Madras Chamber commented that this is a “Smart Budget”, balancing both the welfare and developmental agendas. The noteworthy and laudable point of the budget is that it packs in a lot of welfare without an excessive dose of subsidies and concessions.

The strong inclusive agenda of the budget is underscored by the generous allocations and encouragement measures to the Agriculture and allied sector, boost to rural infrastructure, health care provision for the poor, and MSMEs. The largesse in favour of the agricultural, rural and under-privileged was not unexpected but the unprecedented Rs 5 lac medical insurance cover per family for nearly 10 crore poor families is innovative.

The MSMEs have a lot to cheer for in this budget, both in direct and indirect forms.

“The Income Tax rate which is reduced to 25% for small companies with annual turnover of up to Rs.250 crore would encourage them to grow as they would have higher investible surplus, creating more jobs, which is the need of the hour” says Ms. Gayathri Sriram, Vice President MCCI. “The expansion and deepening of bond market would leave more funds with banks to lend to MSME sector, which has been neglected for long. These are steps in the right direction” she said. The Government’s move to pay 12 per cent of wages to the Employees Provident Fund (EPF) contribution on behalf of new employees in all sections for the next three years is a positive step in the Social Security measures and to encourage more employment.

As far as the Infrastructure sector is concerned, the government has maintained the momentum with additional allocations including Rs 14.34 lac crore towards rural infrastructure, expansion plans for more airports, and the Bharatmala project for better road connectivity. Surprisingly, there was nothing much for the Ports sector, although the need for stepping up exports was mentioned.

The thrust given to Education sector, especially with the launch of Revitalising Infrastructure and Systems in Education by 2022 is laudable, as it would lead to better skill development and employment.

The proposed merger of the three state-owned insurance companies will lead to the creation of a better capitalized organization and higher operating efficiencies with a national footprint. The continuation of trend in consolidation across sectors - from Oil and Gas to the Banking sector to the Insurance sector is a very positive move. The target of disinvestment proceeds from PSUs of Rs 80000 crore in FY2018-19 is a good sequel to the performance in the current year.

To provide free LPG connections to 8 crore poor women and to sanction 76% of MUDRA loans for women indicates the Government’s resolve towards gender sensitivity.

The budget has a clear slant towards the Agriculture sector, as was expected. A number of initiatives for agriculture and food processing have been announced which are welcome.

The respite to senior citizens by increasing pension scheme, medical insurance limits and deductions for interest are also welcome measures.

Some of the concerns in the budget are:

No change in the Income tax slab is a disappointment for the middle class.
 
LTCG introduction @10% on equity is a negative, especially without removal of STT
 
The increase in the Fiscal deficit (3.3% of GDP for FY2019) is higher than the original target for FY2018, especially, high considering the projected GDP of 7.25 to 7.5% in second half of 2018 and maintenance of similar expectation for FY2019.
 
Cess on Imports which has been increased from 3% could lead to inflation as input tax credit cannot be claimed.
 
Extension of Dividend Distribution Tax to Mutual funds will lead to double taxation, as the dividends that a mutual fund receives from a corporate would have already suffered taxation before.
 
There is no reduction in MAT rate, which is disappointing.
 
Though the MSME’s have been benefitted with regard to Corporate Tax, there has been no specific measure for ensuring ease of doing business.
 
01st Feb 2018
 
Gayathri Sriram
Vice President, MCCI
September 2019
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