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
