Feb 02, 2018 8 min read

Budget 2018: Key Points to Sum up the Vision of the Budget

Budget 2018 has embraced every aspect, entity and growth factor in its document. Learn more
As the Modi Government is about to face general elections in 2019, the Finance Minister, Mr. Arun Jaitley, has tried to present a reformist budget for the FY 2018-19. Allowing the fiscal targets to slip a bit, the government has tried to lure the rural population of the country by providing significant incentives to the agricultural and rural sectors.

This time the budget aims to concentrate majorly on three areas – agriculture, education and health. The finance minister has claimed that the Indian economy has been booming at a nominal growth of 7.5%, which has now become the seventh largest economy in the world. But, it was interesting to note that government has struggled to save its boat by balancing the fiscal deficit even during the boom period. This is the last full budget by Modi Government before the upcoming general election and they have managed to create a win – win situation.

Why is Budget Important?

India’s budget document is the principal policy document, which shows the government plans to use the public resources to meet the mentioned policy goals. The Union budget of India is important for every type of entity of the country, be it corporate, general public or government itself. It becomes a point of contact for the government with the rest of India where the welfare of both is being considered. Let us give a thought.

  • To corporate: It is significant as they anticipate an ease of doing business with favorable compliances and regulations every year. They even expect relief in the taxation policy to increase their earnings and enhance their contribution to economy.
  • To a common man: There is a hope of increase in income, relief in taxation and their capability to beat the inflation with every growing year.
  • To Govt.: And lastly, this annual monetary exercise is important for the government to boost economic growth, maintain fiscal discipline, and improve centre-public relationship.

Effects of the Budget 2018

On Govt.: The government might have been struggling with its own problems but it has come out to lend a helping hand to its people.

  • Despite the current scenario where the government has failed to aim its fiscal targets, it has proposed an appreciable policy of providing annual healthcare of Rs. 5 lac to 10 crore families. The future consequences can be anticipated to be negative, if the govt. fails to generate the sufficient income with this policy.
  • As of now, the government has revised the fiscal deficit for 2017-18 to 3.5 per cent of GDP or Rs 5.95 lac crore, excluding the revenue from GST which might impact the balance sheets.
  • Now, it aims to target for the fiscal deficit of 3.3 per cent of GDP, for 2018-19.

On Taxpayers: High taxpayers might find the budget biased this time. But the Finance Minister has focused on the overall growth of the industrial sector on the ground level.

  • The budget gives no relief to the taxpayers as such. In fact, the education cess has been increased from 3% to 4%. The high taxpayers are hit again.
  • But the good news is that Corporate tax has been cut to 25% for the MSME companies having turnover up to Rs. 250 crore. Decrease in the corporate tax could help in the ultimate growth of the small-scale sector. The extra 5% fund for input can increase the output of the sector. Collectively, this move will benefit most of the companies excluding the Indian biggies.
  • Moreover, a standard deduction of Rs. 40k will be allowed to the salaried people, in lieu of the medical and transport allowances that were previously available to them.
  • There are no changes in the structure of personal income- tax rates for now.


On Investors: It seems this time the government is going to juice out the investors for its thirst.

  • The budget has imposed 10% tax on the long-term capital gains that exceeds Rs. 1 lac. However, all the gains earned up to 31st January 2018 will be grandfathered. This rule will apply to the investments in equities.
  • There will be no change to the short –term capital gains from equities. They will continue to attract the tax at 15%.
  • To the next level, FM has introduced 10% tax on the distributed income from Equity Oriented Mutual Funds. This would provide an unbiased environment to the dividend distributing and growth-oriented funds.
  • The above move will give a boost to bond markets. And the ultimate rise in yield could direct investors towards debt and deposits.
  • Here, the importance of the portfolio comes in to the picture. As the tax calculation would change after 31st January 2018 with the inclusion of LTCG, the investors need to be more cautious while churning their portfolio to secure more gains.

On Consumer: This was surely the distillation of benefits in terms of income and expenditure, but in reverse direction. Once again, the government has privileged the farmers by ensuring the maximum output price. This means more income, more investment and more inflow of money in the economy.

  • Rural consumers could enjoy more income and hence, will be able to spend more. All thanks to the rise in farm prices.
  • On the contrary, rise in MSP may increase the inflation and hike in the food prices. The consumers may get hurt due to this reform.
  • Increase in custom duties will again heat up the households of the urban consumers.

On AAM Aadmi: Headlines of the esteemed papers quoted ‘Suits and Boots pay for Gram and Garib’. Well that’s true! Our big-hearted Finance Minister has taken wealth from the 50% of the population to provide for the other half of the country.

  • Touching the base, Government has instructed the NITI aayog to work out the mechanism and provide guaranteed 50% of the cost of their production to the farmers.
  • The budget has proposed Rs. 5 lac annual health cover to 10 crore poor families.
  • Also, plans are designed to provide over 5 million rural houses, housing funds, electricity for all and even more free gas connections.

Sector-wise Significance

This year’s budget is the first after the big kicks and economic reforms such as GST, mega PSU bank recapitalization, dynamic fuel price and more. Let us look at the key points from the FM, Arun Jaitley’s 5th budget sector wise.

Agriculture and Rural Economy

To give it a feel of populism, FM gave stress on the government’s promise of doubling the farmer’s income. The budget has included a rise in the minimum support price (MSP) of the kharif crops by 50 percent of the cost of production, i.e., 1.5 times. For the same purpose, the budget has proposed a corpus of Rs. 2000 crores. This gesture of government could encourage the growth of agriculture and agro-industry. We wish that the seeds of support would grow into a blooming flower of economic augmentation.

Agriculture and Rural Economy

Health, Education and Social Protection

As far as the health sector is concerned, government aims to provide a health cover of Rs. 5 Lac each to 10 crore families, and Rs 1 lac crore has been proposed for “Revitalizing the Infrastructure and Systems in Education (RISE)” by 2022.

Health, Education and Social Protection

The budget proposes an earmarked allocation of Rs.56,619 crore and Rs.39,135 crore for the social inclusion of SCs and STs respectively in 2018-19.

Medium, Small and Micro Enterprises (MSMEs) and Employment

To the joy of new employees, the budget states the contribution of 12% of the salary in the EPF for all the sectors for coming 3 years. Finance minister has provisioned Rs. 3794 crore to MSME Sector for capital support and interest subsidy with the sole motive of innovation. He also emphasized on the growth of Fintech industry quoting the importance of their role in the growth of MSMEs.


Infrastructure Development

FM seemed concerned about the shortage of investment in infrastructure to increase the growth of GDP. The budget is planned to invest Rs. 2.04 lac crore in 99 cities to achieve the ‘Smart Cities Mission’. An estimated cost of Rs. 5,35,000 crore has been approved for developing 35000 KMs of National Highways. For the development of railways which are considered to be the lifeline of the country, Mr. Jaitley has secured Rs. 1.5 lac crore which is a healthy increase from the last fiscal year.


Financial Sector

The Finance Ministry clearly supports the guidelines issued by the regulatory bodies (RBI and SEBI) for governing the Corporates. For the large companies, they have considered mandating the generation of about one-fourth of their capital requirement from the bond market. To combine the digital and physical systems, the FM has doubled the allocation on Digital India Programme to Rs. 3073 crore in 2018-19.

Financial Sector

The disinvestment budget has already crossed the estimations for this fiscal year and reached the mark of Rs. 1,00,000 crore. For the recapitalization of banks, the government is going to issue bonds of Rs. 80,000 crore this year.


Over all

Budget 2018 has embraced every aspect, entity and growth factor in its document. From farmers to consumers, from unemployed to the working class, from corporate giants to small ones, from ministers to commoners, from young bloods to senior citizens, from women to children, this year’s budget has followed the ‘give and take’ policy. It has tried to generate the capital from the privileged to distribute it among the underprivileged. It seems a fair game but only when the growth appears in the near future. The sole motive of the budget is the empowerment of the rural and agricultural areas with the support of the capable section of the community. We hope and pray for the economic advancement, global presence and financial balance of the country.