Budget 2018: The need for India to embrace inclusive growth and bridge the rural–urban developmental divide dominates the Budget 2018 exercise this year while risking the perception of being politically oriented. In the larger interest of the country, it was important to reach out to the sections which are not presently equipped to participate and contribute to India’s growth story. Thrust to infrastructure development across segments has been rightly identified as an important lever to generate growth and employment. The allocations to programmes in the areas of roads, railway, airports, smart cities, affordable homes, village electrification, water supply & sewage treatment, promotion of rural livelihood, among others, are prime requirements for the country to exploit its demographic advantages and generate sustainable employment.
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Identifying infrastructure development for promoting high quality education, research and healthcare and promoting schemes around these themes are far sighted efforts with long term benefits for India’s competitiveness. The Budget 2018 depends heavily on revenues from taxation to meet its outlay. The growth in direct taxes can be endorsed given the additional assesses introduced into the tax system and incremental taxes being levied through hike in the rate of surcharge & cess. Hike in customs duty need to be justified through tangible improvement to Make in India efforts. Else it would turn out to be headwind for the export growth which is being targeted by the government. The buoyancy in the GST collection, however, is the most important assumption which would need to be fully tested.
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It is expected that the additional income to farmers and other economically weaker sections of the society will result in increased demand pull and hence better revenue generation for the government. By excluding the large corporates from the promised direct tax rate reduction, the government has missed an opportunity to put more money in the hands of entities who potentially could have contributed to the regeneration of the investment momentum.