KEY BUDGET HIGHLIGHTS….First Cut (Macquirie)
INDIA BUDGET HIGHLIGHTS
FY18 fiscal deficit at 3.5% of GDP, target was 3.2% but the slippage was widely expected (fiscal deficit is flat YoY). Fiscal deficit for FY19 forecasted at 3.3% of GDP as compared to consensus forecast of 3.2%. Govt is committed towards Fiscal Reforms and Budgetary Management (FRBM) Committee report, will bring down central govt debt to GDP ratio to 40%
FY19 Market Loans forecasted at Rs 6.06 trillion ($ 95bn) as compared to Rs6 trillion in FY18 (budget forecast was Rs5.8 trillion, few days back it was raised by Rs0.2 trillion).
Divestment target in FY19 is Rs800bn; FY18 divestment target upped to Rs1 trillion
Higher direct tax revenue and divestment is partly making up for shortfall in GST (only 11 months of GST collection will reflect in FY18)
Long Term Capital Gains (LTCG) exceeding Rs1lakh will be taxed @10% without benefit of indexation. All gains till 31st Jan 2018 will be grandfathered ie.any gain earned after 31st Jan 2018 will be charged at 10% (ex. If a stock had touched 120 before 31st Jan 2018, and the sale happens at 140..then tax will be on 20 and not on 140—cost). STCG will be cont to be taxed at 15%….tax on distribution of equity oriented at 10%, this will hurt the dividend MF options. FM expects these schemes will bring Rs200bn in the first year…
TAX benefit for MSMEs: Extends reduced corporate tax rate of 25% to companies with turnover <Rs2.5bn. In the last budget this reduced tax rate was floated for cos with turnover <Rs0.5bn abd benefited 25% of total companies filing tax returns..
No change in tax for salaried tax payers. Avg tax paid by salaried tax payers is ~Rs76,000 per person as compared to Rs25,000 per person in case of business tax payers. Standard deduction of Rs40,000 in lieu of transport and medical expenses (this was anyway ~Rs33,000).
Senior citizen incentives : exemption on interest income on FDs/Post office deposit to be increased from Rs10,000 to Rs50,000. Raising limit of health insurance from Rs30,000 to Rs50,000.
Rural Income/ Housing:
Focus on rural income and affordable housing continues – LT target is to double farm income by 2022 and provide house to every poor by 2022.
In this year govt would raise MSP for Kharif crop (monsoon) to 1.5x of cost of produce
Free cooking gas to 80mn poor households
Will spend Rs14.34 trillion (224bn $) for rural livelihood in FY19
Will increase allocation for agri credit from Rs10 trillion (156 bn $) to Rs11 trillion (172 bn $)
Launched flasgship national health protection scheme to cover 100mn families and 500mn beneficiaries. Will provide Rs5 lakh benefit per family per year coverage…this is very sizable
70 lakh formal jobs were created in FY18
Govt will contribute 12% salary towards EPF to employees of all sectors (would be govt employees I assume, though FM did not mention)
Fixed term eployment will be extended to all sectors. It was applicable in textile and footwear industry in FY18
Women cintri to PF be redyced to 8% from 12% in first 3 years