This Union Budget came against the backdrop of a raft of reforms, economic slowdown and fiscal stress. While the Budget proposals will incrementally contribute to economic expansion with its de facto elements of stimulus, the pace of growth will largely be due to factors outside the Budget.
The Finance Minister's statement that India needs an investment of Rs 50 trillion for infrastructure development indicates the government's commitment and thrust to develop the country's infrastructure. In continuation with last year's Budget, the government has provided a record allocation of Rs 5.97 trillion for the sector in current fiscal - an increase of almost a trillion over the previous fiscal. Out of this, transport sector has received an outlay of Rs 2.76 trillion, up by almost 17 per cent from the revised estimates of last fiscal.
An all-time high allocation to rail and road sectors is expected to help in strengthening the transport infrastructure. The Budget also focused on the development of urban infrastructure by increasing allocation for Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and smart cities mission (SCM) by almost 35 per cent in FY2019. The government has so far completed projects worth Rs 23.5 billion under SCM.
In addition, a proposal to set up dedicated affordable housing fund (AHF) and provide assistance for creation of housing in rural and urban areas will help in achieving the target of Housing for All by 2022.
While the government has proposed significant increase in its allocation for infrastructure sector, it is also trying to encourage private sector investments in the sector through innovative measures such as infrastructure investment trusts (InvITs) and toll-operate-transfer models. Overall, the Union Budget FY2019 can be seen as the government's attempt to show its commitment to further augment infrastructure in the country.
Reactions on Budget 2018-19:
Abhishek Goenka, Partner, Tax and Regulatory Services, PwC
Overall, it's a good budget. I'm neither disappointed nor particularly thrilled with the Budget. The reason, I say that is because there was a fear about several populist measures being announced. However, that hasn't happened. The other thing is there's finally some recognition of the rural distress and some very specific measures have been taken on that front. The massive healthcare programme is quite surprising at one level given its target to cover 50 crore people with Rs 5 lakh coverage. But, that's something that the country desperately needs.
If it is pulled-off, it could of one of those watershed announcements.
Vipul Jhaveri, Managing Partner Taxation, Deloitte, Haskins & Sells LLP
The Budget is really targeted at segments that needed to be helped. So, the agriculture sector and small businesses have been adequately recognised for support. Large businesses that were looking for some tax concessions might be disappointed. As far as the tax regime is concerned, the government has reduced the tax rate for MSMEs. And, that should really help the government's agenda on employment generation. Of course, there is no limit to what more could have been done. But it's a continuous process and, therefore, for the time being it is adequate. We don't see anything detrimental in the Finance Minister's speech. Support has been extended to certain specific sectors in the small, medium as well as in agriculture space, whether animal husbandry, leather, apparels or textiles.
Dr. Arun Singh, Lead Economist, Dun & Bradstreet, India
It is not surprising that this Budget has turned out to be populous. The Budget FY19 has given more than what was initially expected as far as rural, social and infrastructure sector is concerned. Increased allocations and measures announced towards agriculture sector, rural infrastructure and social sector including health, if implemented timely and fully, have the potential to kick-start growth momentum in the economy.
This was one of the most appropriate ways to provide some relief to these sectors, which were highly impacted by two structural reforms i.e. demonetisation and GST implementation. This would also address agrarian crisis and unemployment scenario to some extent. However, we don't see a scope for an RBI rate cut. Further, deviation from the path of fiscal consolidation was widely expected and much warranted given slowdown in the investment activity. In addition, lowering of corporate tax, and measures to improve the capital and credit availability for MSMEs, are steps are encouraging steps.
Ashish Dhakan, MD & CEO, Prama Hikvision India The Union Budget 2018 is a shining example of fiscal prudence with an investment focus on Infrastructure sector and railways.
The government's thrust on infrastructure sector (Rs 14.34 lakh crore) and railways (Rs 14.85 lakh crore) would have a positive outcome on the economy. These initiatives will drive the security industry in a whole new growth phase. We welcome the government's move to double the allocation on the Digital India programme to Rs 3,073 crore - a decision that will help the research and skilling in robotics, Artificial Intelligence (AI) and Internet of Things (IoT), among others. We also appreciate the government's resolve to support the establishment of centres of excellence for research, training and skilling in robotics, AI, digital manufacturing, big data analytics, quantum communication and IoT.
Shishir Baijal, Chairman & Managing Director, Knight Frank India
The Union Budget 2018-2019 has predominantly focussed on revitalising the rural economy which is a good move.
We also welcome the thrust on the healthcare, agriculture and infrastructure sectors outlined in this budget. Throughout last year, measures surrounding 'Affordable Housing' were the mainstay from the perspective of real estate industry. This was also evident in the Credit Linked Subsidy Scheme (CLSS) and the last Goods & Services Tax (GST) Council meet where they brought down the effective rate to eight per cent from 12 per cent. A similar trend is visible in this budget where the 'Affordable Housing' fund under National Housing Bank (NHB) has been created as a part of the priority sector lending. However, there has been a silence in the budget on stimulating mainstream real estate demand. The sector grappling with the reforms-driven new order has been bereft of any meaningful interventions that could have been achieved through the Budget.
Now, let's take a look at impact assessment on various sectors. The below sector analysis is based on proposals by the government of India and its impact on allied industries.
Post Budget Analysis:
Power and Green Energy
Housing Finance Companies
Metals: Iron and Steel
OIL & GAS