The date for the Union Budget 2018 is just three weeks away, and this Budget is significant for several reasons. First, this is the first post-GST era Budget, which makes it different; second, this is the last full Budget of the present government ahead of the impeding 2019 General Elections. While the 2017 Budget was hailed as a reformist Budget, the 2018 Budget will most likely be populist.
Though, three important structural changes that began last year will continue this year as well. The presentation of the Union Budget on February 1, removal of distinction between ‘plan’ and ‘non-plan’ expenditure and merger of the Railway Budget with it. The focus on fiscal prudence at 3.2% of the GDP and allotment to the infrastructure sector was widely praised. While just before the Budget presentation, the government is undergoing fiscal slippage, experts are saying that Arun Jaitley should increase it to 3.5%.
Besides, due to the implementation of the GST, this Budget is going to be different too. The Union Budget has two parts — Part A contains allocations to different sectors and schemes, while Part B contains tax proposals, both direct and indirect. Since the implementation of the GST, more than 12 different taxes including VAT, Excise Duty got subsumed, hence, leaving no room for the Budget manoeuvre under different indirect tax heads. Any decision on indirect tax on goods and services is now taken by the GST Council.
Last year, Arun Jaitley announced sops for the middle class in the Budget by reducing personal tax rate. This year too it is expected that there would be some tax-related announcements. The demand of corporate rate tax cut is putting a lot of pressure on Arun Jaitley. The India Budget 2018 may witness the Corporate Tax reform.
However, the Union Budget 2018 is likely to witness incentives for rural population and farmers, infrastructure investment push and measures for job creation.”Clearly, in the last year of its term, the government would like to consolidate on major steps taken than opening up of any new front. Steps could be taken to progress things that have been done in the past few years,” S Krishna Kumar, CIO-Equity, Sundaram Mutual Fund.
Global credit rating agency Moody’s says that the reforms in India may lose steam in 2018 ahead of the Parliamentary elections. “A busy election schedule will slow reform momentum in some Asia Pacific economies. In Indonesia and India, regional elections are also likely to slow down any reform momentum. Both countries also have parliamentary elections in 2019,” the rating agency said in outlook for sovereign creditworthiness in Asia Pacific in 2018.