5 Big Ideas From Union Budget 2018

Union Budget 2018 was surely a budget of big ideas and big macro themes. Infrastructure, rural spending, rural purchasing power are some of the underlying themes of this budget. Here are 5 big ideas that emerged from the Union Budget 2018…

Also read: Union Budget

1. Fiscal Discipline At All Costs…

Yes that is the underlying theme of this budget. Despite the government touching 112% of the full year fiscal deficit target by end of November 2017, the government has only allowed a 30 bps spillage in fiscal deficit from 3.2% to 3.5% for the current fiscal year and from 3% to 3.3% for the next fiscal. Fiscal maths has a big impact on stock markets and foreign portfolio investors who place a lot of premium on fiscal discipline. The markets were expecting a worst case spillage of 50 bps and to that extent the Union Budget has surprised positively. Above all, this is a countercyclical move and most of the additional fiscal deficit is going towards investments in infrastructure and creation of rural spending power.

2. Let The Importers Pay More…

As Arun Jaitley himself admitted, this was a departure from the traditional approach of cutting customs duties in the last 25 years. The government introduced a 10% Social Welfare Surcharge on imports. The government has shown a clear preference for Make in India with higher duties on imports of electronic items like mobile phones. The government has made a departure by actually focusing on increasing the inflows from customs duties. This is likely to become a bigger contributor to the indirect taxes kitty in the years ahead.

Also read: Highlights of Union Budget 2019

3. Creating The Biggest Health Cover In The World…

There have been many rural friendly measures in the budget but this stands apart for its sheer size and complexity. The proposal is to cover nearly 10 crore households under the National Health Protection Scheme with a family cover of Rs.5 lakh. Medical emergencies are a major source of social and economic crises in rural areas and this cover will go a long way. This is the biggest such plan in the world in terms of coverage and promises to improve the quality of life and the risk taking capacity of large sections of India.

4. Yes To Blockchain But No To Crypto Currencies…

Union Budget 2018 has said a clear no to crypto currencies like Bitcoin and the like. Mr. Jaitley has clarified that crypto currencies will not be treated as legal tender in India. That upholds the role of the RBI as the money creator but leaves the door open for the concept. However, the government has shown a preference for Blockchain that is the technology underlying crypto currencies. Blockchain is basically a shared ledger technology which can have tremendous applications in areas like maintenance of government records, land records, legal records etc since they are for perpetuity and tamper-proof. Mr. Jaitley has underlined the government readiness and willingness to explore the use of Blockchain for the purpose of maintenance of government records.

5. An Aggressive Disinvestment Target…

That was the real big theme of the Union Budget. For the fiscal year 2017-18, the government had set a divestment target of Rs.72,500 crore and is likely to achieve Rs.100,000 crore. The target for the fiscal year 2018-19 is already aggressive at Rs.80,000 crore. But if the current fiscal is any indication then we should see final divestment receipts well in excess of Rs.100,000 crore. That is because a total of 24 CPSEs are slated for divestment either through a sale of minority stake or through a strategic sale. In fact, Air India could be the template for the current year and if it works then it could lead to a series of replications across unlisted PSU companies.

The big ideas are as macro as the underlying tone of the Union Budget. Each of these factors has the potential to substantially change the face of the economy and the capital markets too…

Also read: Union Budget 2019 vs. 2018