

This was the first survey under Subramanian. Taking inspiration from the International Monetary Fund's World Economic Outlook, this Survey departed structurally from its predecessors and was presented in two volumes. Volume one discussed the outlook and prospects as well as a number of analytical chapters addressing topical policy concerns. Volume two described recent developments in all the major sectors of the economy and contained all the statistical tables and data. In a sense, volume one was forward-looking but gained from the perspective provided by the recent past, which was the subject of volume two. The survey focused on the trinity of Jan Dhan, Aadhaar, and Mobile (JAM).

ALSO READ: All eyes on Economic Survey as Budget Session of Parliament begins today

The Economic Survey, 2015-16:

The 2015-16 survey talked of creating a more competitive environment by addressing the exit (Chakravyuha) problem, which bedevils the Indian economy and endures as an impediment to investment, efficiency, job creation, and growth. The government later enacted the Insolvency and Bankruptcy Code of India and over 300 insolvent companies, including 12 cases referred by banks under the guidance of the Reserve Bank of India (RBI), are in various stages of restructuring. Rules on bankruptcy are yet to be notified to deal with individual and non-corporate cases. The survey also talked about major investments in people -- their health and education -- to reap the demographic dividend. 

 

Click here to read → Budget 2018

Budget 2018: The healthcare system needs more money and an urgent overhaul

This is the last full budget of the present government and the last opportunity for it to demonstrate its commitment to India's health and nutrition

Slow improvements in basic indicators of maternal and child mortality, double burden of communicable as well as non-communicable diseases, high out-of-pocket expenditure, a failing public sector and heavily commercialised private sector characterise the healthcare crisis in India.
The year 2017 saw a number of incidents in the health sector across the country which highlight each of these issues.

While the deaths of children in a public hospital in Gorakhpur due to alleged disruption of oxygen supply highlighted the systemic failures in public health provision, the cases of excessive billing and negligence in big corporate hospitals (e.g. the case of dengue death in Fortis Hospital, Gurugram) showed that the unregulated private sector is no solution to India’s healthcare problems. The protests against the NEET examination, mainly in Tamil Nadu, brought forth the complexities involved in ensuring a fair and inclusive system of medical education. On the other hand, the resistance to the Karnataka Private Medical Establishments Act (KPME) demonstrated the difficulty in regulating the private sector and the influence of doctors working in the private sector.

The list is long and endless, but what all of these point to is that the health sector in India needs serious overhaul and much greater attention.

Public spending on health
One of the central problems has been the low levels of public spending on health and as a result the poor access to affordable and good quality healthcare for the majority of India’s population. The public expenditure on health at about 1.2% of the GDP is amongst the lowest in the world. Public health facilities suffer from poor infrastructure and human resource inadequacies. For instance, according to the Rural Health Statistics 2017, 13% of the sanctioned health worker (female) posts and 37% of the health worker (male) posts remain vacant. Overall, only 11% of sub-centres and about 13% of primary health centres (PHCs) are functioning as per Indian Public Health Standards (IPHS). There is therefore an urgent need for more resources to be allocated for public healthcare along with measures to strengthen the delivery of health services.

The National Health Policy 2017 aims to “increase health expenditure by Government as a percentage of GDP from the existing 1.15% to 2.5 % by 2025”
Although it has already been reported that the health budget is not going to see a significant increase, it has to be noted that without a substantial enhancement in the allocations much of the needed reforms in healthcare provision will not be possible. Achieving this, requires not just an enhancement in the central budget but also increases in each of the state budgets as well. However, the central government can play an important role.

Further, it also needs to be recognised that a number of states currently do not even have the spending capacity (one big reason for this is also the lack of human resources) and therefore along with the increase in allocations, a number of steps need to be taken towards strengthening the public health system.

Click here to read → Budget 2018

Budget session LIVE: Triple Talaq Bill, poor farmers top agenda, says Modi

Economic Survey 2018 is a flagship annual document of the Finance Ministry that reviews the overall state of the economy

The Economic Survey will be released today. It marks that start of the Budget session of Parliament. The Economic Survey 2018 will be read out by Finance Minister Arun Jaitley, as a precursor to the Budget 2018-19, to be announced on Thursday. In view of this, Finance Ministry's Chief Economic Adviser, Arvind Subramanian started a web page wherein he has shared some details on the Survey.

What is Economic Survey?
It is a flagship annual document of the Finance Ministry. It reviews the overall state of the economy in the last 12 months. In August last year, however, the government for the first time presented a mid-term economic survey.

ALSO READ: Budget session begins today, eyes on Economic survey & top 10 developments

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  Government will be trying to woo back rural voters and small businesses when it announces the 2018/19 budget and pick up economic momentum as it heads into a season of elections, officials said.
   

• 10:55 AM

  A few policy level announcements relating to infrastructure, real estate etc are expected, which would also have an impact on the relevant indirect taxes.
   

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  The Economic survey will surely touch upon the costs and benefits of the demonetisation
   

• 10:52 AM

  What is Economic Survey?

   

  It is a flagship annual document of the Finance Ministry. It reviews the overall state of the economy in the last 12 months. In August last year, however, the government for the first time presented a mid-term economic survey.
   
  Click here to read → Budget 2018

 

 

Budget 2018: Highlights of India's Various Union Budget Documents

Budget 2018 - Mentioned below are the highlights of various Budget documents presented to Parliament by the Finance Minister other than his Budget Speech.

Common to all finance ministers is the briefcase that they carry to the Parliament and pose with on the day of the union budget. In fact the word budget is derived from the French word 'bougette', which means a small bag. The practise is actually a colonial tradition which was started by William Ewart Gladstone, the Chancellor of the Exchequer of Great Britain in 1860 when he first carried a red briefcase or a budget box. British Chancellors hand over the same red box to their successors, a practise which is not followed in India. It is understood that the said briefcase contains the budget speech. But do you know what other budget documents are presented to Parliament on the day of the Budget? Mentioned below are the highlights of various Budget documents presented to Parliament by the Finance Minister other than his Budget Speech.

Annual Financial Statement (AFS): Annual Financial Statement is the primary budget document. It is mandated under the Article 112 of the Constitution of India. The document contains estimated receipts and expenditures for the upcoming financial year, revised estimates for the financial year gone by and actual figures for the financial year prior to it. The receipts and disbursements are divided in to three parts namely Consolidated Fund, Contingency Fund and Public Account for Government Accounts. The Consolidated Fund of India (CFI) owns its existence because of the Article 266 of the Constitution. All revenues of the government, loans taken, receipts received from recoveries of loans together form the Consolidated Fund of India. The Contingency Fund owns its existence to Article 267 of the Constitution. The said fund is used to cover any unforeseen and urgent expenditure of the Government. Finally funds help by the Government in trust such as Provident Funds, Small Savings and more are kept as Public Account. The Annual Financial Statement as mandated under Constitution comprises of Revenue Budget and Capital Budget. For meaningful analysis by Parliament and people the Annual Financial Statement is in accordance with the accounting format laid down by Comptroller and Auditor General of India under Article 150 of the Constitution.

B. Demand for Grants (DG): Demand for Grants (DG) document outlays estimated expenditure which includes revenue expenditure, capital expenditure, grants to State and Union Territories and grants to different ministries. The document is mandated by Article 113 of the Constitution and is voted upon in the Lok Sabha. Mostly one Demand for Grant is presented per Department or Ministry but in case of big ministries and nature of expenditure more than one Demand may also be presented.

C. Appropriation Bill: As per Article 114(3) of the Constitution of India funds cannot be withdrawn from the Consolidated Fund without enactment of such a law by Parliament. Thus after the Demands for Grants are voted by the Lok Sabha to withdraw the expenditure from the Consolidated Fund the Appropriation Bill is placed in parliament separately. Thus the bill gives authority to the government to withdraw funds from the Consolidated Fund to meet any expenditure in the upcoming financial year.

D. Finance Bill: Finance Bill is a money bill which is presented in the Lok Sabha. The bill is mandated under Article 110 of the Indian Constitution. Any changes to the existing tax structure or introduction of any new tax or even continuation of current tax structure beyond the time approved by the Parliament are submitted to the Parliament through this Finance Bill.


E. Memorandum Explaining the Provisions in the Finance Bill: The said document explains the provisions relating to the Finance Bill. The provisions may be related to change in income tax slabs or any other aspect related to the Finance Bill.

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Sneak Peak in to Some Lesser Known Budget Terminology

The Budget session of the Parliament will start on 29th January and the Budget will be presented by Finance Minister Arun Jaitley on 1st of February 2018.

Budget 2018-19 will be presented in the Parliament in the next few days. The Budget session of the Parliament will start on 29th January and the Budget will be presented by Finance Minister Arun Jaitley on 1st of February 2018. Prior to the Budget being presented, in the Budget while it’s being presented and even after the Budget has been presented one will hear some Budget Terminology which is mostly heard in and around the Budget period. Mentioned below are some lesser known Budgetary terms that you are going to come across in the next few days after the Budget 2018-19 is presented on 1st February 2018.

Economic Survey - Economic Survey, also known as the Economic Survey of India is a document that is presented in the Parliament prior to the presentation of the Union Budget of India. The Economic Survey of India is prepared and presented by the Department of Economic Affairs which operates under the Finance Ministry of India. The document reviews and lists all major fiscal developments, economic highlights, policy initiatives and economic prospects in the short to medium term basis.

Public Account - The transactions and funds in which the Government merely acts as a banker are classified as Public Account. In Public Account the actual funds belong to general public thus provident funds, small savings and other such accounts are accounted for here. The Public Account has been set up under the Article 266(2) of the Indian Constitution.

Gross Domestic Product (GDP) - GDP or the Gross Domestic Product is described as the total market value of everything including products and services produced in the country on a quarterly or yearly basis. There are many types of GDP depending upon various factors such as Nominal GDP, Real GDP, GDP per Capita and more.

Fiscal year - Fiscal year (FY) also known as Financial Year is a period that the Government uses for its accounting or financial purposes. Although it is also of 12 months but Fiscal Year is different than the Calendar Year. In India the new Fiscal Year starts from 1st April and end on 31st March the next year. Thus in India accounts prepared for a specific financial year will start from 1st April and will end on 31st March after which a new Fiscal Year will start.

Fiscal Consolidation - Fiscal Consolidation can be termed as steps and policies formulated by the Government to improve its fiscal health and to observe fiscal prudence. Mostly steps taken by the government to reduce deficits and debts and improve revenue collections are termed as components of fiscal consolidation.

Ways and Means Advance (WMA) - Ways and Means Advance is a tool by which the Reserve Bank of India (RBI) provides funds to the States to tackle temporary mismatches of cash flow in their receipts and payments. RBI acts as a banker for states and states can avail for two types of WMA from RBI which are Normal WMA and Special WMA.

Current Account Deficit - Current Account Deficit is primarily described as the deficit between the value of goods and services that a country imports in comparison with what it exports. If in case a country exports more than it imports then the term current account surplus is used.

Zero-Based Budget (ZBB) - Zero-Based Budget is an accounting practise in which every function and aspect of the Budget begins from scratch or zero-base. With a fresh start in Zero-Based Budgeting each new expense has to be justified and is then analysed depending upon needs and costing.

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Budget 2018: An Opportunity to Reform the Banking Sector

It is expected that the FM will have a special focus on the Banking and the financial sector in the Budget 2018-19.

The Banking Sector has seen its share of action which has happened over the last few years. First with the issue of NPAs, then demonetization and now finally with recapitalization of banks the sector has been in the eye of the storm so as to speak. Experts believe that the said issues are going to have a very substantial impact on the Budget 2018. It is expected that the FM will have a special focus on the Banking and the financial sector in the Budget 2018-19. The Government in October 2017 announced and then recently detailed the nature of the recapitalization plan of 2.11 Lakh crore for Public Sector Banks (PSBs). Around 20 PSBs will be recapitalized with Government infusing capital to improve health and functioning of these PSBs. The capital will be used by the Public Sector Banks mostly to tide over bad debts and to revive credit growth. Along with recapitalized a sleuth of Banking reforms and other measures are expected to be put in place. Some of these measures have already been set in motion by the Government. Yearly evaluation of PSBs by independent agencies, yearly report card and rankings and performance linked capitalization are just some of the measures suggested by the Government. Other than these steps other reforms along with a corresponding roadmap can be expected in the Budget 2018-19.

Expectations of the Banking Sector from Budget 2018
During a recent pre-budget consultation between the Finance Minister Arun Jaitley and the industry leaders from the banking and finance sector many requests and suggestions were made to the FM for consideration. As expected the most primary demand of the sector just like that of other sectors is some tax exemptions or reduction on taxes. The industry wants the government to encourage investment by general public in life insurance policies and mutual funds. Thus one of the recommendations that were made is understood to be special tax exemption for investment in to life insurance policies and for the premiums paid. Currently under 80C an exemption of only 1.5 Lakhs can be sought, the industry wants the Government to devise a separate tax exemption for term life insurance. Another major demand of the Banking sector is to increase the TDS limit for bank interest from the current 10000 rupees. Tax sops or subsidy on home loans for first time home buyers to purchase affordable housing is another step that can help banks shore up customers. Banking sector also wants the government to incentivize digitalization, recognition of e-KYC and e-Signature can also go a long way in boosting financial inclusion and enhancing productivity. Thus a renewed push for digitalization and Government’s support for the same to the banks is also desired. Finally due to the popularity of fixed deposits in India thus the Banking sector wants the Government to bring the taxation on FD returns at par with that of debt mutual funds.

Challenges for Public Sector Banks and the Banking Sector of India
The biggest challenges for the PSBs and for the Banking sector of India as a whole are to tackle the surge in bad loans and to expedite recovery of non-performing assets. Another big challenge for the Banking sector and especially PSBs is Asset Quality Deterioration which is leading to worsening of the banking stability indicator (BSI). Also due to rising bad loans and NPAs Public Sector Banks are now extra careful about lending which is resulting in Low Credit Offtake. The fast changing Banking scene along with fast changing trends and rapid digitalization also presents a unique challenge for PSBs. Entry of new players after Reserve Bank of India (RBI) introduced differentiated banking license and Small Finance Banks increases competition for PSBs, especially because the new players won’t have any legacy issues and will be more focused and digitally savvy. New reforms being introduced such as Bankruptcy Code and fresh capital via recap bonds will also require adaptability on part of the PSBs. Public Sector Banks will also have to improve their focus on new banking segments such as micro loans and consumer durable financing.

Some Banking Sector Reforms Expected in the Budget 2018
Although schemes like the Pradhan Mantri Jan Dhan Yojana under which 266.8 million new accounts were opened, establishment of the Bank Boards Bureau (BBB) and FM’s pet Indradhanush plan are steps in the right direction but they had limited impact and the fundamental issues plaguing the Indian Banking sector remains. The Government understands that the Public sector banks have a very vital role to play in India’s growth story. Thus implementation of recommendation of the Narasimham Committee on Banking Sector Reforms can be a beginning point. Experts believe that Banking sector reforms are directly linked with reforms in other sectors as well for instance slow project approvals and a weak economy is one of the reasons for mounting bad debts. In Budget 2018 the Banking sector needs the FM to focus on both fiscal consolidation and on growth simultaneously. In Budget 2018 expect reforms that will help give better operational freedom to PSBs, reforms that will address capital requirement of banks along with human resource management at public sector banks. While highly unlikely one of the major reforms in the Budget 2018 that we may hear about is the Government’s willingness to disinvest some PSBs especially IDBI wherein the government will reduce its holding below 51%. This will infuse efficiency in PSBs and they will be able to compete with private sector banks more efficiently. It will also reduce the pressure on the Government to make available funds for recapitalization. Although as the said step is not very likely, we may hear something about merger of PSBs instead.

Click here to read → Budget 2018

Budget 2018 Could Bring a Change in Income Tax Limits

Major expectation from Budget 2018 is the reduction in Income tax charges and limits

On February 1, 2018, the entire nation would be glued to their televisions as the Finance Minister Mr. Arun Jaitely presents the Union Budget 2018. This is the fifth budget being unveiled by the present government and is considered the most critical in their term.

With major reforms such as GST Act, demonetisation, RERA, Jan Dhan Accounts, affordable housing, etc. that have swept our economy for past two years, the general public and economic experts are now looking at reaping the benefits of these milestones. The current government goes into elections next year and therefore, there are major expectations from this budget. One major expectation is the reduction in Income tax charges and limits.

Tax rates in India are one of the highest in world, particularly corporate and indirect tax rates. Even taxation on individuals is complex and quite high for an emerging market. India stands at 10th position and nine positions are occupied by developed or very robust large economies. Budget 2017 had tried to lower the individual taxation by introducing a slab of 5%. The present slab gives exemption up till Rs. 2.5 lakhs which are increased to Rs. 3 lakhs for senior citizens. There is another category of taxpayers introduced in the form of Super Senior citizens that comprise of individuals who are more than 80 years of age.

Increasing Number of Slabs
Last year an additional slab of 5% was introduced thereby reducing the tax burden on a middle-income group that earned up to Rs. 5 lakhs in a financial year. A similar step can be taken this year as well where the overall tax rate is further decreased by introducing a slab by breaking down a slab with a higher rate.

Replace Multiple Deductions
Tax rules and deductions for individual taxation in India are unbelievably complex. In fact, this is one of the leading reasons why many people refrain from filing returns in the first place. The survey above revealed that 59% of those surveyed agreed that system of multiple rate cuts and numerous deductions should be replaced with one standard deduction. This will simplify the tax computation and may even widen the taxpayer base.

Even though Prime Minister Mr. Narendra Modi hinted that the budget 2018 will continue to push reforms and may not be a populist budget, many experts believe that it will still be the most populist budget of the present government till date. As February 1 inches closer, it remains to be seen what the Finance Minister unwraps, a kitty full of perks or another tough budget aimed at reforms.

Click here to read → Budget 2018 

Budget 2018: Has Modi govt delivered on its promise of urban development?

BJP govt faces this situation as it heads into its last full budget before general elections in 2019

With India’s urban population rising by 11 million annually–the equivalent of adding a Bengaluru every year–and urban voters forming a major vote base for the Bharatiya Janata Party (BJP), making money and management available for cities would appear to be a priority.

But promises of smart cities and managing growth to provide jobs and housing for the coming urban population jump from 377 million in 2011 to 600 million in 2031–with 20% of this growth expected to come from rural distress and migration–are, currently, displaying little progress.

Less than a quarter of central funds for four major national programmes for India’s urban renewal have been used, according to an IndiaSpend analysis of government data. Since urban development is a state subject, state governments implement these national schemes with central assistance playing a key role. State and urban bodies are also expected to finance a portion of the program on their own by raising funds from other sources.

A further disaggregation of central funds data from the ministry of housing and urban affairs reveals:

Upto February 2017–the last release of data–no more than 3% of smart-city projects were completed and 12% of central funds were released;

With two years to deadline, the Centre–as of July 2017, the last release of data–was still to release 87% of funds for urban infrastructure in 500 cities and towns;

Upto July 2017, 95.4% of central funds sanctioned for upgrading 12 heritage cities were unused, as the programme’s November 2018 deadline approaches;

Work on 93% of sanctioned houses–meant to meet 16% of India’s urban housing shortage–was incomplete as of January 2018. The target of housing for all: 2022;

Little is known of how state governments are raising funds and implementing these programmes.

This is the situation facing the BJP government, as it heads into its last full budget before general elections in 2019, at a time when Prime Minister Narendra Modi has promised 100 smart cities and housing for all by 2022.

The urban sector will not just watch how much money is set aside in the 2018-19 budget but also how it is used, as the National Democratic Alliance (NDA) tries to deliver on its promises of urban development and rejuvenation ahead of upcoming assembly elections in eight states and the 2019 general elections.

Click here to read → Budget 2018

From Hasmukh Adhia to Arvind Subramanian, here's Arun Jaitley's Budget team

This is the team that will spearhead what will essentially be the Prime Minister's vision document for 2019

As the Narendra Modi government presents its fifth and final Union Budget before the 2019 polls, this is the team that will spearhead what will essentially be the Prime Minister’s vision document for 2019 and beyond along with Finance Minister Arun Jaitley.

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Budget 2018: Why India merged Railway, Union Budget in 2017

NITI Aayog report stated that as the size of the Railway Budget has shrunken when compared to the overall general budget, presenting the Railway Budget separately is not required

On 21 September 2016, Government of India approved the merger of the Railway Budget with the Union budget of India, and thus came to end — a 92-year-old practice of separate rail and general budgets. The decision of merger was taken along with advancing the date of the Union Budget in the Parliament under the process of budgetary reforms taken up by the government.

Earlier, NITI Aayog (National Institution for Transforming India), which constituted a committee headed by economist and NITI Aayog member Bibek Debroy, produced a whitepaper and recommended that the British-era practise should be phased out. The recommendations were forwarded to the Railway Ministry, after which former railway minister Suresh Prabhu, in a letter, urged Arun Jaitley to merge the Railway Budget with the general budget for the long-term interest of both the railways and the country’s economy. After raising the matter in the Rajya Sabha, Finance Minister Arun Jaitley constituted a committee to chart out the future course of action.

The practice of a separate Railway Budget was started by the British in 1924 under the recommendation of a 10-member Acworth Committee headed by British economist William Mitchell Acworth in 1920-21. Then the country’s gross domestic product (GDP) mostly depended on railway's revenue, in fact, then the Railway Budget was 84 per cent of the general budget. But over the years, the size of the rail budget diminished in comparison with the general budget. In the past, every year the Railway Budget was presented in the Parliament by the Railway Minister few days prior to the general budget. On 25 February 2016, Suresh Prabhu became the last railway minister to present a separate Railway Budget in the parliament. Next year on 1 February 2017, Arun Jaitley became the first Finance Minister to present a combined railway and general budget.

Reasons for Merger of Railway Budget with Union Budget (Observations of NITI Aayog)
The NITI Aayog committee headed by Bibek Debroy noted that a separate Railway Budget was just an annual ritual that should be done away with. The report stated that as the size of the Railway Budget has shrunken when compared to the overall general budget, presenting the Railway Budget separately is not required. The report further stated that India is the only country in the world with a separate Railway Budget. In fact all the countries that Acworth Committee report mentioned had separate Railway Budget but have discontinued the practice.

The committee also noted that the Railway Budget is not a legal or constitutional requirement like the Union Budget. Also the committee observed that over the years the spending of other ministries such as defence, road transport, highways, petroleum and natural gas had overtaken the spending of Indian Railways, even though these ministries functioned without a separate budget.

Another observation of the committee was that the Railway Budget was used as a political tool with decisions on new trains, routes, fare hikes were getting influenced because of political considerations.

Expected benefits from merger of the Railway Budget with Union Budget
The biggest benefit for the Railways of no separate budget would be that now the Railways won’t have to pay an estimated Rs 97 billion (Rs 9,700 crore) to the government as an annual dividend for gross budgetary support. Also, capital charge of Rs 2.27 trillion will be wiped off. Thus the merger would help the Railways increase its capital expenditure. With the merger the size of the general budget will increase which will begood for the country’s economy. Also now the Parliament has to consider only a single Appropriation Bill instead of two Appropriation Billsthereby saving precious timeof the Parliament.

Due to the merger, the Railways Ministry, which requires huge investments and has a burden of about Rs 400 billion (Rs 40,000 crore) due to 7th Pay Commission recommendations and Rs 32,000 due to subsidies will no longer have to deal with these problematic issues. No separate Railway Budget will also mean that Railways can now concentrate better on revenue generation and other related tasks. Thing such as capital expenditure and revenue deficit will now be taken care by the Finance Ministry. While the government has assured that the functional autonomy of the Railways will be maintained, the annual speech of the Railway Minister will surely be missed.

Click here to read → Budget 2018

Union Budget 2018: What's In Store For Education?

With the Union Budget 2018, the education sector is waiting eagerly to hear from Mr. Arun Jaitley if the education sector would be aligned to the latest education systems of twenty-first century.

With the Union Budget 2018 being presented in February, the education sector is waiting eagerly to hear from Mr. Arun Jaitley if the education sector would be aligned to the latest education systems of twenty-first century. In 2017 budget Mr. Jaitley made a statement that imparting the right educational skills and job creation will be one of the nine pillars of our nation. The Indian education system has not been upgraded technologically. There is a huge need for investment in the 21-century learning system and polishing the skills of the youth of our country to be market ready. The smart classroom concept is not yet in place and the teachers are still following the conventional methods of teaching. The focus this year should be on aligning our education system to the corporate world.

Spending on “Learning Outcomes”
Sarva Shiksha Abhiyan has been our Indian government’s pet project last year and it has achieved 100% enrollments. The focus has to shift on learning outcomes. This year there is an expectation that the government would spend on “learning outcomes”. Learning Outcomes is a practice that aims at monitoring a student’s performance and development periodically. There is a need for a strong assessment model which has to be formalized by the government.

There has to be a focus on the improvement of primary education as this is the grass root level foundation for any student. The secondary education also has to be strengthened with the RMSA scheme (Rashtriya Madhyamik Shiksha Abhiyan) to minimize school dropouts at the secondary school level.

Public Private Partnership
The Government is also looking at Public-private partnership (PPP).This is an innovative method to tap the resources of private schools to help the government schools. Any private or public organization, whose earnings are more than 10 crores or revenue is more than 25 crores can fund the municipal schools or government-funded schools to introduce International curriculum in those schools. This would be a part of their CSR.

Higher Education Under GST
With the Union Budget to be presented very soon, the Associated Chambers of Commerce and Industry of India (Assocham) has recommended tax relief for higher education under Good and Services Tax (GST).The chamber has raised a concerned that many private schools, colleges and educational institutions have come up and they cannot take the higher taxes levied as they in turn cannot increase the fee for students. This would give rise to agitation in the campus. For the ed-tech startups ecosystems to get a boost, reduction in GST will be encouraging. The committee raises a concern that why there should be 18% GST levied when the restaurants are paying only 5% GST.
There are a lot of hopes and speculations regarding the upcoming 2018 Union budget. Hopefully, Mr. Modi will bring up some good points for the betterment of the education sector. His focus seems to be more on agriculture, health care basic facilities and primary education. Let’s wait for Mr. Jaitley to unveil the budget for the education sector in the coming few days.

Click here to read → Budget 2018

Will Budget 2018 Make Home Buyers Happy?

Budget 2018 is on its way riding on high expectations from the home buyers.

The Real Estate Regulatory Authority (RERA) Bill introduced in 2016 was a huge milestone that brought about massive reforms in the real estate sector of India. Before 2016, this sector was more or less unregulated and dominated by builders. Delays in projects, overvaluation of property and frauds plagued the entire sector. Home buyers were left with unresolved grievances and at the mercy of builders. Since RERA came into the picture, the real estate prices have rationalized, and the sector has fallen in line. Delays in delivery are penalized, and home buyers can get speedy resolution for their grievances. Demonetisation further removed the influx of black money.

Now, budget 2018 is on its way riding on high expectations from the home buyers.

Deduction of Interest Expense
Currently, home buyers can claim deduction up to Rs. 2 lakhs towards home loan interest under section 24 of Income Tax Act. This provision applies to a self-occupied house. There is no upper limit on the amount of deduction for the house properties that are let out. However, such deduction is allowed only for a property whose construction is completed within three years from the end of financial year in which loan was taken.

After demonetization and RERA, many builders have applied for bankruptcy and numerous projects have got delayed.

Persons who have bought homes in the past 2-3 years may not be able to comply with completion criteria of 3 years and that too without any fault of theirs. Relief should be given to this category by extending the construction completion stipulation to at least five years.

Preconstruction Interest Expense
As mentioned in the earlier point, preconstruction interest expense is not allowed as deduction. Currently, homeowners can accumulate this interest expense and claim it in five equal installments from the year the construction is completed. Such instalment is in addition to current interest expense. However, for self-occupied or vacant house property owners, the ceiling of Rs. 2 lakhs may not allow for the complete deduction of the amount of preconstruction interest. Budget 2018 should specify a separate ceiling for preconstruction interest over and above the limit of Rs. 2 lakhs or simply increase the number of years in which preconstruction interest can be claimed.

Loss from House Property
In case of property given on rent, the loss from house property can be claimed up to Rs. 2 lakhs in a financial year. Homeowners specifically those who have “deemed let out” properties would want to see an increase in the upper ceiling of Rs. 2 lakhs as they do not earn any real income on such house property. The unadjusted loss can be carried forward for eight assessment years, but there is a limitation of this loss being allowed as a deduction only against Income from House property which makes upper limit of Rs. 2 lakhs inadequate. These two are extremely restrictive clauses, and a relief from them would be a welcome move in budget 2018.

Relief on Repayment of Principal Amount
The repayment of a principal portion of the home loan is eligible for deduction under section 80C to the extent of Rs. 1.5 lakhs. Apart from home loan, section 80C’s 1.5 lakhs limit also includes certain other investments like LIC, PPF, Life Insurance Policy, etc. Thus, the eligible deductions usually exceed the amount of Rs. 1.5 lakhs. The government should specify a limit for repayment of home loan principal which is separate from that of other investments made so that individuals can claim benefit. In most of the cases, the eligible amount of investment itself totals to more than 1.5 lakhs easily.

GST on Homes
At present, GST is not applicable to “ready to move in” houses. However, it is being charged with all construction material and services availed by the builder for construction of the property. In the present scenario, the applicability of GST to constructed houses is expected to bring down the final house property prices.

Click here to read → Budget 2018

 

Impact of Goods and Services Tax (GST) on Budget 2018-19

Budget 2018 is the first union Budget after the implementation of GST in July 2017.

 Budget 2018-19 is the first union Budget after the implementation of GST in July 2017. After the implementation most provisions of the Goods and Services Tax (GST) were tweaked and tax rates of numerous products were reduced in subsequent GST council meets which resulted in a sharp decline in government’s tax collection figures.GST replaced more than a dozen indirect taxes; these indirect taxes together formed a bulk of the government's earnings. Service tax alone accounted for more than 14% of the government's revenue in the last Budget in 2017. Thus fall is GST collection is a major cause for concern for the FM.Finance Minister Arun Jaitley who is also the GST Council Chief has stated that Budget 2018 will provide further opportunity for him to address issues related to GST and also to further tweak the GST rates. Almost every sector desires a rate cut in the GST rates but probably only a few of these expectations will be met on the budget day given the precarious fiscal situation that the FM has to deal with.

Effect of GST on Union Budget of India
One of effects of the GST on the union budget of India is that, now that the various indirect taxes are gone the manoeuvring space for the FM has reduced substantially. Before GST implementation in the Budget all the changes in the indirect taxes were contained in the Part B of the Budget that dealt with tax proposals. But now any decision regarding changes in GST rates is taken by the GST Council. Thus other than changes in the basic custom duties which are outside the purview of GST no big bang changes in the GST tax regime is expected. The FM is his Budget 2018 may state about foreseen changes but won’t be able to implement concrete changes through the Budget itself. Another effect of the GST on the Union Budget would be because after the implementation of GST the government’s revenue has been steadily declining which puts further pressure on an already strained fiscal deficit target of the government. Along with need for enhance public spending in various sector, the fall in GST collection throws up a difficult situation for the FM to tackle in the Budget 2018.

Challenges related to GST in Budget 2018
The most significant GST related challenge for the FM is to tackle falling GST revenues. The GST collections have been consistently going South since September. This is majorly due to cut in GST rates on many products and because of small businesses opting to file returns on a quarterly basis instead of initially proposed monthly returns. If the current trend continues the GST collection of the government would be below collection of indirect taxes in the pre-GST era, this will be a big jolt to the fiscal consolidation agenda of the Government. Thus the biggest GST related challenge before the FM is to improve GST collection through better compliance, technology and other means. Another challenge for the FM is to expand the GST base thus we could see some movement on this front too in the Budget 2018. Government may incentivise and offer concessions and rebates to honest tax payers and make evading GST more difficult. GST when introduced was supposed to be a user friendly tax regime hence further steps to simplify the GST system is also expected. The Budget 2018 may also be used to iron out some issues that are plaguing the GST regime such as export refunds that are stuck with GST department, technological bottlenecks and more.

GST related decisions expected in the Budget 2018
The major GST related decisions that may be unveiled in the Budget 2018 are bringing of the real estate sector under the purview of GST along with diesel, natural gas and gasoline. Although the FM cannot reduce the GST rates of the products in the Budget but he can announce the intention of reducing GST rates on products such as electric vehicles, agriculture related products used by farmers and others. One of the GST related expectation from the Budget is that the limit of the composition scheme of GST which is currently 15 Lakhs can be increased to 30 Lakhs. Other GST related decisions on clarity of taxation on e-wallets, centralised registration for banks, insurance companies and financial institutions and also ending of certain restrictions on input tax credit is expected. A decision on single stage return filing by consolidating the three key return forms GSTR1, GSTR2 and GSTR3 to minimize compliance burden on small and medium businesses may also find mention in the FM's speech on the Budget day.

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Union Budget 2018: Impact on Smartphones in India

Mr. Kalirona stated that if the government supports the manufacturing sector of mobile industry, it would support our Prime Minister's vision of "Make in India".

The entire nation has their eyes set on the fifth and last full-fledged Union Budget in Narendra Modi’s government to be presented in Lok Sabha. This Union Budget will be presented on February 1, 2018, by Mr. Arun Jaitley, our Finance Minister. This Union Budget has a lot of significance as it is presented after two big financial decisions made in Mr. Modi’s government- Demonetization and GST. The previous year’s budget was also very unique as railway budget and general budget were presented on the same day.

Everybody is expecting some statement to be made about their respective sector in this Union Budget. There is anticipation that mobile phones may become cheaper after February 1, 2018.

Union Budget 2018: Smartphones to go cheaper?
Mobile phones are seen in every common man’s possession, especially youth. Youth is expecting cheaper handsets for use. The CEO and Director of COMIO Smartphones, Sanjay Kalirona said that the GST has to be reduced from 12%-5% and offer tax reductions to promote the mobile industry market in India. This should help in making mobiles affordable to the common man, especially youth. All the industrialists are looking up to Union Budget’s support for acceptable budgetary allocation for the growth of the mobile industry.

Relief For Manufacturer of Smartphones?
India is the fastest growing mobile market in the world. The CEO COMIO also mentioned that our country has a lot of potential for component manufacture and building a self-sufficient ecosystem. Mr. Kalirona further stated that if the government supports the manufacturing sector of mobile industry, it would support our Prime Minister’s vision of “Make in India”. The various incentives provided by the government for manufacture sector would help in completing the supply chain cycle and India becoming a manufacturing hub. This is a wishful thinking that manufacture sector should get a lot of incentives and tax reductions for the growth of the mobile market; however, there are speculations that the imported mobile and electronic goods may experience higher rates post-budget. The gadgets may get costlier.

Boost To Make In India, Change in Custom Duty And Import Duty
This year’s budget seems to be in favor of Prime Minister’s “Make in India” initiative and vision, giving a boost, while the imported smartphones and electronic gadgets may get costlier through customs duty rejig, There is also a speculation that certain components used in mobile manufacturing may have the basic customs duty, while printed circuit boards, camera modules, and displays would come under the duty-free category.

There could be changes in the customs duty rules to make India a manufacture hum rather than assembly unit. Therefore the individual components may become expensive and finished goods may face low import duty. The import duty on mobile phones is 15% as on date. There is a possibility to rise further. However, tax experts feel that this is not a good move.

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