Expectations from India's 2018-19 budget

Mumbai: India’s government will unveil its budget for the 2018/19 fiscal year on Thursday, with investors expecting increased investment in key areas such as agriculture, and a slew of incentives for businesses.

Handicapped by the chaotic roll out of a goods and service tax (GST) last year and a shock, overnight move to take high value banknotes out of circulation in late 2016, India’s economy is expected to post growth of 6.75 per cent in the 2017/18 fiscal year ending in March, which would be the slowest in three years.

The government is widely expected to increase spending to ensure growth recaptures momentum, but most investors expect it to be prudent as loosening fiscal deficit targets by too much would likely spark a sell-off in the bond market.

Below is a list of expectations across markets and corporate sectors.

Taxes

Reduce corporate tax rate to 25 per cent from 30 per cent

Cut Minimum Alternative Tax to 15 per cent from 18.5 per cent

Enhance tax deductions, exemptions for individuals

May tax long-term capital gains in investments

Agriculture

Establish fund to guarantee credit to encourage investment in agriculture sector

Allocate more funds for crop insurance schemes

Increase spending for dams and canals, micro irrigation systems

Provide subsidies for building cold storage to avoid wastage of perishable crops

Reduce fertiliser subsidies

Banks

Allow full tax deduction for provisioning of non-performing assets at lenders

Raise the threshold for tax deduction on the interest paid on bank deposits from current 10,000 rupees

Reduce the tenure of tax-exempted retail term deposits to minimum of 3 years from current 5

Allow tax relief for proceedings under insolvency code

Infrastructure

Increase investment by 10-15 per cent in roads from 2017/18 budget

Provide support for key road projects, including Bharatmala project, which will connect western and eastern India

Increase railways investments by 10 per cent from 2017/18 budget

Tech/IT

Provide greater incentives for digital transactions

Support digital payments infrastructure

Rationalise tariff structure, excise duties for mobile phones, tablet computers

Lower GST rates for telecom services to 12 per cent from 18 per cent

Autos

Announce policy on scrapping commercial vehicles that do not comply with emission norms if operational for over 15 years

Lower GST rates on electric vehicles, currently at 12 per cent

Real estate

Set single-window clearance for all real estate projects, especially housing to avoid execution and project delays

Give infrastructure status to real estate to help bring down finance, project costs, make homes more affordable

Reduce GST rate for projects under construction from current 12 per cent    

Spend more on affordable housing

Reduce GST rate for home purchases to 12 per cent; stamp duty could also be cut

Oil and Gas

Reduce “cess” duty to 8-10 per cent from 20 per cent for oil and gas exploration and production

Set more beneficial GST rates for natural gas

Reduce or exempt city gas distribution companies from excise duty

Exempt LNG imports from paying basic customs duty

Provide subsidy aid to downstream companies selling LPG, kerosene below market prices

Metals and Mining

Decrease in basic customs duty on coking coal across grades

Decrease in export duty on iron ore above certain grade levels

Hike basic customs duty on aluminium scrap to protect domestic industry

Accelerate minerals exploration

Gold

Cut import tax on gold to 2-4 per cent from 10 per cent to prevent smuggling