Budget 2018: A Budget focusing on Developmental Populism and rural economy

The Honourable Finance Minister has delivered a balanced budget catering to people across the social spectrum without unduly impacting fiscal math. I believe this is a budget that focuses on developmental populism. The budget covered all key themes like Rural India, Healthcare, Sops for Senior Citizens, Women and New employment.
 

The big announcement that came towards the end of the budget was something that a log of people in the market had been talking for a while now - the introduction of Long Term Capital Gains for Equity investments. While this may be disappointing from a market investor perspective, we need to keep in mind that the Government has a fiscal math to balance and I think this was critical from the fact that a lot of income has been booked by equity investors that was going outside the tax net.

I would encourage all of you to not take any knee-jerk reaction. The grandfathering treatment mentioned in the budget ensures all past returns are protected. The 10% taxation announced today will continue make Equity Mutual Funds a lot more favourable vis-à-vis other instruments like banks and corporate Fixed Deposits.

The announcement on taxing dividends from equity oriented mutual funds will mean that Asset Management Companies will have to come up with a plan on how to handle dividends going forward. Let’s remember this tax is for both dividend payout and dividend reinvestment options.
 

From a larger perspective the honourable finance minister catered to all sections of the society in a very balanced manner. The focus on infrastructure continues as expected. The budgetary support of Rs. 5.97 trillion for infrastructure in FY19 will be a big positive for the sector and supplementary industries such as cement. The focus of the government will remain on effective and timely execution of existing projects.

The budget also placed a lot of focus on the agriculture sector. The government has found multiple ways to put money in the hands of rural. This will give a massive boost to the rural consumption story. There’s also a provision for connecting 22,000 GAMs with the national agriculture market, for better market access and increased aggregation and rationalization.

One of the big announcements made by Finance Minister Arun Jaitley was a new initiative under the Ayushman Bharat Program in the Union Budget 2018. Under the programme, a new Flagship National Health Protection Scheme, providing health insurance cover of 5 lakh per family per year. This is India’s very own Modicare. The Scheme will cover 10 crore vulnerable families, with approximately 50 crore beneficiaries.

This is a big step that India is taking towards universal health coverage making it the world’s largest healthcare programme. The government also announced that 150,000 centres for health and wellness will be created under Ayushman Bharat program are again a step in the right direction. These centres will provide primary and secondary healthcare focusing on non-communicable diseases, maternity benefits, diagnostics, and deliver cheap medicines. 

In summary, I believe budget2018 is a balanced budget and I will give it a 7.5/10.

The author is the CEO of Sundaram Mandal