Budget 2018 Highlights

1. Fiscal deficit target for FY19 has been set at 3.3% of GDP and the revised estimate for FY18 pegged it
at 3.5% of GDP.

2. The FY19 divestment target is set at Rs 80,000 crore and the revised estimate for FY18 was Rs 1 lakh
crore.

3. Long Term Capital Gains tax of 10% has been introduced for gains of over Rs 1 lakh on equities, units
of equity mutual funds, and units of business trusts. LTCG is a tax levied on long term assets, i.e. assets
that have been under possession for a year or more.

4. No changes in personal income tax slabs were proposed.

5. A flagship national health programme, covering 50 crore people was announced, under which the
government will provide cover of Rs 5 lakh to a family requiring hospital care.

6. Corporate tax for firms with a turnover of up to Rs 250 crore will be cut to 25%.

7. Short term capital gains tax will continue at 15%.

8. Standard deduction of Rs 40,000 for salaried employees has been introduced, in lieu of medical
expenses and transport allowance.

9. With a total allocation of Rs 5.97 lakh crore, projects worth Rs 9.46 lakh crore have been fast tracked.

10. The government will set up an agri-market infrastructure corpus fund of Rs 2,000 crore.
 Macro Indicators
Rs Cr
Key Budgetary Numbers
2600000
2400000
2200000
2000000
1800000
1600000
1400000
1200000
1000000
800000
600000
400000

100000
2217750

2442213

1505428

1725738

80000

594849

624276
17473

200000 12199
0
Total Expenditure Revenue Receipts Recoveries Other Receipt Fiscal Deficit

2017-18 (RE) 2018-19 (BE)

Fiscal Deficit
600K 4.6

500K 3.8

400K 3.1

300K 2.3

200K 1.5

100K 0.8

0 0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 (RE) 2018-19 (BE)

Fiscal Deficit (Rs Cr) Fiscal Deficit to GDP (%)

Rs Cr Revenue Receipts Rs Cr Revenue Expenditure

1600000
2000000
1200000
1600000

800000 1200000

800000
2013-14 1014724

2014-15 1126294

2015-16 1195025

2016-17 1374203

1505428

1725738

400000
2013-14 1371772

2014-15 1488780

2015-16 1537761

2016-17 1690584

1944305

2141772

400000
0
0
2017-18
(RE)

2018-19
(BE)

2017-18
(RE)

2018-19
(BE)
 Income Tax Slabs

Standard deduction was re-introduced after a gap of 13 years. The

deduction of Rs 40,000 was introduced in lieu of transport and
medical reimbursement.

Income Tax Slab Rates for FY 2018-19(AY 2019-20)

NO CHANGE in Tax Slabs

Income Tax Slab for Individual Tax Payers & HUF (Less Than 60 Years Old) (Both Men & Women)

Income Slab Tax Rate

Income up to Rs 2,50,000 No tax
Income from Rs 2,50,000 – Rs 5,00,000 5%
Income from Rs 5,00,000 – 10,00,000 20%
Income more than Rs 10,00,000 30%

Surcharge: 10% of income tax, on total income between Rs 50 lakh and Rs 1 crore.

Surcharge: 15% of income tax, on total income above Rs 1 crore.

Education cess: Increased from 3% of income tax to 4%.

 Sectors Impact

Pharma
Healthcare has got its due in Budget 2018 with the government
increasing allocation by 11.5% to Rs 47,353 crore. The govt
announced two schemes that include providing health insurance
worth Rs 5 lakh to 10 crore poor families, and plans to set up 1.5
lakh health and wellness centres across the country. The
government raised education cess from 3% to 4% of income tax to
mobilise Rs 11,000 crore to fund health schemes.

Mutual Fund
The government introduced a dividend distribution tax (DDT) of
10% on equity mutual funds. This move may be taken negatively by
the industry. Among positives, DIPAM will also launch debt ETFs to
raise debt for the government, apart from Bharat 22 ETF.

Insurance
Finance Minister Arun Jaitley revealed a sweeping government
decision to merge three public sector general insurance
companies and list them as one. This will not only boost their
valuations and eliminate individual losses, but will also be an
attractive investment opportunity in the stock market.

Auto
Finance Minister Arun Jaitley proposed to raise customs duty on
completely knocked down kits of vehicles to 15% from 10%.
Customs duty has also been raised on completely built units of
trucks and buses to 25% from 20%.

Auto - Tyre
Stocks of Indian tyre companies were upbeat today as Finance
Minister Arun Jaitley raised customs duty on imported truck and
bus radials to 15% from 10%.
This has brought some relief for Indian manufacturers such as
Apollo Tyres, Ceat, MRF and JK Tyres who have been battling
competition from cheap Chinese tyres.
 Sectors Impact

Equity Market
The dreaded four letter word LTCG was spoken in the Budget. A
LTCG of 10% was introduced for gains above Rs 1 lakh. This will be
taken negatively by the market

The tax will be applicable based on cost prices prevailing on Jan 31,
2018, which will prevent any large scale selling of stocks.

Fisheries & aquaculture

The government has also proposed to allocate Rs 10,000 crore for

fisheries & aquaculture, animal husbandry funds and to extend
Kisan Credit Card to fisheries & animal husbandry farmers.

Irrigation
FM has allocated Rs 2,600 crore for underground water irrigation in
96 districts. Government will set up a Long Term Irrigation Fund
(LTIF) in NABARD to meet funding needs of irrigation projects.

Agriculture
The government has declared minimum support price (MSP) for a
majority of Rabi crops of 1.5 times the original cost, and also decided to
fix MSP for Kharif crops at 1.5 times the production cost.

The government has been steadily increasing the volume of institutional

credit for agriculture sector from Rs 8.5 lakh crore in 2014-15 to Rs 10
lakh crore in 2017-18. FM now raised this to Rs 11 lakh crore for the year
2018-19.

Rural
In the coming year, the government will focus on providing as many
livelihood opportunities for the rural populace as possible by spending
more on agriculture and allied activities, and development of rural
infrastructure.

"In the year 2018-19, for creation of livelihood and infrastructure in rural
areas, total amount to be spent by the ministries will be Rs 14.34 lakh
crore, including extra-budgetary and non-budgetary resources of Rs
11.98 lakh crore," Jaitley said in his Budget speech.
 Cheaper / Costlier

The government changed customs duty

on the following imported products,
resulting in them getting costlier/cheaper.

Cars
CHEAPER
Motorcycles
Raw Cashew  
nuts
Mobile
Phones
Select
Electronics
Silver 
Solar
Tempered Gold
Glass
Deodorants
Moulded
Plastic
Products Diamonds

Radial Tyres

Footwear 

Silk Fabrics

Sunglasses

COSTLIER
 Expert Reactions
This year, we are spending nearly Rs 70,000 crore. However,
Don't
from next year we expect
expect very significant
spending correction
to be around Rs in the market. This
Budget
1,40,000 crore and will certainly
for fiscal 2019-20,provide the rural fillip
we are expecting it to which was required
and which
be around Rs 1,60,000 wassaid
crore, theGadkari.
prime need for thefrom
However, last couple of years. I don't
Madhu Kela Nitin Gadkari
expect the markets to be very negative.
next year we expect spending to be around Rs 1,40,000
Market Veteran Union Transport
crore and for fiscal 2019-20. Minister | GoI

I think
This year, we are whatnearly
spending he hasRsdone, he crore.
70,000 had toHowever,
do particularly everyone
expected
from next year we expectand it was known
spending that emphasis
to be around Rs will be on the rural
economy,
1,40,000 crore and on 2019-20,
for fiscal the farmers, health,
we are education
expecting it to and infrastructure and
he has taken
be around Rs 1,60,000 crore,asaid
lot of pain and
Gadkari. time tofrom
However, explain what all has been
Deepak Parekh Nitin Gadkari
done, what is in the pipeline regarding
next year we expect spending to be around Rs 1,40,000 all this.
Chairman Union Transport
crore and for fiscal 2019-20.
HDFC Minister | GoI

This year, we are spending nearly Rs 70,000 crore. However,

from next year weOne must
expect not taketo
spending today's reaction
be around Rs at face value since it is too
1,40,000 crore andwishful to think
for fiscal thatwe
2019-20, a LTCG tax plus fiscal
are expecting it to slippage has been
met with
be around Rs 1,60,000 green
crore, saidon the Sensex
Gadkari. on Budget
However, from day, tomorrow's
Udayan Mukherjee Nitin Gadkari
reaction key.
next year we expect spending to be around Rs 1,40,000
Consulting Editor Union Transport
crore and for fiscal 2019-20. Minister | GoI

This year, we are spending nearly Rs 70,000 crore. However,

from next year we expect spending to be around Rs
With the economy on a recovery path, any acceleration on
1,40,000 crore and for fiscal 2019-20, we are expecting it to
spending will give a further boost. So, market is bound to focus
be around Rs 1,60,000 crore, said Gadkari. However, from
Ridham Desai on what the government expenditure will be forNitinFY18.
Gadkari
next year we expect spending to be around Rs 1,40,000 Union Transport
MD & Head
croreStanley
Morgan and for fiscal 2019-20. Minister | GoI

This year, we are spending nearly Rs 70,000 crore. However,

from next year weLong-term
expect spending
capital to be (LTCG)
gain aroundtax
Rs will be taken in stride
1,40,000 crore and forwill
and fiscal
not2019-20,
have muchwe are expecting it to
impact.
be around
Nirmal Jain Rs 1,60,000 crore, said Gadkari. However, from
Nitin Gadkari
next year we expect spending to be around Rs 1,40,000
Chairmani
Union Transport
IIFL
crore and for fiscal 2019-20. Minister | GoI
 Market Indicators

Sensex on Budget Days

2

-1

-2

-3

-4

-5

-6
2008 2009 2010 2011 2012 2013 2014 2015 2016 2018

Sensex

Top Gainers on Sensex Top Losers on Sensex

M&M 4.44% ONGC -4.06%

L&T 2.77% Sun Pharma -3.99%

IndusInd Bank 2.44% Dr Reddy's Labs -3.07%

Bajaj Auto 2.13% SBI -2.30%

Asian Paints 1.89% ICICI Bank -2.04%

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 -4 -3 -2 -1 0

Top gainers on the BSE Midcap Top gainers on the BSE Smallcap

IDBI Bank 5.47% IIFL Holdings 11.09%

Bajaj Finserv 5.14% Aegis Logistics 10.57%

MRF 4.88% Avanti Feeds 7.95%

Apollo Hospitals 4.67% Kirloskar Bros 7.76%

GMR Infra 4.60% JK Tyre & Ind 7.25%

0 1 2 3 4 5 0 2 4 6 8 10 12
View on Budget 2018 from Kotak Securities
In the run-up to the Budget, the market was awash with expectations about
a reintroduction of Long-term Capital Gains (LTCG). 

While Finance Minister Arun Jaitley announced a 10% tax, it would be only applicable
on gains over Rs 1 lakh, thus safeguarding small investors. To soften the blow, the
budget also announced a grandfathering of capital gains until 31 January, 2018. This,
along with a 10% tax on dividends distributed by equity funds, are likely to affect
investors directly.

The increase in expenditure in the rural, health, women and other social sectors was
also as per forecasts. But what’s noticeable is the start of universal health coverage
with an annual medical reimbursement of Rs 5 lakh per family.

This social expenditure, however, is balanced by a 21% increase in capital expenditure,

which is needed for the economy to improve. The higher expenditure is expected to be
balanced by a rise in divestment and tax revenue and help reduce the fiscal deficit to
3.3% of the GDP in FY2018-19.

On the whole, the budget seems to be well-balanced, with an increase in revenue and
expenditure on as a wide array of sectors. However, it’s important to read the fine print
to draw the real picture. 

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