Expectations for India's 2018-19 budget

The government is widely expected to increase spending to ensure growth recaptures momentum. Image source: IANS

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 rollout 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 percent 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 pct from 30 pct
Cut Minimum Alternative Tax to 15 pct from 18.5 pct
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 pct 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 pct 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 pct from 18 pct

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 percent

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 percent
Spend more on affordable housing
Reduce GST rate for home purchases to 12 pct; stamp duty could also be cut

OIL & GAS

Reduce "cess" duty to 8-10 pct from 20 pct 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 & MINING