Overview of Indian Economy

Key Features of Budget 2018-2019

On February 1, 2018, the Union Minister for Finance, Government of India, announced the Union Budget for 2018-19. The budget focuses on uplifting the rural economy and strengthening the agricultural sector, healthcare for the economically less privileged, creating infrastructure, and improving the quality of education in the country. In this article, we will provide budget updates for 2018-19.

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Budget Updates – 2018-19

In the second quarter of 2017-18, India’s GDP grew at 6.3 percent and was expected to grow at 7.2-7.5 percent in the second half of 2017-18.

Further, in 2018-19, the International Monetary Fund (IMF) predicts the growth at 7.4 percent. Further, exports were expected to grow at 15 percent in 2017-18. The fiscal deficit target for 2018-19 is also set at 3.3 percent of the GDP.


budget updates

                                                                                                                                       Source: Pixabay

Budget Updates – Agriculture and Rural Economy

By 2022, the government is targeting to double the farmers’ income. The budget plans to spend Rs. 14.34 lakh crore ($225.43 billion) for the creation of infrastructure and livelihood in rural areas.

Further, the minimum support price (MSP) for all announced Kharif crops is at least one and half times of their production cost. This is similar to the majority of Rabi crops.

In 2017-18, the budget for the institutional credit to the agricultural sector was Rs. 10 lakh crore ($157.2 billion). In the Union Budget 2018-19, the amount was set at Rs. 11 lakh crore ($172.93 billion).

The budget allocated a corpus of Rs. 10,000 crore ($1.57 billion)to start a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) and also an Animal Husbandry Infrastructure Development Fund (AHIDF).

It also allocated another corpus of Rs. 2,000 crore ($314.41 million) to start an Agri-market Infrastructure Fund. Also, a restructured National Bamboo Mission was planned with a total outlay of Rs. 1,290 crore ($202.79 million).

Lastly, the budget increased the allocation for the National Rural Livelihood Mission to Rs. 5,750 crore ($903.93 million).

Budget Updates – Health, Education and Social Protection

The budgeted expenditures on health, education, and social protection for 2018-19 are Rs. 1.38 lakh crore ($21.69 billion). After additional allocation, an additional amount of Rs. 15,000 crore ($2.36 billion) will be added to it.

Further, the budget decided to increase the role of technology in the education sector with a focus on increased digital intensity.

The government also planned to launch a new initiative – Revitalizing Infrastructure and Systems in Education (RISE) by 2022, with an investment of Rs. 1 lakh crore ($15.72 billion) over the next four years.

Further, under the National Health Policy, the budget allocated Rs. 1,200 crore ($188.65 million) for Health and Wellness Centers. Also, 24 new government medical colleges and hospitals are planned in 2018-19.

Budget Updates – Medium, Small and Micro Enterprises (MSMEs)

The budget provided Rs. 3,790 crore ($596.43 million) for credit support, capital and interest subsidy, and innovations in the MSME sector.

Further, the government plans to revamp the online loan sanctioning facility for MSME’s. Also, the public sector banks and corporates are being brought on-board the Trade Electronic Receivable Discounting System (TReDS) platform which is linked with the GSTN. Additionally, the government is targeting lending under the MUDRA Yojana at Rs. 3 lakh crore ($47.16 billion).

Budget Updates – Employment Generation

The government plans to contribute 12 percent of the wages of the new employees in the Employees’ Provident Fund for all sectors in the next three years.

The budget also proposes reducing the women employees’ contribution to the EPF to 8 percent for the first three years with no change in the employers’ contribution. This will help promote women employment. Further, the government is setting up a model aspirational skill center in every district of the country.

Budget Updates – Infrastructure and Financial Sector Development

The budget identified investments in excess of Rs. 50 lakh crore ($786.02 billion) in the country’s infrastructure to increase the growth of GDP and connect and integrate the country’s transport network.

The budget allocated Rs. 5.97 lakh crore ($93.85 billion) for infrastructure in 2018-19. Also, the rail and road sectors have received an all-time high allocation.

The government is using the online monitoring system – PRAGATI to facilitate and also fast-track projects worth Rs. 9.46 lakh crore ($148.72 billion). Further, projects worth Rs. 20,852 crore ($3.82 billion) is under progress under the Smart Cities Mission.

Additionally, to promote tourism in the country, 10 prominent tourism sites are being developed into iconic tourism destinations. Also, the government has approved the construction of nearly 35,000 kilometers of roads under the Phase-1 of the Bharatmala Pariyojana, costing nearly Rs. 5.35 lakh crore ($84.10 billion).

Budget Updates – Railways

In 2018-19, the government has set the capital expenditure in the Railways sector at Rs. 148,528 crores ($23.35 billion). The government plans to procure around 12,000 wagons, 5,160 coaches, and 700 locomotives in 2018-19.

Further, there are plans to redevelop 600 major railway stations. The government also plans to continue the electrification of railway tracks (around 4,000 km). Additionally, the government plans to set up a dedicated institution in Vadodara to train manpower for work on high-speed rail projects.

Budget Updates – Digital Economy

The budget allocated Rs. 3,073 crore ($483.09 million) for the Digital India Program for 2018-19. Further, the NITI Aayog will initiate a national program to increase the efforts in the area of artificial intelligence.

For establishing and promoting centers of excellence for research, training and skilling robotics, artificial intelligence, internet of things, etc., the government plans to launch a mission on cyber-physical systems under the Department of Science and Technology.

Further, the telecom infrastructure sector has a budget of Rs. 10,000 crore ($1.57 billion). The government also plans to set up 500,000 WiFi hotspots to provide internet connectivity to over 5 million rural residents.

Budget Updates – Disinvestment

The government has set up a target of Rs. 80,000 crore ($12.58 million) for disinvestment in 2018-19. Further, there are plans to merge the National Insurance Company Limited, United India Assurance Company Limited, and Oriental India Insurance Company Limited into a single insurance entity.

The government also plans to frame a comprehensive Gold Policy to develop gold as an asset class and establish a system for regulated gold exchanges.

Budget Updates – Fiscal Management

  • The total budgeted expenditure for 2018-19 = Rs. 2,442,213 crore ($383.93 billion)
  • As per the recommendations of the Fiscal Reform and Budget Management Committee, the Central Government’s debt-to-GDP ratio is being targeted to reach below 40 percent.
  • The government plans to offer a 100 percent deduction for a five-year period starting 2018-19 for companies registered as Farmer Producer Companies with an annual turnover of up to Rs. 100 crore ($15.72 million). This will also promote ‘Operation Greens’ and the ‘Sampada Yojana’.
  • A standard deduction of Rs. 40,000 crore ($6.28 billion) for salaried individuals to replace the current exemption of transport allowance and reimbursement of miscellaneous medical expenses.
  • Exempted interest income on deposits with banks and post offices increased from Rs. 10,000 ($157.2) to Rs. 50,000 ($786.02)
  • Further, the deduction limit for health insurance premium increased from Rs. 30,000 ($471.6) to Rs. 50,000 ($786.02) [proposed].
  • The extension of the Pradhan Mantri Vaya Vandana Yojana till 2020.
  • Further, the Long Term Capital Gains (LTCG) exceeding Rs. 1 lakh ($1.572.04) will be taxed without indexation. This is applicable to LTCG after January 31, 2018.
  • An increase in the cess on personal income tax and corporation tax from 3 percent to 4 percent.
  • Further, the government plans to rollout e-assessment across the country for better efficiency and transparency in Direct tax collection.
  • Increase in the customs duty on mobile phones from 15 percent to 20 percent.

Solved Question

Q1. What are the primary areas of focus in the Budget 2018-19?


The primary areas of focus in the Budget 2018-19 are:

  • Uplifting the rural economy and strengthening the agricultural sector
  • Healthcare for the economically less privileged
  • Creating infrastructure
  • Improving the quality of education in the country
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