The Indian Union Budget 2018-19 has reaffirmed Modi government’s inclusive growth philosophy. For business leaders, this budget has opened up enormous opportunities for participation in different creative ways. Ease of Doing Business and Ease of Living are the two key aspects of this budget. Sustaining the agenda of the fundamental structural reforms for the consecutive fourth budget is one of the achievements of the current government.
The focus of the budget is on strengthening the backbone sectors of the economy such as Agriculture, MSMEs, Infrastructure, and Manufacturing. This is the right time for domestic and foreign players to align their business goals with the spirit of the ‘New India.’
Indian Union Budget 2018-19- An Overview
From Agriculture to Agri-business
The Agriculture is the driving force of the ‘New India.’ The focus of the budget is on Agribusiness and Agro Value Addition. Finance Minister Mr. Arun Jaitely has mentioned in his budget speech that “we consider agriculture as an enterprise and want to help farmers produce more from the same land parcel at a lesser cost and simultaneously realize higher prices for their produce.” This new approach toward agriculture sector will yield remarkable results in the future. To achieve the target of doubling farmer’s income by 2022 and for transforming Indian agriculture sector into a profitable enterprise, the government has announced a number of initiatives in the union budget:
–Government has allocated Rs. 14.5 lakh crores for the rural development and agriculture sector. Finance Minister has announced that government has decided to keep MSP for all unannounced kharif crops at least at one and half times of their production cost after declaring the same for the majority of rabi crops.
–In April 2016, the government has launched Electronic National Agricultural Market (e-NAM), an online platform to integrate 585 wholesale markets across India. As of now, 470 APMCs have been connected to the e-NAM network and the rest are targeted to get connected by March 2018. This year, for those farmers who are not in a position to directly transact at APMCs and other wholesale markets, the government has decided to develop and upgrade existing 22,000 rural haats into Gramin Agricultural Markets (GrAMs). These GrAMs will be electronically linked to e-NAM to provide the farmers a facility to sell their produce directly to the consumers. An Agri-Market Infrastructure Fund with a corpus of 2000 crore will be set up for this purpose.
–To address the challenge of price volatility of perishable agricultural commodities finance minister has proposed to launch a scheme called “Operation Greens.” This scheme will help to bring farmers closer to the marketplace through better logistics, processing facilities, and professional management, a sum of Rs. 500 crore is allocated for this purpose. The Farmer Producer Organizations (FPO) will play a crucial role in the success of operation greens. The FPOs (similar to cooperative societies) provide assistance for the procurement of seeds, fertilizers, machinery, market linkages, training, networking, financial and technical advice to the farmers. To support FPOs government has announced that the FPOs having annual turnover of Rs. 100 crore will get 100% income tax exemption for the next five years. The Farmer Producer Organizations (FPOs), Village Producers Organizations (VPOs) and Women Self Help Groups (SHGs) will be encouraged to promote cluster-based organic farming too. Apart from this to support the organized cultivation of medicinal and aromatic plants and associated industries government has allocated Rs. 200 crore in the budget. The allocation for Food Processing sector is being doubled from Rs. 715 crore in 2017-18 to Rs. 1400 crore in the current fiscal year. The state-of-the-art testing facilities will be set up in all Mega Food Parks of the country.
–To promote the bamboo sector, Finance Minister has proposed to launch a re-structured ‘National Bamboo Mission’ with an outlay of Rs. 1290 crore. India’s northeast region has a rich diversity of Bamboo cultivation and farmers of Northeast India will get a huge benefit from this step. In some states, Indian Farmers are installing solar water pumps to irrigate their fields, this helps them to not only irrigate their fields for free but also help them to earn some extra income by selling the surplus solar power produced to the electricity grid. One such model is being implemented successfully in the Gujarat where the solar irrigation pumps installed in the farmer’s fields are connected to the power grid of Madhya Gujarat Vij Company Limited (MGVCL), which allows the farmers to sell back the surplus energy. The government has decided to put in place a structured mechanism for this model which will encourage the state governments and distribution companies to cooperate efficiently.
–Finance Minister has announced about setting up a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF) for financing infrastructure requirement of animal husbandry sector. A total Corpus of these two new Funds would be 10,000 crores.
–The volume of institutional credit for agriculture sector has increased from 10 lakh crore in 2017-18 to 11 lakh crore for the year 2018-19. To help lessee cultivators to avail crop loans without compromising the rights of the landowners, NITI Aayog will design a suitable mechanism too. The facility of Kisan Credit Cards is extended to include fisheries and animal husbandry farmers to help them meet their working capital needs. The small and marginal farmers will get more benefits too.
–To launch PM Krishi Sinchai Yojna in 96 irrigation deprived districts government has allocated Rs. 2600 crore. For building rural infrastructure Rs. 14.34 lakh crore is being allocated, including extra-budgetary and non-budgetary resources of Rs. 11.98 lakh crore. This fund will be used in developing 3.17 lakh kilometers of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and to provide 1.75 crore new household electric connections.
MSMEs and STARTUPs
To address the financing needs of MSMEs and Startups a number of measures have been announced in the budget i.e. government has proposed to onboard public sector banks and corporate on Trade Receivable Discounting System (TReDS) platform and link this with GSTN. The TReDS is an online platform which was launched last year to facilitate the financing of trade receivables of MSMEs. The government has provided Rs. 3794 crore for giving credit support, capital and interest subsidy to MSMEs. The government will take some additional measures for addressing the non-performing assets and stressed accounts of MSMEs too.
The target of lending under MUDRA Yojana has been extended to 3 lakh crore. From this year, NBFCs (Non-Banking Finance Companies) will also facilitate MUDRA loans for MSMEs. The government has launched the MUDRA scheme to provide easy finance to entrepreneurs from rural and remote areas. Since its launch in 2015, over 90 million loans worth 4.28 trillion rupees have been sanctioned to entrepreneurs from remote and rural areas of the country, out of which a majority of entrepreneurs are women. To strengthen the Startup India and Pradhan Mantri Kaushal Kendra kind of initiatives government has decided to take additional measures during 2018-19.
The Indigenous Defense manufacturing is one of the key focus areas of the ‘Make in India.’ A few days back, Indian MoD has launched a Defense Investor cell to promote Indian defense startups and industry. According to the official press release Rs 2, 95, 511. 41 crore has been allocated for the defense sector. There is a growth of 7.81 percent from the last year’s defense budget. Out of Rs. 2,95,511.41 crore, Rs. 1,95,947.55 crore has been allocated for Revenue expenditure and Rs. 99,563.86 crore for Capital expenditure for the Defence Services and the Organizations/ Departments under MoD, it includes modernization related expenditure too. A few days back Department of Defense Production has launched a task force to explore the potential use of Artificial Intelligence for the defense capabilities.
Two important measures announced in the budget are:
–Development of the two Defence Industrial Corridors in the country. The first Defence Production Corridor is planned to be established in Tamil Nadu and the second one will be announced soon.
–Launching industry-friendly Defence Production Policy 2018 to promote indigenous defense production and MSMEs.
Building rural infrastructure is one of the key focus areas of the budget. The total amount allocated for building rural infrastructure and livelihood is 14.34 lakh crore. The target is to build 3.17 lakh kilometers of rural roads, 51 lakh new rural houses, 1.88 crore toilets, and to provide 1.75 crore new household electric connections.
The budgetary allocation of National Highways has pegged at Rs. 71,000 crores, up from Rs. 61,000 crore allocated during 2017-18. The Cabinet has approved the investment proposal for the Bharatmala Pariyojana (BMP) Phase I for development/upgradation of about 35,000 km of National Highways (NHs) with an estimated cost of Rs.5,35,000 crore. The Bharatmala Pariyojana is crucial for connecting the remote and backward areas with the borders of the country and it is a key enabler of other key schemes, such as Sagarmala, Dedicated Freight Corridors, Industrial Corridors, UDAN-RCS, BharatNet, Digital India and Make in India. For other infrastructure projects such as NH (O), Special Accelerated Road Development Programme in North East (SARDP-NE), Externally Aided Projects (EAP) and Roads Projects in Left Wing Extremism Affected Areas (LWE), an additional outlay of Rs.1,57,324 crore has been allocated. The NHAI will also use innovative monetizing structures like Toll, Operate and Transfer (TOT) and Infrastructure Investment Funds (InvITs) for raising equity from the market for its road assets. The Housing and Urban Affairs (HUA) ministry’s budgetary provisions have been pegged at over Rs. 41,765 crores.
The pace of infrastructure related projects is remarkable! PM Modi himself reviews the progress made on these projects on a regular basis. As of now, infrastructure projects of worth 9.46 lakh crore have been facilitated and fast-tracked by the government. The smart urban infrastructure is a top priority of the government. The ‘Smart Cities Mission’ launched in 2015, is progressing well. The target of Smart Cities Mission is to develop 100 smart cities all over the country and as of now, 99 Cities have been selected (through a unique competitive process called ‘smart city challenge.’) with an estimated cost of 2.04 lakh crore. The Projects of worth 2350 crore have been completed and works of 20,852 crores are in progress. Other key infrastructure projects are HRIDAY (Heritage City Development and Augmentation Yojana) and AMRUT (Atal Mission for Rejuvenation and Urban Transformation).
The infrastructure and connectivity related works in the border areas of the country have been fast-tracked. The Rohtang tunnel has been completed and the contract related process for the construction of Zozila Pass is going on. In the budget, the government has proposed to take up construction of the tunnel under Sela Pass too.
The Railways’ Capex has been pegged at Rs. 1,48,528 crore. Maintenance and Safety with the help of technology will be the main priority of Railways. Track doubling, redeveloping railway stations, installing CCTV cameras, providing Wi-Fi facility, increasing the use of ‘Fog Safe’ and ‘Train Protection’ kind of technologies and renewal of over 3600 km of tracks are some of the targeted areas of the Railways budget.
The Department of Science & Technology will launch a Mission on Cyber-Physical Systems to support the establishment of centres of excellence for research, training, and skilling in robotics, artificial intelligence, digital/smart manufacturing, big data, quantum communication and IoT. For 2018-19 the allocation for Digital India programme is Rs. 3073 crore, almost a double of previous year’s budget. The task of connecting 1 lakh gram panchayats under the first phase of Bharat Net Project has been completed. Bharat Net is an initiative to provide high-speed broadband internet to all rural areas by March 2019. By December 2018, Bharat Net will provide connectivity to all 250,000-gram panchayats across the country. Bharat Net is the infrastructure backbone of Digital India. This year, the government has announced to set up five lakh Wi-Fi hotspots too and Rs. 10000 crores are allocated for establishing the Telecom infrastructure.
The focus of the budget is on leveraging the cutting edge technologies and promoting the culture of R&D related to advanced technologies in the country. The Department of Telecom will facilitate the establishment of an indigenous 5G Test Bed at IIT, Chennai.
The new scheme ‘Ayushman Bharat’ presented in the budget will deal with some of the most serious needs of the poor and lower middle-class families of the country. In the budget, two major initiatives were announced as part of the ‘Ayushman Bharat’ programme.
–Government has launched a flagship National Health Protection Scheme to cover over 10 crore poor and vulnerable families (approximately 50 crore beneficiaries) by providing them a coverage of up to 5 lakh rupees per family per year for secondary and tertiary care hospitalization, these families will be able to get free treatment up to Rs. 5 lakhs per annum in the identified hospitals. The National Health Protection Scheme is the world’s largest government-funded healthcare programme.
–Government will establish 1.5 lakh Health and Wellness Centres which will provide comprehensive health care services to the people, a sum of 1200 crore is allocated for this flagship programme. Private sector (through their CSR initiatives) and philanthropic organizations will be given an opportunity to adopt these centres. Apart from this, Government has decided to allocate additional 600 crores to provide nutritional support to all TB patients at the rate of Rs. 500 per month for the duration of their treatment. There is a plan to set up 24 new Government Medical Colleges and Hospitals by upgrading existing district hospitals to ensure that there is at least 1 Medical College for every 3 Parliamentary Constituencies and at least 1 Government Medical College in each State of the country.
In the last three and a half years, Modi government has taken a number of steps to improve the EODB ranking of India by improving the country’s status on indicators like construction permits, the ease of getting credit, minority investor protection, paying taxes, enforcing contracts and resolving insolvency. To continue the trajectory of EODB reforms, the government has identified 372 specific business reform actions. All States have taken up these reforms in a mission mode and constructively competing with each other.
To ease the cross-border trade and to align some provisions in line with the World Trade Organization’s Trade Facilitation Agreement, the Finance minister has proposed to make certain amendments to the Customs Act, 1962. These amendments are crucial for improving India’s ranking on cross-border trade. In the budget 2018-19, considerable relief has been provided for the companies facing insolvency proceedings. Finance Minister has announced that to simplify the dispute resolution processes and to reduce litigation, certain amendments are being made such as pre-notice consultation, definite timelines for adjudication and deemed closure of cases if those timelines are not adhered to.