From essential commodities to tax slab, what you can expect from Jaitley

The financial budget is all set to be announced on Feb 1, so before you get the inside detail of the upcoming budget here we bring to you the possibilities of what you will get.

Arun Jaitley

As the union budget, 2018 is going to be announced by our Finance minister Arjun Jaitely in the hope of some betterment. The financial budget is all set to be announced on Feb 1, so before you get the inside detail of the upcoming budget here we bring to you the possibilities of what you will get. Needless to say, the budget will always hold importance in the life of middle class and lower class people the most. So keeping them as our target audience lets take a look at few important aspect of people’s life which will be affected by the upcoming budget. Having earlier said that by our honorable Prime minister Narendra Modi that this year’s budget would fulfill the expectations of common people, following which the commoners have a high expectation from the current government. Talking about the upcoming budget, it is being said that there is a lot of surprise in the store for the common people. From tax slabs to essential commodities the government has paid an extra attention to the important sectors.

Let’s take a look at what to expect from 2018 Budget

Revision of Tax Slab: People are eagerly waiting for the government to raise the income tax limit from Rs 2.5 lakh per annum to Rs 3 lakh. Arun Jaitley has hinted at some relief for taxpayers. Recently talking in an event, Jaitley said, “In income tax, the base has become larger. It is bound to enlarge. And, therefore, charging higher rates from few selected groups – which has traditionally been done – is an area which has been changing,” reports a leading news portal.

Focus on sectors like agricultural and infrastructure: Budget 2018 could see the announcement of more road, railways, seaport and airport projects. Apart from the infrastructure, Jaitely also holds special importance in the area of Agriculture. There might be hope for the rural class to taste the victory as the 2018 budget is expected to be growth accelerated, employment generated. It will also improve the agricultural income.

Some of the major highlights are:
1- Establish a fund to guarantee credit to encourage investment in the agriculture sector
2- Allocate more funds for crop insurance schemes
3- Reduce fertiliser subsidies

Positive push to the gems and jewelry sector: There is an expectation to give a positive push to the gem and jewelry sector. Several media reports suggest that there is a hope to reduce the import duty on Gold by 4 percentage.

Others sectors to get benefit this financial budget: Apart from the agricultural and rural, economic sectors like healthcare, education and housing will also get some much-needed boost for their respective field.

GST rate revision: The upcoming budget will be crucial post the implementation of GST (Goods Service Tax), so people especially from the electrical sector seeking some positive response from the finance minister by increasing the cash purchase limit and GST rate revision on gold. The electrical industry feels that the GST rate of 28 percent will be revised to 18 percent considering products like TV, Refrigerator are no longer lies in the Indian luxurious households.

Click here to read → Budget 2018

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Budget 2018: India Inc wants GST reforms, friendly-business policies

For the real estate sector, long pending demand of its recognition as industry, increase in tax rebate limit and single window clearance are among key expectations of the leaders

 budget

Tabled in Parliament on Monday by Finance Minister Arun Jaitley, the Economic Survey has estimated that the Indian economy will grow by 7-7.5 percent in 2018-19, re-establishing India as the world’s fastest-growing major economy.

Every budget rides high on the expectations of taxpayers and the finance minister has a challenging task of balancing tax cuts and increased revenues and here’s what India Inc expects from Budget 2018:

“Considering the government’s vision to achieve Housing for All by 2022, we believe affordable housing development requires a long-term perspective supported by easy home finance at very affordable interest rates. It is therefore, the honourable finance minister must offer sizeable support to the urban middle-class population in terms of higher limits of exemption on home loans in the Budget 2018-19. The housing finance companies like us have a key role to play in boosting the government’s efforts towards affordable and low-cost housing in metros as well as in tier-II and III cities,” said Monu Ratra, ED and CEO, India Infoline Housing Finance Limited.

For the real estate sector, long pending demand of its recognition as industry, increase in tax rebate limit and single window clearance are among key expectations of the leaders.

Getamber Anand, Chairman, CREDAI and CMD, ATS Infrastructure Ltd. said, “The real estate opportunity to boost GDP mustn’t be missed by the Finance Ministry in this budget. We expect government to increase the exemption limits for deduction of interest from the income of the middle class and salaried homebuyer. Also the interest rates must further be rationalised as must tax rates as the burden is ultimately passed onto the consumer.”

He further elaborated, “On the supply side, we respect the changes that the government brought in last year into the sector by giving it “Infrastructure status for affordable housing”, but RBI has not given any directions to the banks per se on reducing cost of capital for projects which qualify as infrastructure. Also under section 80 IB, the push for smaller houses is welcome but we have requested the government to increase the size from 30 and 60 sq. m. to 60 and 90 sq. m. because this is a practical size which is even aspirationally more attractive to the homebuyer.”

“Also for smaller towns the condition that 80 percent of FSI must be achieved is not practical and should be reduced to about 50 percent. Having said that we are very hopeful that the government in its wisdom like last year will bring in some new exciting announcements for the real estate sector this year too,” he added.

“We expect the honourable finance minister will announce increased tax rebate limit, so that the consumers may find more disposable income to buy their chosen dream homes. He should also give a sympathetic ear to the long pending demand of introducing single window clearance system in this budget to help the developers fulfil their promises to home buyers and ensure timely delivery of projects. We also expect the government to grant industry status to real estate sector to facilitate ease of doing business and access to construction loan at a cheaper cost. At Solitaire Group we aim to develop a slew of international quality residential projects and industry status, if granted, will surely become instrumental in turning our dreams into reality,” said Arjunpreet Singh Sahni, Executive Director, Solitaire Group.

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Budget 2018 LIVE: Will Jaitley, Modi take India’s growth story forward?

Will the Modi govt’s last full Union Budget before general elections 2019 will be a populist one? All eyes are now on FM Arun Jaitley’s Budget speech on Thursday

 Arun Jaitley, Budget

As Finance Minister Arun Jaitley gets set to present Budget 2018, the last full Union Budget of the Narendra Modi-led central government in its present term, there is an anticipation that he will somewhat shed his prudent stance in favour of a more populist stance one. The view emanates from the fact that this will be the finance minister’s last chance to please the voters through a Budget 2018 before 2019 general elections.

Populism in the government’s Annual Union budget 2018 could assume policy decisions like lower tax rate for the salaried class, lower corporate tax rates in tune with Trump’s benevolence for the corporate class in the US and big bonanzas for India’s farmers.

If the Economic Survey, prepared by Chief Economic Advisor Arvind Subramanian and his team is anything to go by, Jaitley has all the ammunition that he needs to sound the election bugle for 2019 with this Budget. All he needs to do is lock, load and fire.

ALSO READ: No tax relief, spending spree due in budget 2018 before elections: Poll

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India’s spending on R&D reduces against rising per capita income

CEA Subramanian bats for private push in research

Scientists find potential trigger to kill cancer

India’s spending on research and development as a percentage of gross domestic product fell against a rising per capita income in recent years, contrary to China and select advanced economies in comparison, the analysis presented in the economic survey has demonstrated.

India spent only 0.7% of its GDP on R&D in 2016-17, got only a fifth of its filed patents granted in 2016 and filed only six patents per million people.

Though R&D spending in India (% of GDP) grew faster than China at a time when their per capita incomes were comparable, China’s spending rate outpaced India’s when the former’s income levels rose.

This reinforces the direct relationship between improved incomes and scientific prowess when we consider this fact: private funding has contributed to scientific progress more than government efforts in advanced economies.

Comparing India with China, Israel, South Korea, Japan and the United States, the survey has found India as an outlier in the pattern of R&D funding: while R&D spend in India is led by the government, that in the countries in comparison has been led by private investment.

The economic survey for the financial year 2017-18 was tabled in the parliament by chief economic advisor Arvind Subramanian on January 29, 2017. While it proposed better private-government coordination, it also laid down potential missions on subjects like dark matter, genomics and cyber-physical systems.

Corporates in China spent $ 286 billion in 2015 on R&D, comparable to $ 341 billion by counterparts in the US. India corporates spent a mere $17 billion (Chart 1).

Though India ranks sixth in global scientific publications, the survey quotes a study to note that promotion in research jobs acts as an incentive rather than the research objective. It also notes India’s lag compared to China, specifically in the period that saw the economic boom.

“If journal publications reflect a country’s prowess in science, patents reflect its standing in technology”, the survey said.

In terms of patents applications filed, India and China were comparably negligible in front of the advanced economies prior to 1990. While China filed twice the number of patents as that of India, India led in the number of patents granted (Chart 2).

China eventually took the lead in the 1990s and India’s contribution became increasingly negligible in the 2000s and more so in recent years.

 

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Budget 2018: Revenue shortfall put corporate tax cuts on hold

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen

Budget 2018

Businesses waiting for Indian Prime Minister Narendra Modi to follow through on a pledge to cut corporate taxes may need to wait a bit longer.

In his last full budget before 2019 elections, Modi is facing a revenue squeeze that may make it difficult to deliver on a promise to lower the basic corporate tax rate over time to 25 percent from 30 percent. It’s a catch-22 situation for the premier, who is also trying to lure foreign investors at a time when the US, UK and other countries are lowering business taxes.

Here’s a look at Modi’s challenge ahead of the government’s budget 2018 on Thursday.

Why Cut?

Modi pledged in 2015 to bring down corporate taxes over four years, but businesses are still waiting for a roadmap on how that will happen. It’s part of his mission to improve India’s investment climate: he is also reducing red-tape, spurring the liquidation of assets to speed-up the recovery of bad loans, and introduced a national sales tax last year to cut down business costs. India is ranked 119 out of 190 countries when it comes to ease of paying taxes, according to the World Bank’s Doing Business index.

While those reforms have helped India win a credit rating upgrade and record foreign direct inflows last year, Modi needs to keep investment going to help support an economy that’s set to expand at its slowest pace in four years.

Tax competition around the world is heating up. The US lowered corporate taxes by 14 percentage points to 21 percent, with companies like Apple Inc, Wal-Mart Stores Inc and JPMorgan Chase & Co announcing plans to raise investment, hiring or wages.

“The US has made corporate tax rates competitive and India needs to respond,” said Jayesh Sanghvi, a tax partner at EY in Hyderabad. If it doesn’t, companies will examine arbitrage opportunities given the 10-15 percentage point difference, he said.

After reducing the rate last year to 25 percent for small companies with a turnover of up to 500 million rupees ($7.9 million), businesses are expecting Finance Minister Arun Jaitley to move again this week. Half of the 120 professionals surveyed by Deloitte expect the rate to be cut to 25 percent for all companies. Rakesh Nangia, head of tax advisory firm Nangia & Co, warned of a “flight of capital” if tax rates aren’t reduced.

Can India Afford It?

Modi is in a fiscal bind. Revenue collection remains under pressure following the chaotic roll-out of a national sales tax, and with an eye on next year’s election, his spending priorities may turn to the distressed rural sector, putting pressure on the budget deficit.

The government signaled on Monday it may slow the pace of fiscal consolidation after pledging to narrow the budget gap to 3 percent of gross domestic product in the year beginning April 1 from an estimated 3.2 percent this year. Chief Economic Adviser Arvind Subramanian told lawmakers that setting “overly ambitious targets” may undermine the credibility of fiscal policy.

Abhishek Gupta, a Mumbai-based analyst with Bloomberg Economics, expects the budget deficit to come in at 3.4 percent of GDP this year. The median estimate in a Bloomberg survey of 18 economists is for 3.5 percent this year and 3.2 percent next year.

Political considerations may also prevent Modi from reducing corporate taxes now, said Shailesh Kumar, a senior analyst at Eurasia Group in Washington.

“In addition to concerns that a reduction will further widen the deficit, a move by Modi to cut corporate rates ahead of next year’s election would expose him to opposition criticism that he is a crony capitalist who only wants to help friends in the business sector,” he said.

Click here to read → Budget 2018 

No tax relief, spending spree due in last budget before elections: Poll

The median forecast from over 40 economists polled Jan 24-29 was for India’s government to borrow 3.2 percent of gross domestic product (GDP) in fiscal 2018-19.

Arun Jaitley, Budget

India is expected to unveil only modest stimulus at this week’s budget, a Reuters poll of analysts showed, despite it being the last before the next election, with government spending likely limited by longer-term efforts to trim the fiscal deficit.

Fiscal consolidation was first proposed by Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) government in its maiden budget in fiscal 2014/15, aiming to break a long line of Indian governments that preferred to borrow and spend.

But in following budgets, the timeframe for reaching a reduction to a 3.0 percent fiscal deficit target was pushed back.

The latest Reuters poll shows the government is expected to delay the timeframe for hitting that target by another year, for the third year in a row, due to setbacks in the economic outlook.

The median forecast from over 40 economists polled Jan 24-29 was for India’s government to borrow 3.2 percent of gross domestic product (GDP) in fiscal 2018-19.

“As the current government will present its last full-year budget before the 2019 general elections, many in the market expect a heavier dose of populism. However, the government has limited financial resources to propose any targeted scheme for the poor,” wrote Gautam Duggad, head of research at Motilal Oswal Securities, in a research note.

“We also do not expect much relief on the tax front, except some reduction in the corporate tax rate for medium-sized companies.”

The government’s own economic survey presented to parliament on Monday suggested that pushing further out the fiscal deficit target would give the economy some momentum.

For the current fiscal year, the target is 3.2 percent and the government is unlikely to meet that as it has already overshot its full-year goal. With less than one quarter of the fiscal year left, the government is unlikely to meet its deficit target.

Three-quarters of the 40 economists polled, based in India, Singapore and Europe, said that fiscal consolidation is likely to be Finance Minister Arun Jaitley’s dominant theme when he unveils his budget on Thursday.

Just under 10 percent of survey respondents said he will focus on boosting subsidies while about 18 percent expect a significant increase in borrowing and spending.

Among those expecting a more populist budget are economists that say the government will announce new subsidies, such as loan waivers for farmers, an increase in healthcare spending, a cut to taxes on fuel and a ramp up in rural housing schemes.

Click here to read → Budget 2018

Economic Survey sounds a note of caution on the high equity valuations

Domestic equities have risen sharply on expectations of strong corporate earnings

Eco Survey 2018: Real estate, construction to create 15-mn jobs by 2022

The Economic Survey 2018 sounded a note of caution on the high equity valuations and hasn’t ruled out a possibility of a correction. After a sharp 23 per cent rally this financial year, the benchmark Sensex is trading at 27 times its trailing 12-month earnings. The broader-market BSE Midcap and Smallcap indices, which have outperformed the benchmark in FY18, are trading at even higher valuations of 47 and 105 times, respectively.

“Sustaining these valuations will require future growth in the economy and earnings in line with current expectations, and require the portfolio re-allocation to be semi-permanent. Otherwise, the possibility of a correction in them cannot be ruled out,” the Survey said.

Domestic equities have risen sharply on expectations of strong corporate earnings. However, the earnings growth has been elusive so far, only to belie analysts’ expectations.

“Expectations of earnings growth are much higher in India. Indeed, it was such expectations that lie at the origin of the stock market boom. In early 2016-17, signs emerged that the long slide in the corporate profits-to-GDP ratio might finally be coming to an end. Investors reacted to this news with alacrity, bidding up share prices in anticipation of a recovery they hoped lay just ahead. Accordingly, the ratio of prices-to-current earnings rose sharply,” said the report.

The lackluster earnings trajectory has been largely on account of policy disruptions such as implementation of the goods and services tax (GST) and demonetisation. The Street is expecting a turnaround in earnings.

“There is exuberance in broader market valuations, largely on account of earnings revival expectations. Therefore, if earnings disappoint or if there is a drop in incremental flows, we could see a sharp correction,” said Gautam Duggad, head of research, Motilal Oswal Institutional Equities. What has kept stock prices afloat despite lack of earnings momentum, is the availability of abundant liquidity — both globally and domestically.

According to the Survey, low interest rates, globally have resulted in a fall in the equity risk premium (ERP). Low ERPs have led to a shift in portfolio allocations from debt to equity.

Click here to read → Budget 2018