Budget 2018: FM Arun Jaitley has to balance economics with politics says HDFC Securities; 4 key expectations

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Published: January 25, 2018 6:10:23 PM

Budget 2018: Even as the date for Union Budget 2018 nears, Finance Minister Arun Jaitley M has the unpopular task of balancing economic with politics. HDFC Securities says that this time around, prolonged rural distress and a delayed recovery in economic growth—is shaping the politics.

Budget 2018: Listening to the speeches of the leaders can give quite a direction to where the union budget 2018 is heading.Budget 2018: Finance Minister Arun Jaitley will have to balance economics with politics, says HDFC Securities. (Image: Reuters)

Budget 2018: Even as the date for Union Budget 2018 nears, Finance Minister Arun Jaitley M has the unpopular task of balancing economic with politics. In its pre-budget expectation note, HDFC Securities says that this time around, prolonged rural distress and a delayed recovery in economic growth—is shaping the politics. Interestingly, the experts seem to be divided on whether this year’s Budget will be populist or reformist. “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 told CNBC-TV18 in an interview. We take a look at HDFC Securities’ key expectations from the budget.

Focus on Agriculture and Housing

HDFC Securities says that Finance Minister Arun Jaitley will provide thrust to areas relating to agriculture and housing in the upcoming Budget 2018. “For FY19, expenditure focus areas would be agriculture and housing. In agriculture the government  would focus on addressing the rural distress by price support mechanism where the market price of crops fall below the MSP. Capex focus could be on irrigation, food supply chain, rural roads and housing. We expect government spend to remain strong in schemes like MNREGA (jobs), PMAY (housing), PMKSY (irrigation), SBM (clean India), NHM (health), NEM (education), and the crop insurance scheme,” the firm noted.

Watch Video: Budget 2018: How Modi Government Can Deal With Agricultural Stress; These Steps Will Help

Extra- budgetary sources for railways and waterways

The government could rely on non-budgetary sources of funding to fund the government’s ambitious programs in railways, roadways and waterways, says HDFC Securities. “Budgetary allocations for capital spending are likely to be supplemented by extra-budgetary sources of funds such as institutional finance and market borrowings of the CPSEs, Railways as well as the NIIF,” said the firm.

Also read: Budget 2018: Here are two major demands of Oil & Gas sector from Arun Jaitley

Income tax limits

The common man can expect Finance Minister Arun Jaitley to provide some income tax relief, says HDFC Securities. “On the taxes front, we expect raising of exemption limits for individuals from Rs.2.5 lacs currently to Rs.3 lacs, Period of holding for LTCG being raised from the current 1 year to 2 (in line with immoveable property) or 3 years, Deduction u/s 80CCF may be reintroduced for investment in Infra bonds. Some plugging of loopholes like bonus stripping may be undertaken,” HDFC Securities noted.

Corporate tax

The research and brokerage firm expects a corporate tax rate cut in the upcoming Union Budget 2018. “On the corporate level Corporate tax rate may be cut to 25% for companies with annual sales of upto Rs.200 cr (vs Rs.50 cr earlier) (Realistically, a step-down in the corporate tax rate may be introduced only in conjunction with paring of exemptions, to maintain revenue neutrality), Corporate tax rate on insurance companies may be hiked gradually from the current 12.5%+SC over few years to match with the normal corporate tax rate, IBC cases – clarification/legislation expected on treatment of tax including MAT on writebacks,” said the firm.

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