by Soumik Ghosh

Decoding Budget 2018: Who won, who lost

Feb 04, 2018
Big DataBudgetingBusiness

Healthcare and FMCG looking at sunny days ahead; manufacturing, BFSI and IT see cloud cover; telecom in doldrums. n

Feb 1, 2018 saw Arun Jaitley walking the tightrope in a bid to play the balancing act between catering to the lower income populace and driving industrial prosperity.

Jaitley’s speech marked the end of the last full-fledged budget for this term, and its underlying intent of targeting the 2019 general election was unmistakable. The budget invoked mixed reactions from various verticals – ranging from jubilation to absolute disappointment.

We take a look at the hits and misses across various verticals, and the reactions they evoked.





NHP scheme: Rs. 5 lakh per family per annum for 10 crore families

Allocated sum of Rs 2000 crore works out to Rs 40/person


Farmer-producer organizations can avail 100% tax deduction

Unchanged IT slabs for consumers means less disposable income

Food processing sector gets 1.5x hike in MSP on kharif crops

Increased customs duty on consumer products


Investments amounting to Rs 5.97 crore in railways, roadways and new airports

No reduction in customs duty on raw material

‘Make in India’ thrust

No incentivization for electric vehicles


Rs 3 lakh crore for MUDRA loans

No steps towards non-performing assets


Push towards AI, blockchain, quantum computing, big data

No weighted tax for R&D activities

Lack of uniform GST slabs for hardware and software



No mention of benefits; demands not met

Healthcare gets a booster dose

Modi government’s newly announced flagship – the National Health Protection scheme stands out as, Jaitley quoted, “the world’s largest healthcare program.”

Set to roll out from October 2, the scheme aims to provide health insurance cover of Rs 5 lakh per family per annum. Covering 10 crore families, it targets close to 50 crore beneficiaries.

What hasn’t yet been clarified is how the government intends to procure the humongous capital the scheme calls for. As Prashant Bhushan points out, the allocated sum of Rs 2000 crore works out to only Rs 40 per person.

Retail to see cascading effect of tax sops

Jaitley’s boost to the agricultural economy and the food processing sector came in the form of a 1.5x hike in the MSP on kharif crops. In addition, farmer-producer organizations can avail a 100 percent tax deduction, provided their annual turnover is less than Rs 100 crore.

To incentivize manufacturing of apparel, footwear and leather products, the budget also includes relaxed criteria and tax benefits.

Adding thrust to the ‘Make in India’ campaign, Jaitley increased customs duty on consumer products such as sunglasses, perfumes, watches, and fruit juices, amongst many.

The only deterrent comes in the form of unchanged income tax slabs for consumers, as there would be no increase in disposable income and spending power.

Manufacturing sees fair to middling boost

Although the government hasn’t taken its foot off the pedal in the ‘Make in India’ drive, it failed to lend a limb to encourage a profitable year for the manufacturing space.

With investments amounting to Rs 5.97 crore in railways, roadways and new airports, steel manufacturers are staring at increased business volumes. However, the sector was disappointed over no reduction in customs duty on raw material.

In the 2017 Union Budget, the automotive industry was gunning for incentivization and tax sops for companies manufacturing electric vehicles and was left disappointed with the government not touching upon it. The same story played out in this year’s budget as well.

Additionally, Jaitley hiked customs duty on imported vehicles from 20 percent to 25 percent. Now this doesn’t just apply to the vehicle, but to its components as well. With almost every company in India importing components, the move is likely to hit the industry hard.

The auto industry was also looking forward to the benefit of weighted tax deductions for R&D operations; but this found no mention in the budget.

Banking sector looks forward to recapitalization

The Union Budget earmarked Rs 3 lakh crore for Micro Units Development and Refinance Agency (MUDRA) loans. Additionally, the nation will be banking upon the BFSI sector to dole out the finance required for the healthcare scheme.

“Unlike last year when the Finance Minister said we are largely a tax non-compliant society, the year gone by has seen better tax compliance. Government’s measures to reduce cash in the economy and its commitment towards having a non-adversarial tax regime is showing results,” says Ritu Shaktawat – Associate Partner, Khaitan &Co.

Jaitley’s announcement of recapitalizing banks stood out as one of the most significant announcements. “The recapitalized banks will now have a greater ability to support growth. All these structural reforms in the medium and long run will help Indian economy achieve stronger growth for a long time,” said Jaitley in his budget speech.

With respect to personal tax, Kuldip Kumar, Leader, Personal Tax at PwC India says: “The government reintroduced standard deduction of Rs 40,000 to benefit salaried class, but the tax benefit is greatly offset due to increase in cess by 1 percent and withdrawal of present tax exemption of medical reimbursement and transport allowance.” However, he adds senior citizen can cheer as their long standing expectation of deduction for interest on fixed deposits and also for medical expenditure has been met.

One of the biggest disappointments felt by the sector stemmed from Jaitley not touching upon BFSI’s perennial migraine – non-performing assets.

IT/ITeS expects big bucks from Jaitley’s tech drive, but demands remain unfulfilled

“The efforts towards strengthening India’s position as a digital economy through investments around new age technologies like AI and Fintech is a timely and welcome move,” says Shyamal Mukherjee, Chairman of PwC India.

The sector lauded Jaitley’s proposal to reduce corporate tax rate for companies with a turnover of less than Rs 250 crore. The move is expected to bolster MSMEs in the country.

However, the IT sector expected weighted deduction under section 35 (2AB) for R&D activities to be extended to companies engaged in the development and sale of software or providing IT services; but that was not to be.

Additionally, the lack of uniform GST slabs for hardware and software continues to bother OEMs and SIs.

Telecom misses the call

Among the verticals that got absolutely nothing from the union budget, the telecom sector stood out like a sore thumb.

Given the fact that the government will be focusing on Digital India and grappling with technologies like 5G, it is imperative for the nation to have a strong telecom foundation. Jaitley however, made no mention of benefits for telecom players.

Rajan S Mathews, Director General of Cellular Operators Association of India (COAI) says: “We had sought a reduction in levies and taxes, and an urgent intervention is critical for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition.”