Let us look back and quickly compare Budget 2018 with interim budget 2019.
Overview: Budget 2018
Here is a quick overview of Budget 2018 and some key highlights:
- After a long gap of 14 years, the government introduced tax on long-term capital gains (LTCG) on equities and equity funds. The tax was at a flat rate of 10% above Rs1 lakh per year and came without indexation benefits.
- The dividends distributed by equity funds were also made subject to dividend distribution tax (DDT) at the rate of 10%,
- The government announced minimum selling price (MSP) for Kharif crops at 150% of the cost of production.
- The Union Budget 2018 did not propose any changes in personal income tax rates.
- Fiscal deficit was pegged at 3.5% of the GDP in the first instance of spillover of fiscal deficit from the FRBM targets.
- Education cess increased from 3% to 4% to net an additional Rs11,000cr.
- Customs on a host of critical products increased to provide the much-needed boost to ‘Make in India’ initiatives.
With elections coming up, the focus of the budget was clearly to ensure that welfare measures were delivered. Let us now turn to the highlights of interim budget 2019.
- A total 12cr small and medium farmers were assured annual income of Rs6,000 at the bare minimum leading to an annual outlay of Rs75,000cr of helicopter money.
- Total allocation of Rs60,000cr to the government MGNREGA scheme to provide jobs across rural and semi-urban areas.
- Net taxable income up to Rs5 lakh made tax free. The slabs were not disturbed, but the tax payment was offered as a 100% rebate.
- Standard deduction limit raised from Rs40,000 to Rs50,000, including pensioners, in lieu of transport and medical allowance.
- Big boost to real estate sector in the form of rollover of capital gains, tax exemption on notional rental income, and enhancement of TDS threshold for tax on rent.
- Fiscal deficit target shifted higher to 3.4% with an outer target of 3% by 2020-21.
- Interest subvention of 2% for MSMEs on loans up to Rs1cr subject to filing of GST returns regularly.
- MSP at 150% of cost of production, which began in 2018 for Kharif crops, was extended to all the 22 crops in the 2019 interim budget.
As much as the interim budget 2019 looks like an extension of the previous budget, there appears to be a subtle distinction too.
- First, the similarities. Both the budgets have been liberal on the fiscal deficit front to make up the gap in resource raising. Both the budgets have also been fairly ambitious on the disinvestment targets keeping it close to the Rs1tn marks. Both the Union Budgets of 2018 and 2019 have also been very liberal to farmers and rural population. The accent on rural was a lot more in 2019, which is obvious considering the elections.
- However, there were some key differences too. Budget 2019 made a clear shift from keeping business happy to keeping farmers and small businesses happy. This was partially an outcome of the election setbacks suffered in states such as Rajasthan, Madhya Pradesh, and Chhattisgarh. In the three states, rural distress was a major issue. Hence, interim budget 2019 has been a lot more liberal to rural India. Second, budget 2019 has focused on middle-class disposable income which is normally the fulcrum for consumption growth. That was missing in the 2018 budget.