Budget 2018: Why it’s a calibrated departure from policy in the last two decades

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Updated: February 2, 2018 2:46:34 AM

Budget 2018: I rise to present the Budget for 2018-19. The government, led by the Prime Minister, Shri Narendra Modi, has successfully implemented a series of fundamental structural reforms. With the result India stands out among the fastest growing economies of the world.

I rise to present the Budget for 2018-19.Budget 2018: I rise to present the Budget for 2018-19. The government, led by the Prime Minister, Shri Narendra Modi, has successfully implemented a series of fundamental structural reforms. With the result India stands out among the fastest growing economies of the world.

Budget 2018-2019:

Speech of
Arun Jaitley
Minister of Finance
February 1, 2018

Section I
Governance, Economy and
Development

Madam Speaker,
I rise to present the Budget for 2018-19.

2. Madam, four years ago, we pledged to the people of India to give this nation an honest, clean and transparent government. We promised a leadership capable of taking difficult decisions and restoring strong performance of the Indian economy. We promised to reduce poverty, expedite infrastructure creation and build a strong, confident and a New India. When our government took over, India was considered a part of the Fragile 5; a nation suffering from policy paralysis and corruption. We have decisively reversed this. The government, led by the Prime Minister, Shri Narendra Modi, has successfully implemented a series of fundamental structural reforms. With the result India stands out among the fastest growing economies of the world.

3. The journey of economic reforms during the past few years has been challenging but rewarding. As a result of the reforms undertaken by the government, foreign direct investment has gone up. Measures taken by the government have made it much easier to do business in India. Natural resources are now allocated in a transparent and honest manner. There is a premium on honesty. There was a time when corruption was commonplace. Today, our people, especially our youth, are curious to lead their lives honestly. The indirect tax system, with introduction of the goods and services tax, has been made simpler. Benefits to the poor have been targeted more effectively with the use of digital technology. The demonetisation of high-value currency has reduced the quantum of cash currency and circulation in India. It has increased the taxation base and spurred greater digitisation of the economy. The Insolvency and Bankruptcy Code (IBC) has changed  the lender-debtor relationship. The recapitalised banks will now have a greater ability to support growth. All these structural reforms in the medium and long run will help the Indian economy achieve stronger growth for a long time.

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4. The Indian economy has performed very well since our government took over in May 2014. India achieved an average growth of 7.5% in first three years of our government. The Indian economy is now $2.5 trillion economy — the seventh largest in the world. India is expected to become the fifth largest economy very soon. On purchasing power parity basis, we are already the third largest economy.

5. Indian society, polity and economy had shown remarkable resilience in adjusting with the structural reforms. GDP growth at 6.3% in the second quarter signalled a turnaround of the economy. We hope to grow at 7.2% to 7.5% in the second half. The IMF, in its latest update, has forecast that India will grow at 7.4% next year. Manufacturing sector is back on a good growth path. The services, the mainstay of our growth, have also resumed their high growth rates of 8%-plus. Our exports are expected to grow at 15% in 2017-18. We are now firmly on course to achieve high growth of 8%-plus.

Income tax impact of Budget 2018. Calculate gain or loss with this Income Tax Calculator

6. We have taken up programmes to direct the benefits of structural changes and good growth to reach farmers, the poor and other vulnerable sections of our society and to uplift underdeveloped regions. This year’s Budget will consolidate these gains and particularly focus on strengthening agriculture and the rural economy, provision of good healthcare to the economically less privileged, taking care of senior citizens, infrastructure creation and working with the states to provide more resources for improving the quality of education in the country.

7. Prime Minister Shri Narendra Modi has always stressed importance of good governance. He has articulated the vision of “Minimum government and maximum governance”. This vision has inspired government agencies in carrying out hundreds of reforms in policies, rules and procedures. This transformation is reflected in the improvement of India’s ranking by 42 places in the last three years in the World Bank’s ‘Ease of Doing Business’ with India breaking into the top 100 for the first time. I would like to congratulate all those who worked to achieve this.

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8. Now, our government has taken Ease of Doing business furtherby stress on ‘Ease of Leaving’ for the common men of this country, especially for those belonging to the poor and middle classes of society. Good governance also aims at minimum interference by the government in the life of the common people of the country.

Budget 2018: Finance Minister Arun Jaitley projects a deficit of 3.3% of GDP for FY19

9. The government is providing free LPG connections to the poor of this country through Ujjwala Yojana. Under Saubhagya Yojna 4 crore household are being provided with electricity connections. More than 800 medicines are being sold at lower price through more than 3,000 Jan Aushadhi Centres. Costs of stents have been controlled. Special scheme for free dialysis of the poor has been initiated. Persons belonging to poor and middle classes are also being provided a great relief in interest rates on housing schemes. Efforts are being made to provide all government services, whether bus or train tickets or individual certificates, online. These include passports which may be delivered at the doorstep in two or three days or company registration in one day and these facilities have benefited a large section of our country. Certificate attestation is not mandatory, interviews for appointment in Group C and Group D posts have been done away with. These measures have saved time and money of lakhs of our youth. Our government by using modern technology is committed to provide a relief to those who suffer because of rigid rules and regulations.

10. Madam, while undertaking these reforms and programmes, we have worked sincerely and without weighing the political costs. Our government has ensured that benefits reach eligible beneficiaries and are delivered to them directly. Many services and benefits are being delivered to the people at their doorsteps or in their accounts. It has reduced corruption and cost of delivery and has eliminated middlemen in the process. The direct benefit transfer mechanism of India is the biggest such exercise in the world and is a global success story.

Section II Investment, Expenditure and  Policy Initiatives

Agriculture and Rural Economy

11. My government is committed for the welfare of farmers. For decades, the country’s agriculture policy and programme had remained production-centric. We have sought to effect a paradigm shift. Honourable Prime Minister gave a clarion call to double farmers’ income by 2022 when India celebrates its 75th year of independence. Our emphasis is on generating higher incomes for farmers. We consider agriculture as an enterprise and want to help farmers produce more from the same land parcel at lesser cost and simultaneously realise higher prices for their produce. Our emphasis is also on generating productive and gainful on-farm and non-farm employment for farmers and landless families.

12. Madam Speaker, as a result of the hard work of our country’s farmers, agriculture production in our country is at a record level. Doing the year 2016-17 we achieved a record foodgrain production of around 275 million tonnes and around 300 million tonnes of fruits and vegetables.

13. Madam Speaker, in our party’s manifesto it has been stated that farmers should realise at least 50% more than the cost of their produce; in other words, one and a half times of the cost of their production. The government has been very much sensitive to this resolution and it has declared minimum support price (MSP) for the majority of rabi crops at least at one and a half times the cost involved. Now, we have decided to implement this resolution as a principle for the rest of the crops. I am pleased to announce that as per predetermined principle, the government has decided to keep MSP for the all unannounced crops of kharif at least at one and half times of their production cost. I am confident that this historic decision will prove an important step towards doubling the income of our farmers.

14. Our government works with the holistic approach of solving any issue rather than in fragments. Increasing MSP is not adequate and it is more important that farmers should get full benefit of the announced MSP. For this, it is essential that if the price of the agriculture produce market is less than MSP, then in that case the government should purchase either at MSP or work in a manner to provide MSP for the farmers through some other mechanism. Niti Aayog, in consultation with central and state governments, will put in place a foolproof mechanism so that farmers will get adequate price for their produce.

15. For better price realisation, farmers need to make decisions  based on prices likely to be available after its harvest. The government will create an institutional mechanism, with participation of all concerned ministries, to develop appropriate policies and practices for price and demand forecast, use of futures and options market, expansion of the warehouse depository system and to take decisions about specific exports- and imports-related measures.

16. Madam Speaker, last year, I had announced the strengthening of  e-NAM and to expand coverage of  e-NAM to 585 APMCs. 470 APMCs have been connected to the e-NAM network and the rest will be connected by March 2018.

17. More than 86% of our farmers are small and marginal. They are not always in a position to directly transact at APMCs and other wholesale markets. We will develop and upgrade the existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs). In these GrAMs, physical infrastructure will be strengthened using MGNREGA and other government schemes. These GrAMs, electronically linked to e-NAM and exempted from regulations of APMCs, will provide farmers the facility to make direct sale to consumers and bulk purchasers.

18. An Agri-Market Infrastructure Fund with a corpus of Rs 2000 crore will be set up for developing and upgrading agricultural marketing infrastructure in the 22,000 Grameen Agricultural Markets (GrAMs) and 585 APMCs.

19. The task of connecting all eligible habitations with an all-weather road has been substantially completed, with the target date brought forward to March 2019 from March 2022. It is now time to strengthen and widen its ambit further to include major link routes which connect habitations to agricultural and rural markets (GrAMs), higher secondary schools
and hospitals. Prime Minister Gram Sadak Yojana Phase III will include such linkages.

20. For several years, we have been stating that India is primarily an agriculture-based country. As India is primarily an agriculture-based country, our districts can specialise in some or other agricultural produce and be known for it. But special attention is lacking in this regard. There is a need to develop a cluster-based model in a scientific manner for identified agriculture produce in our districts in the same manner as we have a developed model for the industrial sector.

21. Cultivation of horticultural crops in clusters bring the advantage of scale of operations and can spur the establishment of an entire chain from production to marketing, besides giving recognition to the districts for specific crops. The ministry of agriculture and farmers’ welfare will reorient its ongoing schemes and promote cluster-based development of agri- commodities and regions in partnership with the ministries of food processing, commerce and other allied ministries.

22. Our government has promoted organic farming in a big way. Organic farming by farmer producer organisations (FPOs) and village producers’ organizations in large clusters, preferably of 1,000 hectares each, will be encouraged. Women self-help groups (SHGs) will also be encouraged to take up organic agriculture in clusters under the National Rural Livelihood Programme.

23. Our ecology supports cultivation of highly specialised medicinal and aromatic plants. India is also home  to a large number of small and cottage industries that manufacture perfumes, essential oils, and other associated products. Our government shall support organised cultivation and associated industry. I propose to allocate a sum of Rs 200 crore for this purpose.

24. The food processing sector is growing at an average rate of 8% per annum. Prime Minister Krishi Sampada Yojana is our flagship programme for boosting investment in food processing. Allocation of the ministry of food processing is being doubled from `715 crore in RE 2017-18 to `1,400 crore in BE 2018-19. The government will promote establishment of specialised agro-processing financial institutions in this sector.

25. Tomato, onion and potato are basic vegetables consumed throughout the year. However, seasonal and regional production of these perishable commodities pose a challenge in connecting farmers and consumers in a manner that satisfies both. My government proposes to launch an “Operation Greens” on the lines of “Operation Flood”. Operation Greens shall promote FPOs, agri-logistics, processing facilities and professional management. I propose to allocate a sum of Rs 500 crore for this purpose.

26. India’s agri-exports potential  is as high as $100 billion against  current exports of $30 billion. To realise this potential, export of agri-commodities will be liberalised. I also propose to set up state-of-the-art testing facilities in all the 42 Mega Food Parks.

27. I propose to extend the facility of Kisan Credit Cards to fisheries and animal husbandry farmers to help them meet their working capital needs. Small and marginal farmers will get more benefits.

28. Bamboo is ‘Green Gold’. We removed bamboo grown outside forest areas from the definition of trees. Now, I propose to launch a Restructured National Bamboo Mission with an outlay of Rs 1,290 crore to promote bamboo sector in a holistic manner.

29. Many farmers are installing  solar water pumps to irrigate their fields. Generation of solar electricity  is harvesting of the Sun by farmers using their lands. The government of India will take necessary measures  and encourage state governments to put in place a mechanism that their surplus solar power is purchased  by distribution companies or licensees at reasonably remunerative rates.

30. Our government set up a  Long-Term Irrigation Fund in NABARD for meeting funding requirement of irrigation works. The scope of the fund would be expanded to cover specified command area development projects.

31. Last year, I had announced  setting up of Micro Irrigation  Fund for facilitating expansion of coverage under micro irrigation and Dairy Processing Infrastructure Development Fund to help finance investment in dairying infrastructure. It is now time to expand such focused investment funds. I, now, announce setting up a Fisheries and Aquaculture Infrastructure Development Fund for fisheries sector and an Animal Husbandry Infrastructure Development Fund for financing infrastructure requirement of animal husbandry sector. The total corpus of these two new funds would be Rs 10,000 crore.

32. Our government has been steadily increasing the volume of institutional credit for the agricultural sector from year to year from `8.5 lakh crore in 2014-15 to Rs 10 lakh crore in 2017-18. I now propose to raise this to Rs 11 lakh crore for the year 2018-19.

33. Presently, lessee cultivators are not able to avail crop loans. Consequently, a significant proportion of arable land remains fallow and tenant cultivators are forced to secure credit from usurious moneylenders. NITI Aayog, in consultation with state governments, will evolve a suitable mechanism to enable access of lessee cultivators to credit without compromising the rights of the land owners.

34. The government will extend a favourable taxation treatment to FPOs for helping farmers aggregate their needs of inputs, farm services, processing and sale operations. I shall give details in Part B of my speech.

35. Air pollution in the Delhi-NCR region has been a cause of concern. A special scheme will be implemented to support the efforts of the governments of Haryana, Punjab, Uttar Pradesh and the NCT of Delhi to address air pollution and to subsidise machinery required for in- situ management of crop residue.

36. Madam Speaker, the present top leadership of this country has reached at this level after seeing poverty at close quarters. Our leadership is familiar with the problems being faced by the SC, ST, Backward Classes and economically weaker sections of the society. People belonging to poor and middle classes are not case studies for them, on the other hand they themselves are a case study.

37. The lower and middle classes have been the focus of our government during the last three years. This government is continuously striving to alleviate all the small and major problems of the poor.

38. We launched the Prime Minister’s Ujjwala Scheme to make poor women free from the smoke of wood. Initially our target was to provide free LPG connections to about 5 crore poor women. But in view of the pace of implementation of the Ujjwala scheme and its popularity among the women, we propose to increase the target of providing free connection to 8 crore poor women.

39. Our government has launched the Prime Minister Saubhagya Yojana for providing electricity to all households of the country. Under this scheme, 4 crore poor households are being provided with electricity connection free of charge. We are spending Rs 16,000 crore under this scheme. You can very well imagine our anxiety and restlessness even with one hour power cut. Think about those women and children whose houses will not get electricity. Their life is going to change because of Pradhan Mantri Saubhagya Yojana.

40. Swachh Bharat Mission has benefited the poor. Under this mission, the government has already constructed more than 6 crore toilets. The positive effect of these toilets is being seen on the dignity of ladies, education of girls and the overall health of the family. The government is planning to construct around 2 crore toilets.

41. Madam Speaker, a roof for his family is another concern of the  poor. Far from the benami properties earned by corruption, the poor only desire to have a roof, a small house  by his earning of honesty. Our  government is helping them so that they may fulfil the dream of their own house. We have fixed a target that every poor of this country may have his own house by 2022. For this purpose Prime Minister Awas Yojana has been launched in rural and urban areas of the country. Under Prime Minister Awas Scheme Rural, 51 lakh houses in year 2017-18 and 51 lakh houses during 2018-19, which is more than 1 crore houses, will be constructed exclusively in rural areas. In urban areas the assistance has been sanctioned to construct 37 lakh houses.

42. My government will also establish a dedicated Affordable Housing Fund in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorised by the the government of India.

43. Loans to SHGs of women increased to about Rs 42,500 crore in 2016-17, growing 37% over previous year. The government is confident that loans to SHGs will increase to Rs 75,000 crore by March 2019. I propose to substantially increase allocation of National Rural Livelihood Mission to Rs 5,750 crore in 2018-19.

44. Groundwater irrigation scheme under Prime Minister Krishi Sinchai Yojana — Har Khet ko Pani will be taken up in 96 deprived-irrigation districts where less than 30% of the land holdings gets assured irrigation presently. I have allocated Rs 2,600 crore for this purpose.

45. As my proposals outlined indicate, the focus of the government next year will be on providing maximum livelihood opportunities in rural areas by spending more on livelihood, agriculture and allied activities and construction of rural infrastructure. In the year 2018-19, for creation of livelihood and infrastructure in rural areas, the total amount to be spent by the ministries will be Rs 14.34 lakh crore, including extra-budgetary and non-budgetary resources of Rs 11.98 lakh crore. Apart from employment due to farming activities and self employment, this expenditure will create employment of 321 crore person days, 3.17 lakh kilometres of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and provide 1.75 crore new household electric connections, besides boosting agricultural growth.

Health, Education and Social Protection

46. My government’s goal is to assist and provide opportunity to every Indian to realise her full potential capable of achieving her economic and social dreams. Our government is implementing a comprehensive social security and protection programme to reach every household of old, widows, orphaned children, divyaang and deprived as per the Socio-Economic Caste Census. Allocation on National Social Assistance Programme this year has been kept at Rs 9,975 crore.

47. We have managed to get children to school but the quality of education is still a cause of serious concern. We have now defined learning outcomes and National Survey of more than 20 lakh children has been conducted to assess the status on the ground. This will help in devising a district-wise strategy for improving quality of education. We now propose to treat education holistically without segmentation from pre-nursery to Class 12.

48. Improvement in quality of teachers can improve the quality of education in the country. We will initiate an integrated B.Ed programme for teachers. Training of teachers during service is extremely critical. We have amended the Right to Education Act to enable more than 13 lakh untrained teachers to get trained.

49. Technology will be the biggest driver in improving the quality of education. We propose to increase the digital intensity in education and move gradually from “black board” to “digital board”. Technology will also be used to upgrade the skills of teachers through the recently launched digital portal “DIKSHA”.

50. The government is committed to provide the best quality education to tribal children in their own environment. To realise this mission, it has been decided that by the year 2022, every block with more than 50% ST population and at least 20,000 tribal persons, will have an Ekalavya Model Residential School. Ekalavya schools will be on par with Navodaya Vidyalayas and will have special facilities for preserving local art and culture, besides providing training in sports and skill development.

51. To step up investments in research and related infrastructure in premier educational institutions, including health institutions, I propose to launch a major initiative named “Revitalising Infrastructure and Systems in Education (RISE) by 2022” with a total investment of `1,00,000 crore in next four years. Higher Education Financing Agency (HEFA) would be suitably structured for funding this initiative.

52. Our government has taken major initiative of setting up institutes of eminence. There has been tremendous response to this initiative by institutions both in public and private sectors. We have received more than 100 applications. We have also taken steps to set up a specialised Railways University at Vadodara.

53. We propose to set up two new full-fledged Schools of Planning and Architecture, to be selected on challenge mode. Additionally, 18 new SPAs would be established in the IITs and NITs as autonomous schools, also on challenge mode.

54. The government would launch the “Prime Minister’s Research Fellows (PMRF)” Scheme this year. Under this, we would identify 1,000 best B.Tech students each year from premier institutions and provide them facilities to do Ph.D in IITs and IISc, with a handsome fellowship. It is expected that these bright young fellows would  voluntarily commit a few hours every week for teaching in higher educational institutions.

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55. Now I come to the Health Sector. is the guiding principle of my government. Only Swasth Bharat can be a Samriddha Bharat. India cannot realise its demographic dividend without its citizens being healthy.

56. I am pleased to announce two major initiatives as part of “Ayushman Bharat” programme aimed at making pathbreaking interventions to address health holistically, in primary, secondary and tertiary care systems covering both prevention and health promotion.

57. The National Health Policy, 2017, has envisioned health and wellness centres as the foundation of India’s health system. These 1.5 lakh centres will bring the healthcare system closer to the homes of the people. These centres will provide comprehensive healthcare, including for non-communicable diseases and maternal and child health services. These centres will also provide free essential drugs and diagnostic services. I am committing `1,200 crore in this budget for this flagship programme. I also invite contribution of the private sector through CSR and philanthropic institutions in adopting these centres.

58. Madam Speaker, we are all aware that lakhs of families in our country have to borrow or sell assets to receive indoor treatment in hospitals. The government is seriously concerned about such impoverishment of poor and vulnerable families. The present Rashtriya Swasthya Bima Yojana (RSBY) provides annual coverage of only Rs 30,000 to poor families. Several state governments have also implemented/supplemented health protection schemes providing varying coverage. My government has now decided to take health protection to a more aspirational level.

59. We will launch a flagship National Health Protection Scheme to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) providing coverage up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation. This will be the world’s largest government-funded healthcare programme. Adequate funds will be provided for smooth implementation of this programme.

60. Madam Speaker, these two far-reaching initiatives under Ayushman Bharat will build a New India 2022 and ensure enhanced productivity, well-being and avert wage loss and impoverishment. These schemes will also generate lakhs of jobs, particularly for women. The government is steadily but surely progressing towards the goal of universal health coverage.

61. TB claims more lives every year than any other infectious disease.  It affects mainly poor and malnourished people. My government has, therefore, decided to allocate additional Rs 600 crore to provide nutritional support to all TB patients at the rate of `500 per month for the duration of their treatment.

62. In order to further enhance accessibility of quality medical education and healthcare, we will be setting up 24 new government medical colleges and hospitals by upgrading existing district hospitals in the country. This would ensure that there is at least one medical college for every three parliamentary constituencies and at least one government medical college in each state of the country.

63. Our resolve of making our villages open defecation free is aimed at improving the life of our villagers. We will launch a scheme called Galvanising Organic Bio-Agro Resources Dhan (GOBAR-DHAN) for management and conversion of cattle dung and solid waste in farms to compost, fertiliser, bio-gas and bio-CNG.

64. Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJBY) has benefited 5.22 crore families with a life insurance cover of Rs 2 lakh on payment of a premium of only Rs 330 per annum. Likewise, under Pradhan Mantri Suraksha Bima Yojana, 13 crore 25 lakh persons have been insured with personal accident cover of Rs 2 lakh on payment of a premium of only Rs 12 per annum. The government will work to cover all poor households, including SC/ST households, under these in a mission mode.

65. The government will expand the coverage under Prime Minister Jan Dhan Yojana by bringing all 60 crore basic accounts within its fold and undertake measures to provide services of micro-insurance and unorganised sector pension schemes through these accounts.

66. Our commitment towards “Beti Bachao Beti Padhao” is unflinching. Sukanya Samriddhi Account Scheme launched in January 2015 has been a great success. Until November, 2017 more than 1.26 crore accounts have been opened across the country in the name of the girl-child, securing an amount of Rs 19,183 crore.

67. Cleaning the Ganga is work of national importance and it is our firm commitment. Members will be happy to learn that this work has gathered speed. A total of 187 projects have been sanctioned under the Namami Gange programme for infrastructure development, river surface cleaning, rural sanitation and other interventions at a cost of Rs 16,713 crore. 47 projects have been completed and remaining projects are at various stages of execution. All 4,465 Ganga Grams — villages on the bank of river — have been declared open defecation free.

68. To give focused attention and to achieve our vision of an inclusive society, the government has identified 115 aspirational districts taking various indices of development in consideration. The government aims at improving the quality of life in these districts by investing in social services like health, education, nutrition, skill upgradation, financial inclusion and infrastructure like irrigation, rural electrification, potable drinking water and access to toilets at an accelerated pace and in a time-bound manner. We expect these 115 districts to become models of development.

69. Economic and social advancement of hard-working people of Scheduled Castes (SCs) and Scheduled Tribes (STs) has received core attention of the government. Our government increased total earmarked allocation for SCs in 279 programmes from Rs 34,334 crore in 2016-17 to Rs 52,719 crore in RE 2017-18. Likewise, for STs, earmarked allocation was increased from Rs 21,811 crore in 2016-17 to Rs 32,508 crore in RE 2017-18 in 305 programmes. I propose an earmarked allocation of Rs 56,619 crore for SCs and Rs 39,135 crore for STs in BE 2018-19.

70. The government’s estimated schematic budgetary expenditure on health, education and social protection for 2018-19 is Rs 1.38 lakh crore against an estimated expenditure of Rs 1.22 lakh crore in BE 2017-18. This expenditure is likely to go up by at least Rs 15,000 crore in 2018-19 on account of additional allocation during the year and extra budgetary expenditure, including through Higher Education Financing Agency.

Medium, Small and Micro Enterprises (MSMEs) and Employment

71. Medium, small and micro enterprises (MSMEs) are a major engine of growth and employment in the country. I have provided Rs 3,794 crore to the MSME sector for giving credit support, capital and interest subsidy and innovations. Massive formalisation of the businesses of MSMEs is taking place in the country after demonetisation and introduction of GST. This is generating enormous financial information database of MSMEs’ businesses and finances. This big data base will be used for improving financing of MSMEs’ capital requirement, including working capital.

72. It is proposed to onboard public sector banks and corporates on Trade Electronic Receivable Discounting System (TReDS) platform and link this with GSTN. Online loan sanctioning facility for MSMEs will be revamped for prompt decision-making by banks. The government will soon announce measures for effectively addressing non-performing assets and stressed accounts of MSMEs. This will enable larger financing of MSMEs and also considerably ease cash flow challenges faced by them. In order to reduce the tax burden on MSMEs and to create a larger number of jobs, I will be announcing some tax measures in Part B of my speech.

73. MUDRA Yojana launched in April 2015 has led to the sanction of Rs 4.6 lakh crore in credit from 10.38 crore MUDRA loans. 76% of loan accounts are of women and more than 50% belong to SCs, STs and OBCs. It is proposed to set a target of Rs 3 lakh crore for lending under MUDRA for 2018-19 after having successfully exceeded the targets in all previous years.

74. Non-banking financial companies (NBFCs) stepped up financing of MSMEs after demonetisation. NBFCs can be a very powerful vehicle for delivering loans under MUDRA. Refinancing policy and eligibility criteria set by MUDRA will be reviewed for better refinancing of NBFCs.

75. Use of fintech in the financing space will help the growth of MSMEs. A group in the ministry of finance is examining the policy and institutional development measures needed for creating the right environment for fintech companies to growing India.

76. Venture capital funds and the angel investors need an innovative and special developmental and regulatory regime for their growth. We have taken a number of policy measures including launching “Start-Up India” programme, building a very robust alternative investment regime in the country and rolling out a taxation regime designed for the special nature of VCFs and angel investors. We will take additional measures to strengthen the environment for their growth and successful operation of alternative investment funds in India.

77. Creating job opportunities and facilitating generation of employment has been at the core of our policy-making. During the last three years, we have taken a number of steps to boost employment generation in the country. These measures include:-

  • Contribution of 8.33% of Employees’ Provident Fund (EPF) for new employees by the government for three years.
  • Contribution of 12% to EPF for new employees for three years by the government in sectors employing a large number of people like textile, leather and footwear.
  • Additional deduction to the employees of 30% of the wages paid for new employees under the Income Tax Act.
  • Launch of the National Apprenticeship Scheme with stipend support and sharing of the cost of basic training by the government to give training to 50 lakh youth by 2020.
  •  Introducing a system of fixed-term employment for apparel and footwear sector.
  •  Increasing paid maternity leave from 12 weeks to 26 weeks, along with provision of crèches.

78. These measures have started showing results. An independent study conducted recently has shown that 70 lakh formal jobs will be created this year.

79. To carry forward this momentum, I am happy to announce that the government will contribute 12% of the wages of the new employees in EPF for all the sectors for next three years. Also, the facility of fixed-term employment will be extended to all sectors.

80. To incentivise employment of more women in the formal sector and to enable higher take-home wages, I propose to make amendments in the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, to reduce women employees’ contribution to 8% for first three years of their employment against existing rate of 12% or 10% with no change in employers’ contribution.

81. The government is setting up a model aspirational skill centre in every district of the country under Pradhan Mantri Kaushal Kendra Programme. 306 Pradhan Mantri Kaushal Kendra have been established for imparting skill training through such centres.

82. The government had approved a comprehensive textile sector package of `6,000 crore in 2016 to boost the apparel and made-up segments. I now propose to provide an outlay of `7,148 crore for the textile sector in 2018-19.
Infrastructure and Financial
Sector Development

83. Infrastructure is the growth driver of economy. Our country needs massive investments estimated to be in excess of `50 lakh crore in infrastructure to increase growth of GDP, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways and to provide good quality services to our people.

84. We have made an all-time-high allocation to rail and road sectors. We are committed to further enhance public investment. Provision of key linkages like coal for power, power for railways and railway rakes for coal have been rationalised and made very efficient. The Prime Minister personally reviews the targets and achievements in infrastructure sectors on a regular basis. Using online monitoring system of PRAGATI alone, projects worth 9.46 lakh crore have been facilitated and fast-tracked.

85. To secure India’s defences, we are developing connectivity infrastructure in border areas. Rohtang tunnel has been completed to provide all-weather connectivity to the Ladakh region. Contract for construction of Zojila Pass tunnel of more than 14 kilometres is progressing well. I now propose to take up construction of a tunnel under Sela Pass. For promoting tourism and emergency medical care, the government will make the necessary framework for encouraging investment in sea plane activities.

86. Urbanisation is our opportunity and priority. My government has rolled out two interlinked programmes — Smart Cities Mission and AMRUT.

87. Smart Cities Mission aims at building 100 smart cities with state- of-the-art amenities. I am happy to inform that 99 cities have been selected with an outlay of `2.04 lakh crore. These cities have started implementing various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks. Projects worth `2,350 crore have been completed and works of `20,852 crore are under progress. To preserve and revitalise the soul of the heritage cities in India, the National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way.

88. India is blessed with an abundance of tourist attractions. It is proposed to develop 10 prominent tourist sites into Iconic Tourism destinations by following a holistic approach involving infrastructure and skill development, development of technology, attracting private investment, branding and marketing. In addition, tourist amenities at 100 Adarsh monuments of the Archaeological Survey of India will be upgraded to enhance visitor experience.

89. The AMRUT programme focuses on providing water supply to all households in 500 cities. State level plans of `77,640 crore for 500 cities have been approved. Water supply contracts for 494 projects worth `19,428 crore and sewerage work contract for 272 projects costing `12,429 crore have been awarded.
90. Reforms are being catalysed by these missions. 482 cities have started credit rating. 144 cities have got investment-grade rating.

91. My ministry will leverage the India Infrastructure Finance Corporation Limited (IIFCL) to help finance major infrastructure
projects, including investments in educational and health infrastructure, on strategic and larger societal benefit considerations.

92. Our government has scaled new heights in development of the road infrastructure sector. We are confident to complete National Highways exceeding 9,000 kilometres length during 2017-18. The ambitious Bharatmala Pariyojana has been approved for providing seamless connectivity of interior and backward areas and borders of the country to develop about 35,000 km in Phase-I at an estimated cost of `5,35,000 crore. To raise equity from the market for its mature road assets, NHAI will consider organising its road assets into special purpose vehicles and use innovative monetising structures like toll, operate and transfer and infrastructure investment funds (InvITs).

93. Strengthening the railway network and enhancing the railways’ carrying capacity has been a major focus of the government. Railways’ capex for the year 2018-19 has been pegged at `1,48,528 crore. A large part of the capex is devoted to capacity creation. 18,000 kilometres of doubling, third and fourth line works and 5,000 kilometres of gauge conversion would eliminate capacity constraints and transform almost entire network into broad gauge.

94. There has also been significant improvement in the achievement of physical targets by the railways as well. We are moving fast towards optimal electrification of the railway network. 4,000 kilometres are targeted for commissioning during 2017-18.

95. Work on the Eastern and Western dedicated freight corridors is in full swing. Adequate number of rolling stock — 12,000 wagons, 5,160 coaches and approximately 700 locomotives — are being procured during 2018-19. A major programme has been initiated to strengthen infrastructure at goods sheds and fast-track commissioning of private sidings.

96. A ‘Safety First’ policy, with allocation of adequate funds under Rashtriya Rail Sanraksha Kosh, is the cornerstone of the railways’ focus on safety. Maintenance of track infrastructure is being given special attention. Over 3,600 km of track renewal is targeted during the current fiscal. Other major steps include increasing use of technology like “Fog Safe” and “Train Protection and Warning System”. A decision has been taken to eliminate 4,267 unmanned level crossings in the broad gauge network in the next two years.

97. Redevelopment of 600 major
railway stations is being taken up by the Indian Railway Station Development Co Ltd. All stations with more than 25,000 footfalls will have escalators. All railway stations and trains will be progressively provided with Wi-Fi. CCTVs will be provided at all stations and on trains to enhance security of passengers. Modern train-sets with state-of-the-art amenities and features are being designed at Integrated Coach Factory, Perambur. The first such train-set will be commissioned during 2018-19.

98. Mumbai’s transport system, the lifeline of the city, is being expanded and augmented to add 90 kilometres of double-line tracks at a cost of over `11,000 crore. 150 kilometres of additional suburban network is being planned at a cost of over `40,000 crore, including elevated corridors on some sections. A suburban network of approximately 160 kilometres at an estimated cost of `17,000 crore is being planned to cater to the growth of the Bengaluru metropolis.

99. Foundation for the Mumbai-Ahmedabad bullet train project, India’s first high-speed rail project, was laid on September 14, 2017. An institute is coming up at Vadodara to train manpower required for high-speed rail projects.

100. In the last three years, domestic air passenger traffic grew at 18% per annum and our airline companies placed orders for more than 900 aircraft. Regional connectivity scheme of UDAN (Ude Desh ka Aam Nagrik) initiated by the government last year shall connect 56 unserved airports and 31 unserved helipads across the country. Operations have already started at 16 such airports. ºÉ®E É® E Ò <ºÉ {ɽ±É ºÉä ½´ÉÉ<Ç SÉ{{É±É {ɽxÉxÉä ´ÉɱÉä xÉÉMÉÊ®E ¦ÉÒ ½´ÉÉ<Ç VɽÉVÉ ¨ÉäÆÆ ªÉÉjÉÉ E ® ®½ä ½é* Airport Authority of India (AAI) has 124 airports. We propose to expand our airport capacity more than five times to handle a billion trips a year under a new initiative — NABH Nirman. The balance sheet of AAI shall be leveraged to raise more resources for funding this expansion.

Budget 2018: No change to personal income tax rates

101. Our efforts to set up a Coalition on Disaster Resilient Infrastructure for developing international good practices, appropriate standards and regulatory mechanism for resilient infrastructure development are moving well. I propose to allocate `60 crore to kick start this initiative in 2018-19.

102. The government and market regulators have taken necessary measures for development of monetising vehicles like InvITs and real estate investment trusts in India. The government would initiate monetising select CPSE assets using InvITs from next year.

103. In the current year, we included, in the scope of harmonised list of infrastructure, ropeways to promote tourism, logistics parks and expanded the scope of railways infrastructure to include development of commercial land around railway stations.

104. The Reserve Bank of India has issued guidelines to nudge corporates access bond market. The Securities and Exchange Board of India will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market.

105. Corporate bonds rated ‘BBB’ or equivalent are investment grade. In India, most regulators permit bonds with the ‘AA’ rating only as eligible for investment. It is now time to move from ‘AA’ to ‘A’ grade ratings. The government and concerned regulators will take necessary action.

106. We will take reform measures with respect to stamp duty regime on financial securities transactions in consultation with the states and make necessary amendments ot the Indian Stamp Act.

107. International Financial Service Centre (IFSC) at Gift City, which has become operational, needs a coherent and integrated regulatory framework to fully develop and to compete with other offshore financial centres. The government will establish a unified authority for regulating all financial services in IFSCs in India.

108. The global economy is transforming into a digital economy thanks to development of cutting-edge technologies in the digital space — machine learning, artificial intelligence, internet of things, 3D printing and the like. Initiatives such as Digital India, Start Up India, Make in India would help India establish itself as a knowledge and digital society. NITI Aayog will initiate a national programme to direct our efforts in the area of artificial intelligence, including research and development of its applications.

109. Combining cyber and physical systems have great potential to transform not only innovation ecosystem but also our economies and the way we live. To invest in research, training and skilling in robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and internet of things, the department of science and technology will launch a Mission on Cyber Physical Systems to support establishment of centres of excellence. I have doubled the allocation on Digital India programme to Rs 3,073 crore in 2018-19.

110. The task of connecting one lakh gram panchayat through high-speed optical fibre network has been completed under Phase I of the Bharatnet project. This has enabled broadband access to over 20 crore rural Indians in about 2,50,000 villages. The government also proposes to set up 5 lakh Wi-Fi hotspots which will provide broadband access to 5 crore rural citizens. I have provided `10,000 crore in 2018-19 for the creation and augmentation of telecom infrastructure.

111. To harness the benefit of emerging new technologies, particularly the ‘Fifth-generation’ (5G) technologies and its adoption, the department of telecommunications will support the establishment of an indigenous 5G test bed at IIT, Chennai.

112. Distributed ledger system or blockchain technology allows organisation of any chain of records or transactions without the need of intermediaries. The government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system. The government will explore use of block chain technology proactively for ushering in digital economy.

113. The system of toll payments physically by cash at road toll plazas is being fast replaced with Fastags and other electronic payment systems to make road travel seamless. The number of Fastags has gone up from about 60,000 in December 2016 to more than 10 lakh now. From December 2017 all class “M” and “N” vehicles are being sold only with Fastags. The government will come out with a policy to introduce toll system on “pay as you use” basis.

114. In order to create employment and aid growth, the government’s estimated budgetary and extra budgetary expenditure on infrastructure for 2018-19 is being increased to `5.97 lakh crore against estimated expenditure of `4.94 lakh crore in 2017-18.

Building Institutions and Improving
Public Service Delivery

115. Our armed forces have played a stellar role in meeting the challenges we have been facing on our borders as well as in managing the internal security environment both in Jammu and Kashmir and the northeast. I would like to place on record our appreciation for the efforts and the sacrifices made by the three services in defending the interests of the nation.

116. Ever since the NDA government has assumed office in 2014, a lot of emphasis has been given to modernising and enhancing the operational capability of the defence forces. A number of initiatives have been taken to develop and nurture intrinsic defence production capability to make the nation self-reliant for meeting our defence needs. Ensuring adequate budgetary support will be our priority.

117. We have opened up private investment in defence production including liberalising foreign direct investment. We will take measures to develop two defence industrial production corridors in the country. The government will also bring out an industry-friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and MSMEs.

118. Aadhaar has provided an identity to every Indian. Aadhaar has eased delivery of so many public services to our people. Every enterprise, major or small, also needs a unique ID. The government will evolve a scheme to assign every individual enterprise in India a unique ID.

119. To carry the business reforms for ease of doing business deeper and in every state of India, the government of India has identified 372 specific business reform actions. All states have taken up these reforms and simplifications in a mission mode constructively, competing with each other. Evaluation of performance under this programme will now be based on user feedback.

120. Capital of the Food Corporation of India will be restructured to enhance equity and to raise long-term debt for meeting its standing working capital requirement.

121. Budgeting of the government of India’s contribution in equity and debt of the metro ventures floated by the state governments will be streamlined.

122. The department of commerce will be developing a National Logistics Portal as a single-window online market place to link all stakeholders.

123. The government has approved the listing of 14 CPSEs, including two insurance companies, on the stock exchanges. The government has also initiated the process of strategic disinvestment in 24 CPSEs. This includes strategic privatisation of Air India.

124. The process of acquisition of Hindustan Petroleum Corporation by ONGC has been successfully completed. Three public sector general insurance companies — National Insurance Company Ltd, United India Assurance Company Ltd and Oriental India Insurance Company Ltd — will be merged into a single insurance entity and will be subsequently listed.

125. The government introduced exchange-traded fund Bharat-22 to raise `14,500 crore, which was over-subscribed in all segments. DIPAM will come up with more ETF offers including debt ETF.

126. The 2017-18 Budget Estimates for disinvestment were pegged at the highest ever level of `72,500 crore. I am happy to inform the House that we have already exceeded the Budget Estimates. I am assuming receipts of `1,00,000 crore in 2017-18. I am setting the disinvestment target of `80,000 crore for 2018-19.

127. The bank recapitalisation programme has been launched with bonds of `80,000 crore being issued this year. The programme has been integrated with an ambitious reform agenda, under the rubric of an Enhanced Access and Service Excellence (EASE) programme. This recapitalisation will pave the way for the public sector banks to lend additional credit of `5 lakh crore.

128. It is proposed to allow strong regional rural banks to raise capital from the market to enable them to increase their credit to the rural economy.

129. The National Housing Bank Act is being amended to transfer its equity from the Reserve Bank of India to the government. The Indian Post Offices Act, Provident Fund Act and National Saving Certificate Act are being amalgamated and certain additional people-friendly measures are being introduced. To provide the Reserve Bank of India an instrument to manage excess liquidity, the Reserve Bank of India Act is being amended to institutionalise an incollateralised deposit facility. The Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, and Depositories Act, 1996, are being amended to streamline adjudication procedures and to provide for penalties for certain infractions. These proposals are in the Finance Bill.
130. For easier access, links to all detailed demand for grants will be provided at india.gov.in. The government will also consider feasibility of providing disclosed fiscal information in a machine-readable form.

131. The government is transforming the method of disposal of its business by the introduction of e-office and other e-governance initiatives in central ministries and departments.

132. The government will formulate a comprehensive gold policy to develop gold as an asset class. The government will also establish a system of consumer-friendly and trade-efficient system of regulated gold exchanges in the country. The gold monetisation scheme will be revamped to enable people to open a hassle-free gold deposit account.

133. Outward direct investment (ODI) from India has grown to $15 billion per annum. The government will review existing guidelines and processes and bring out a coherent and integrated ODI policy.

134. Hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for start-ups and venture capital firms. The government will evolve a separate policy for the hybrid instruments.

135. The emoluments of the President, the vice-president and governors were last revised with effect from January 1, 2006. These emoluments are proposed to be revised to `5 lakh for the President,`4 lakh for the vice-president and to `3.5 lakh per month for governors.

136. There has been a public debate with regard to the emoluments paid to the members of Parliament. Present practice allows the recipients to fix their own emoluments, which invites criticism. I am, therefore, proposing necessary changes to refix the salary, constituency allowance, office expenses and meeting allowance payable to members of Parliament with effect from April 1, 2018. The law will also provide for automatic revision of emoluments every five years indexed to inflation. I am sure
Hon’ble members will welcome this initiative and will not suffer such criticism in the future.

137. Our country will commemorate the 150th birth anniversary of Mahatma Gandhi, the father of the nation, from October 2, 2019, to October 2, 2020. The government and the people of India will rededicate them, through their actions, to the ideals that the Mahatma taught and lived by. A national committee, chaired by the Prime Minister, which includes chief ministers of all the states, representatives from across the political spectrum, Gandhians, thinkers and eminent persons from all walks of life, has been constituted to formulate a Commemoration Programme. My government has earmarked `150 crore for the year 2018-19 for the activities leading to the commemoration.

Section III – Fiscal Management

138. I now turn to the fiscal situation for 2017-18 and fiscal estimates for 2018-19.

139. In 2017-18, the central government will be receiving GST revenues only for 11 months, instead of 12 months. This will have a fiscal effect. There has also been some shortfall in non-tax revenues on account of certain developments, including deferment of spectrum auction. A part of this shortfall has been made up through higher direct tax revenues and bigger disinvestment receipts.

140. Total Revised Estimates for expenditure in 2017-18 are `21.57 lakh crore (net of GST compensation transfers to the states) as against the Budget Estimates of `21.47 lakh crore.

141. Our government assumed office in May 2014 when the fiscal deficit was running at very high levels. Fiscal deficit for 2013-14 was 4.4% of GDP. The Prime Minister and the government have always attached utmost priority to prudent fiscal management and controlling the fiscal deficit. As Hon’ble members would recall, we embarked on the path of consistent fiscal reduction and consolidation in 2014. Fiscal deficit was brought down to 4.1% in 2014-15 to 3.9% in 2015-16, and to 3.5% in 2016-17. Revised fiscal deficit estimates for 2017-18 are `5.95 lakh crore at 3.5% of GDP. I am projecting a fiscal deficit of 3.3% of GDP for the year 2018-19.

142. In order to impart unquestionable credibility to the government’s commitment for the revised fiscal glide path, I am proposing to accept key recommendations of the Fiscal Reform and Budget Management Committee relating to adoption of the Debt Rule and to bring down the central government’s debt to GDP ratio to 40%. The government has also accepted the recommendation to use the fiscal deficit target as the key operational parameter. Necessary amendment proposals are included in the Finance Bill.

Budget 2018: How society was resilient to structural reforms

PART B

Madam Speaker,

143. I shall now present my tax proposals.

144. The attempts made by our government for reducing the cash economy and for increasing the tax net have paid rich dividends. The growth rate of direct taxes in the financial years 2016-17 and 2017-18 has been significant. We ended the last year with a growth of 12.6% in direct taxes and in the current year, the growth in direct taxes up to January 15, 2018, is 18.7%. The average buoyancy in personal income tax of seven years preceding these two years comes to 1.1. In simple terms, tax buoyancy of 1.1 means that if nominal GDP growth rate of the country is 10%, the growth rate of personal income tax is 11%. However, the buoyancy in personal income tax for financial years 2016-17 and 2017-18 (RE) is 1.95 and 2.11, respectively. This indicates that the excess revenue collected in the last two financial years from personal income tax compared to the average buoyancy pre-2016-17 amounts to a total of about `90,000 crore and the same can be attributed to the strong anti-evasion measures taken by the government.

145. Similarly, there has been a huge increase in the number of returns filed by taxpayers. In financial year 2016-17, 85.51 lakhs new taxpayers filed their returns of income as against 66.26 lakh in the immediately preceding year. By including all filers as well as persons who did not file returns but paid tax by way of advance tax or TDS, we can derive the figure of the effective taxpayer base. This number of effective taxpayer base increased from 6.47 crore at the beginning of FY14-15 to 8.27 crore at the end of FY16-17. We are enthused by this success of our measures and we pledge to continue to take all such measures in future by which the black money is contained and honest taxpayers are rewarded. Demonetisation was received well by honest taxpayers as “imandari ka utsav” only for this reason.

146. Madam Speaker, recognising the need for facilitating compliance, the government had liberalised the presumptive income scheme for small traders and entrepreneurs with annual turnover of less than `2 crore and introduced a similar scheme for professionals with annual turnover of less than `50 lakh with the hope that there would be significant increase in compliance. Under this scheme, 41% more returns were filed during this year, which shows that many more persons are joining the tax net under the simplified scheme. However, the turnover shown is still not encouraging. The department has received 44.72 lakh returns for assessment year 2017-18 from individual, HUF and firms with a meagre average turnover of `17.97 lakh and an average tax payment of Rs 7,000 only. The tax compliance behaviour of professionals is no better; the department has received 5.68 lakh returns under the presumptive income scheme for assessment year 2017-18 with average gross receipts of `5.73 lakh only. Average tax paid by them is only Rs 35,000.

Tax incentive for promoting  post-harvest activities of agriculture

147. Madam Speaker, at present, 100% deduction is allowed in respect of profit of cooperative societies which provide assistance to its members engaged in primary agricultural activities. Over the last few years, a number of farmer producer companies have been set up along the lines of cooperative societies which also provide similar assistance to their members. In order to encourage professionalism in post-harvest value-addition in agriculture, I propose to allow 100% deduction to these companies registered as farmer producer companies and having annual turnover up to `100 crore in respect of their profit derived from such activities for a period of five years from financial year 2018-19. This measure will encourage “Operation Greens” mission announced by me earlier and it will give a boost to Sampada Yojana.

Employment Generation

148. Currently, a deduction of 30% is allowed in addition to normal deduction of 100 % in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year under section 80-JJAA of the Income Tax Act. However, the minimum period of employment is relaxed to 150 days in the case of the apparel industry. In order to encourage the creation of new employment, I propose to extend this relaxation to the footwear and leather industry. Further, I also propose to rationalise this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year.

Incentive for Real Estate

149. Currently, while taxing income from capital gains, business profits and other sources in respect of transactions in immovable property, the consideration or circle rate value, whichever is higher, is adopted and the difference is counted as income both in the hands of the purchaser and seller. Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors including shape of the plot and location. In order to minimise hardship in real estate transactions, I propose to provide that no adjustment shall be made in a case where the circle rate value does not exceed 5% of the consideration.

Incentivising Micro, Small and Medium Entrepreneurs

150. In the Union Budget, 2017, I had announced the reduction of corporate tax rate to 25% for companies whose turnover was less than `50 crore in financial year 2015-16. This benefitted 96% of the total companies filing tax returns. Towards fulfilment of my promise to reduce corporate tax rate in a phased manner, I now propose to extend the benefit of this reduced rate of 25% also to companies who have reported turnover up to `250 crore in the financial year 2016-17. This will benefit the entire class of micro, small and medium enterprises which account for almost 99% of companies filing their tax returns. The estimate of revenue forgone due to this measure is `7,000 crore during the financial year 2018-19. After this, out of about 7 lakh companies filing returns, about 7,000 companies which file returns of income and whose turnover is above `250 crore will remain in the 30% slab. The lower corporate income tax rate for 99% of the companies will leave them with higher investible surplus which in turn will create more jobs.

Relief to Salaried Taxpayers

151. The government had made many positive changes in the personal income tax rate applicable to individuals in the last three years. Therefore, I do not propose to make any further change in the structure of the income tax rates for individuals. There is a general perception in society that individual business persons have better income as compared to the salaried class. However, income tax data analysis suggests that a major portion of personal income tax collection comes from the salaried class. For assessment year 2016-17, 1.89 crore salaried individuals have filed their returns and have paid a total tax of `1.44 lakh crore, which works out to average tax payment of `76,306 per individual salaried taxpayer. As against this, 1.88 crore individual business taxpayers including professionals who filed their returns for the same assessment year paid total tax of `48,000 crore which works out to an average tax payment of `25,753 per individual business taxpayer. In order to provide relief to salaried taxpayers, I propose to allow a standard deduction of `40,000 in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently- abled persons. Also, other medical reimbursement benefits in case of hospitalisation, etc, for all employees shall continue. Apart from reducing paperwork and compliance, this will help middle-class employees even more in terms of reduction in their tax liability. This decision to allow standard deduction shall significantly benefit pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. The revenue cost of this decision is approximately Rs 8,000 crore. The total number of salaried employees and pensioners who will benefit from this decision is arou

The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crore.

Relief to Senior Citizens

152. A life with dignity is a right of every individual in general, more so for senior citizens. To care for those who cared for us is one of the highest honours. To further the objective of providing a dignified life, I propose to announce the following incentives for senior citizens:
– Exemption of interest income on deposits with banks and post offices to be increased from Rs 10,000 to Rs 50,000 and TDS shall not be required to be deducted on such income, under Section 194A. This benefit shall be available also for interest from all fixed deposits schemes and recurring deposit schemes.
– Raising the limit of deduction for health insurance premium and/ or medical expenditure from Rs 30,000 to Rs 50,000, under Section 80D. All senior citizens will now be able to claim benefit of deduction up to Rs 50,000 per annum in respect of any health insurance premium and/or any general medical expenditure incurred.

– Raising the limit of deduction for medical expenditure in respect of certain critical illness, from Rs 60,000 in case of senior citizens and from `80,000 in case of very senior citizens, to Rs 1 lakh in respect of all senior citizens, under Section 80DDB.
These concessions will give extra tax benefit of Rs 4,000 crore to senior citizens. In addition to tax concessions, I propose to extend the Pradhan Mantri Vaya Vandana Yojana up to March 2020 under which an assured return of 8% is given by Life Insurance Corporation of India. The existing limit on investment of Rs 7.5 lakh per senior citizen under this scheme is also being enhanced to Rs 15 lakh.

Tax Incentive for International Financial Services Centre (IFSC)

153. The government had endeavoured to develop a world-class international financial services centre in India. In recent years, various measures including tax incentives have been provided in order to fulfil this objective. To further this objective, I propose to provide two more concessions for IFSC. In order to promote trade in stock exchanges located in IFSC, I propose to exempt transfer of derivatives and certain securities by non-residents from capital gains tax. Further, non-corporate taxpayers operating in IFSC shall be charged alternate minimum tax (AMT) at a concessional rate of 9% at par with minimum alternate tax (MAT) applicable for corporates.

Further Measures to Control Cash Economy

154. Currently, the income of trusts and institutions is exempt if they utilise their income towards their objects in accordance with the relevant provisions of the Income Tax Act. However, there is no restriction on these entities for incurring expenditure in cash. In order to have audit trail of the expenses incurred by these entities, it is proposed that payments exceeding `10,000 in cash made by such entities shall be disallowed and the same shall be subject to tax. Further, in order to improve TDS compliance by these entities, I propose to provide that in case of non-deduction of tax, 30% of the amount shall be disallowed and the same shall be taxed.

Rationalisation of Long-term Capital Gains (LTCG)

155. Madam Speaker, currently, long-term capital gains arising from transfer of listed equity shares, units of equity-oriented funds and units of a business trust are exempt from tax. With the reforms introduced by the government and incentives given so far, the equity market has become buoyant. The total amount of exempted capital gains from listed shares and units is around Rs 3,67,000 crore as per returns filed for AY17-18. A major part of this gain has accrued to corporates and LLPs. This has also created a bias against manufacturing, leading to more business surpluses being invested in financial assets. The return on investment in equity is already quite attractive even without tax exemption. There is therefore a strong case for bringing long-term capital gains from listed equities in the tax net. However, recognising the fact that a vibrant equity market is essential for economic growth, I propose only a modest change in the present regime. I propose to tax such long-term capital gains exceeding Rs 1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to January 31, 2018, will be grandfathered. For example, if an equity share is purchased six months before January 31, 2018, at Rs 100 and the highest price quoted on January 31, 2018, in respect of this share is Rs 120, there will be no tax on the gain of Rs 20 if this share is sold after one year from the date of purchase. However, any gain in excess of Rs 20 earned after January 31, 2018, will be taxed at 10% if this share is sold after July 31, 2018. The gains from equity share held up to one year will remain short-term capital gain and will continue to be taxed at the rate of 15%. Further, I also propose to introduce a tax on distributed income by equity-oriented mutual funds at the rate of 10%. This will provide a level playing field across growth-oriented funds and dividend distributing funds. In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs 20,000 crore in the first year. The revenues in subsequent years may be more.

Health and Education Cess

156. Madam Speaker, at present there is a 3% cess on personal income tax and corporation tax consisting of 2% cess for primary education and 1% cess for secondary and higher education. In order to take care of the needs of education and health of BPL and rural families, I have announced programmes in Part A of my speech. To fund this, I propose to increase the cess by 1%. The existing 3% education cess will be replaced by a 4% “Health and Education Cess” to be levied on the tax payable. This will enable us to collect an estimated additional amount of Rs 11,000 crore.

E-assessment.

157. We had introduced e-assessment in 2016 on a pilot basis and in 2017, extended it to 102 cities with the objective of reducing the interface between the department and the taxpayers. With the experience gained so far, we are now ready to roll out the e-assessment across the country, which will transform the age-old assessment procedure of the income tax department and the manner in which they interact with taxpayers and other stakeholders. Accordingly, I propose to amend the Income Tax Act to notify a new scheme for assessment where the assessment will be done in electronic mode which will almost eliminate person-to-person, contact leading to greater efficiency and transparency.

158. My other tax proposals on direct tax are listed in Annexure 5 of my speech.

Indirect Tax

159. On the indirect taxes side, this is the first Budget after the roll-out of the goods and service tax. Excise duties to a large extent and service tax have been subsumed in GST, along with corresponding duties on imports. Hence, my budget proposals are mainly on the customs side.

160. In this Budget, I am making a calibrated departure from the underlying policy in the last two decades, wherein the trend largely was to reduce the customs duty. There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items. I propose to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country. Details of changes made in rates of customs duty as well as certain changes made in the excise duty structure are given in Annexure 6 to my speech.

161. To help the cashew processing industry, I propose to reduce customs duty on raw cashew from 5% to 2.5%.

162. I propose to abolish the education cess and secondary and higher education cess on imported goods, and in its place impose a social welfare surcharge, at the rate of 10% of the aggregate duties of customs, on imported goods, to provide for social welfare schemes of the government. Goods which were hitherto exempt from education cesses on imported goods will, however, be exempt from this surcharge. In addition, certain specified goods, mentioned in the Annexure 6 to my speech, will attract the proposed surcharge at the rate of 3% of the aggregate duties of customs only.

163. I also propose to make certain changes to the Customs Act, 1962, to further improve ease of doing business in cross-border trade, and to align certain provisions with the commitments under the Trade Facilitation Agreement. To smoothen the dispute resolution processes and to reduce litigation, certain amendments are being made to provide for pre-notice consultation, definite timelines for adjudication and deemed closure of cases if those timelines are not adhered to.

164. With the roll-out of GST, I propose to change the name of Central Board of Excise and Customs to Central Board of Indirect Taxes and Customs. The necessary changes in law for this are proposed in the Finance Bill.

165. Madam, while making the proposals in this year’s Budget, we have been guided by our mission to especially strengthen agriculture, rural development, health, education, employment, MSME and infrastructure sectors of Indian economy. I am sure the New India which we aspire to create now will emerge. Swami Vivekanand had also envisioned decades ago in his Memoirs of European Travel, “You merge yourselves in the void and disappear, and let new India arise in your place. Let her arise – out of the peasants’ cottage, grasping the plough; out of the huts of the fisherman. Let her spring from the grocer’s shop, from beside the oven of the fritter-seller. Let her emanate from the factory, from marts, and from markets. Let her emerge from groves and forests, from hills and mountains.”

166. With these words, Madam Speaker, I commend the Budget to the House.

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