Budget 2018: Middle class seems worse off, but rural India is smiling

Editor’s note: India has announced its Union Budget for 2018-19. Today's Daily Rundown brings you the key announcements driving professional conversations.

Finance minister Arun Jaitley has deviated from the path of fiscal consolidation in the government's last Budget before next year's general elections. There was a slew of populist measures for rural India, including the "world’s largest health insurance programme" and sops for the stressed farm sector. But there is hardly any encouraging news for the salaried middle-class — income tax liability might actually increase, long-term capital gains over ?1 lakh will be taxed, and a lot of items will soon have pricier tags. Jaitley said India was on track to achieving over 8% growth in 2018-19, and will likely grow at 7.2-7.5% in the remainder of this fiscal.

Here's the lowdown.

Jaitley has left income tax slabs for individuals untouched, but brought back standard deduction (?40,000) in lieu of transport allowance and medical reimbursement. Experts feel this will result in nominal benefit for the salaried. In fact, for those earning more than ?5 lakh annually, the tax outgo is set to increase thanks to 4% 'Health and Education Cess'. But senior citizens will benefit from higher deduction against health insurance premium. The finance minister has kept his promise of cutting corporate tax partially — companies with annual turnover of up to Rs 250 crore will pay 25% tax instead of 30%.

A lot of items will turn costlier. Though Jaitley cut basic excise duty on petrol and diesel by ?2 and abolished additional excise duty of ?6, he introduced a new road cess of ?8 per litre, which means prices will remain unchanged. Higher customs duty will mean imported cars, bikes, mobile phones, TVs, perfumes, watches and wearables will get dearer. Cigarettes, too, will become costlier. But tiles, cashew nuts, solar-tempered glass and solar cells will turn cheaper. 

There is a clear push on boosting rural incomes and giving an impetus to the agrarian economy. Measures include a higher agricultural credit target of ?11 lakh crore, a minimum support price for farmers that’s 50% higher than costs, favourable tax treatment for farmer produce companies, and a ?10,000 crore outlay for fisheries and animal husbandry, among others. Overall, the government has earmarked ?14.34 lakh crore for creation of livelihood and infrastructure in rural areas.

A mega health scheme for the poor is coming. As many as 100 million families will come under 'Ayushman Bharat', the largest government-funded health programme in the world. The scheme, which entitles each family to state-sponsored health insurance worth ?5 lakh, can be used to pay for hospitalisation and treatment at secondary and tertiary care facilities. On the education front, the government has proposed to deploy ?1 lakh crore over the next four years to step up investments in research. The Budget also seeks to set up 24 new government medical colleges.

The focus on digitisation and new-age tech is likely to continue. Jaitley said all enterprises in India will get a unique identity, much like Aadhaar for individuals. The government will also invest in areas like machine learning, artificial intelligence and robotics, and the Department of Science will launch a "Mission for Cyberspace." The finance minister added that the government will leverage blockchain to expedite digitisation. But there is bad news for cryptocurrency investors — Jaitley said the government does not consider it legal tender and will take steps to eliminate its use.

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