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  India   All India  02 Feb 2018  A blockbuster budget for rural India

A blockbuster budget for rural India

THE ASIAN AGE.
Published : Feb 2, 2018, 1:26 am IST
Updated : Feb 2, 2018, 6:51 am IST

People invest in equities for long term returns, and this tax is not going to dissuade investment in equities in the long run.

In the light of the distress in the agricultural economy, such bold allocation was necessary.
 In the light of the distress in the agricultural economy, such bold allocation was necessary.

The first thought when hearing the FM speech was “but how’s he going to fund this? Is there a huge sting in the tail in the form of taxes lined up? As it turned out there was no real sting, if anything the 10% tax on long term capital gains on equities was a mild one — easy to accept and digest. As compared to all other asset classes, only equities enjoyed a zero LTCG, seen in that light a 10% tax on profits is just fine. People invest in equities for long term returns, and this tax is not going to dissuade investment in equities in the long run.

The budget has provided a huge emphasis to rural India. In 2018-19, Rs 14.34 lakh crores has been allocated for creation of livelihood in rural areas, 8 crore poor women will get new LPG connections, 4 crore poor people will get power connection, 2 crore toilets to be constructed in next fiscal year, and under Swach Bharat Mission and 1 crore houses will be built under Pradhan Mantri Awas Yojana in rural areas. In the light of the distress in the agricultural economy, such bold allocation was necessary.

 

Huge investments have been planned in healthcare and education (1 lac cr). Infrastructure, as expected, is a huge focus area for modern India, and investment into roads and highways is budgeted at 5.35 lac crore. Other investment, including in railways (capex of 1.5 lac cr), and investment into smart cities mission (2 lac cr) will lead to greater velocity and more circulation of money in the system, and create more jobs.

Together such investments and government spends will lead to a huge kick off of demand in supplementary industries like cement steel and so on. Consumption was doing fine, but will fire even better and spur other industries.

 

On corporate tax, it is quite obvious by now that the FM is delivering on the promise of 25% corporate tax, but in phases, starting from the most deserving of them all — the small corporates i.e the MSME. The benchmark chosen by the FM SMEs with turnover upto Rs. 250 crores is a big increase from the earlier cut off of Rs 50 crores. Over 5.3 lac companies have been covered now for 25% corporate tax rate.

That the fiscal deficit is projected at 3.3% is not a problem, as the glide path towards continuous reduction has been maintained. The estimates on divestment of Rs. 80,000 crore and the tax revenue are conservative. This is further reinforced by the position credit rating agency Moody’s took post the budget- that India’s fiscal consolidation is on track.

 

It was a bolder budget than expected, and surely a blockbuster one for rural India.

V Vaidyanathan, Chairman, Capital First

Tags: budget 2018, union budget, pradhan mantri awas yojana