Indian economy has started showing some signs of improvement and economic indicators point towards slow recovery in government revenue. However, the GST collections have reduced in the recent months and Finance Ministry is concerned about the issue. The informal economy suffered a major blow and farm incomes reduced. The Finance Minister has introduced a budget which is focused on agriculture sector.

We present views of Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank on the Union Budget presented by Arun Jaitley.

A budget focused on priority segments

The Finance Minister focused the FY18/19 budget on spends in Agriculture, rural upliftment, the poor, health, education, Infrastructure and Digital India.

The fiscal deficit projected, thus, saw a marginal slippage to 3.3% in FY19, with the current year’s deficit estimated at 3.5%. Given the criticality of areas that spends have been allocated to, the money would be well spent and good for India and the Indian economy in the long run.

The National Health Protection Scheme to cover 10 crore families at Rs 5 lakh per family is commendable, as are measures to provide for basics to the poor, increase spends in rural India, and steps to ensure farmers get fair compensation and direct linkages to consumers and markets.

The continued spends on infrastructure – particularly roads, railways, ports, smart cities, are all steps which will give a boost to India’s economic growth and development in the medium to long term.

The steps to ensure increased credit flow to the MSME segment and a reduction in the corporate tax to 25% for companies with a turnover of up to Rs 250 crore will again go a long way in giving a significant boost to this segment, and will create more employment.

The salaried segment did not receive any added benefits other than a higher standard deduction. Benefits to senior citizens, including an increase in the tax exemption limit for interest income on fixed deposit returns, is welcome.

The much discussed and awaited Long Term Capital Gains tax (LTCG) was also announced. In what is a fair move, the 10% LTCG tax is applicable on an incremental basis and all holdings as on Jan 31st 2018 would be grandfathered and valued at prices on that day. However, Securities Transaction Tax (STT) was not reduced.

The introduction of dividend distribution tax on equity mutual funds was a surprise.

Overall, it was a balanced budget with focused allocation given to priority segments that are needed to lay the foundation for India’s long term sustainable growth, with only a marginal slippage on the fiscal deficit.