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Budget 2018: Foundation For A Robust Economic Performance

Budget 2018 evenly addresses rural and farm sorrow through aimed actions. There are no general subsidies and nothing that can be immediately classified as wasteful expenditure. Whether it’s the linking of Minimum Support Prices (MSP) to input costs or the provision of a reasonable level of health insurance to just fewer than 40% of our population, measures declared in the budget pinpoint the root causes of distress and provide solutions.

Budget 2018

At the same time, the government needs to be vigilant that this does not result in a huge spike in healthcare costs as has been experienced in other countries which have tried to combine insurance funded healthcare with private healthcare providers. As we move towards Universal Healthcare, a spiking of costs in the initial years will cause great distress to those who remain uncovered and should be guarded against. In the coming years, one would expect more measures to control prices of drugs and treatments to prevent a demand driven spiral.

The infrastructure thrust continues with an increased allocation to Tourism, Roads and Highways and Railways, among others. The emphasis on asset creating expenditure remains as shrill as earlier, which is extremely welcome. While the benefits of this approach may not be immediately apparent, they should start to kick into gear in the coming year and drive both ease and gains to the under – connected population of the country.

On the personal tax front, while there is some good news for salaried taxpayers, there is some bad news for the markets. Long Term Capital Gains (LTCG) on listed equities, which were hitherto untaxed, have been brought into the tax net with a 10% tax rate (without indexation benefit).


As expected, this was not taken well by market participants initially, but they reconciled quickly. In reality, there is no logic for the absence of tax on capital gains from one asset class when all others are taxed. Nor is there logic in exempting gains from capital when income from effort is taxed at a much higher rate.

At the same time, the fact that the government has chosen to grandfather gains made till January 31, 2018 shows that this measure has been introduced with a high degree of sensitivity.

The Union Budget 2018 also details many other market-focused measures, like a unified financial services regulator for International Financial Services Centers (IFSCs), measures to develop the bond markets, consolidation and listing of Centrally owned Public Sector Enterprises which have a positive long term impact. Changes in the Gold Monetization scheme have also been introduced in a continuing attempt to wean the Indian population off the precious metal.


In summary, this Union Budget is an acknowledgement of the fact that economic progress cannot be accompanied by rural distress. In addressing the latter, the Budget 2018 lays the foundation for robust economic performance in the coming years.

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