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Budget 2018: Has Modi govt sounded the election bugle?

Finance minister Arun Jaitley on Thursday unveiled a pro-poor, pro-farmer budget ahead of the general elections due in 2019.

While the finance minister was widely expected to deliver a sops-heavy budget, he was also constrained by fiscal slippages. Still, he revised the fiscal deficit target for 2018-19 to 3.3% of gross domestic product from 3%. This, after he failed to plug holes and breached the 3.2% target for the current financial year; the fiscal gap will now be 3.5% for this year.

Yet, Jaitley delivered a populist budget, which should bring some cheer to farmers, who can now expect to get a minimum support price at 1.5 times their cost of production for the coming year.

In addition, the minister said that institutional credit to the farm sector will be raised to Rs 11 lakh crore. Moreover, more than 22,000 rural hubs across the country will be connected with the agricultural produce marketing committees (APMCs) to help small farmers, he said in his budget speech. Besides, he said that the government will set up an agricultural market fund of Rs 2,000 crore.

The highlight of this year’s budget, however, was a universal healthcare insurance plan that will benefit 10 crore families. Jaitley said these families will now be able to avail healthcare insurance up to Rs 5 lakh a year. This will effectively help 50 crore people, or nearly 40% of the poorest in the country, he said.

Garima Pande, national leader for business tax services at audit and consulting firm EY India, said the budget proposals “largely deliver on the populist agenda”, with increased focus on strengthening the agricultural and rural economy, healthcare, infrastructure and education in the country.

Amar Ambani, partner and head of research at IIFL Wealth, said that the focus on the rural economy and on farmers as well as the world’s largest healthcare protection plan are “big vote-swinging” moves. “Clearly, the government is getting election-ready,” he said.

In a major sop for small companies, Jaitley said that those with an annual turnover of Rs 250 crore or less will now pay corporate tax at 25% as against the present rate of 30%.

While Jaitley tried to please farmers, the poor and small companies, he imposed a long-term capital gains tax of 10% above a threshold of Rs 1 lakh on stock market transactions. The government expects to gain Rs 20,000 crore from this move, he said.

Also, the finance minister set a disinvestment target of Rs 80,000 crore for the coming year. He said the current year’s target of Rs 72,500 crore had been exceeded with the exchequer netting in excess of Rs 1 trillion.

Jaitley further said that the government will list 14 state-run companies in the coming year. The government will combine three state-owned insurers—National Insurance, Oriental Insurance and United India Insurance—and list the merged entity on the bourses.

While there were no changes to the personal income tax slabs for salaried individuals, the finance minister allowed a standard deduction of Rs 40,000 for transport and medical claims.