Highlights of the Budget 2018 – Economyria

The Finance Minister Arun Jaitley presented the Union budget on 1st February. It was the last full budget of the Government before the 2019 Lok Sabha elections.

With elections approaching, the budget was expected to be populist.

The focus of this year’s budget is on agriculture and rural sector.

(Read: What is Union Budget of India?)

Highlights of the Budget 2018


  • The Minimum Support Price (MSP) of Kharif crops has been fixed at 1.5 times the cost of production.
  • So, the Government will procure crops from the farmers at this Minimum Support Price/ MSP.
  • If the Government is not able to buy their crops, the farmers will be compensated if the market price is below MSP.
  • The MSP guarantee has been extended to all the crops. Earlier, it was limited to wheat and rice.
  • The details of the implementation of the MSP scheme have not been worked out yet. It will be done by NITI Aayog.
  • The increased MSP will increase farm income, but can also stoke food inflation.
  • Strengthening the e-national agricultural market (e-NAM) network.
  • Liberalising agricultural exports so that the farmers have a bigger market to sell their produce.
  • Increasing scope of futures and options in agriculture. The farmers will have a better understanding of demand and prices of their crops and will be able to make informed choices.
  • That said, the government has fixed higher MSP keeping the elections in mind. What we need is structural reforms in the agricultural sector to improve farm productivity and income.


  • Affordable healthcare is one of the critical changes facing Indian economy.
  • The Government has introduced a health insurance scheme for the poor households.
  • The National Health Protection Scheme (NHPS) will provide health insurance of Rs. 5 lakh per year to 10 crore poor households.
  • Though the scheme has been touted as ‘Modicare’, only Rs.2000 crores were allocated in the budget for it,
  • Set up 1.5 lakh health centres to bring healthcare closer to homes. Rs.1200 crores have been allocated.
  • Giving nutritional support to tuberculosis patients. Rs. 600 crores were allocated.


The Government has allocated 1 lakh crore to update education infrastructure across the country over the next 4 years. It includes

  • integrated B.ED program
  • increasing digital intensity in education
  • training of 13 lakh teachers
  • setting up of Eklavya schools for Scheduled Tribe category people.


  • Constructing 9000 km of National Highways.
  • Laying down infrastructure to connect the interior parts of the country through the railway
  • Investing in smart cities
  • Expansion of airport capacities.


  • Lowering the mandatory norm of provident fund contribution of 12 % to 8 % for the first three years of employment to incentivise employment.
  • The allocation for National Livelihood Mission increased to Rs 5000 crore.
  • Loans to women self-help groups of women to be increased to 75,000 cr by March 19.

Poor people

Various schemes for the poor have been allocated higher money in the budget.

  • Ujjwala scheme to provide subsidised cooking gas
  • Saubhagya scheme to provide electricity connections
  • Jan Aushadhi Kendra to provide affordable medicines.
  • Pradhan Mantri Awas Yojana to provide housing to all
  • 2 crores toilets to be built by next year

Middle class

  • A standard deduction of Rs. 40000 for salaried taxpayers.
  • This deduction was given in place of the current exemption for travel (16000 monthly) and medical reimbursement (15000 pa) from the place of work.
  • Therefore, the net benefit for the middle class will be only Rs. 5800
  • Education cess name changed to health and education cess. This cess has been increased from 3 % to 4 %, It will affect the salaried taxpayers the most
  • Reintroduction of LTCG on equity. The investors will have to pay 10 % LTCG for gains above Rs.1 lakhs.

Senior citizens

  • Increase in exemption on interest income on bank and post office deposits for senior citizens from Rs.10000 to Rs.50000.
  • Increase in deduction on premium on health insurance (section 80 D) from Rs.30000 to Rs.50000

Corporate sector

  • The companies with revenues under Rs.250 crores will have to pay corporate tax of 25 %.
  • Earlier the revenue limit was only Rs.50 crores.
  • It will benefit the Micro, Small and Medium sector enterprises (MSMEs). They had to pay corporate tax of 35 % earlier.

Fiscal deficit

  • The Government did not meet the fiscal deficit target of 3.2 % for the year 2017-18. The target has been revised upwards to 3.5 %.
  • The Government will target the fiscal deficit of 3.3 % for the year 2018-19.
  • There is a risk of fiscal slippage. The expenditure might end up higher.
  • The bonds yields increased after the announcement of the budget. The 10-year bond yield hit a 22-month high.
  • The government has targeted disinvestment of Rs.80000 crores in 2018-19.
  • The customs duty has also been hiked for 46 goods to support domestic manufacturing. The Government is expected to gain Rs.6000 crores a year from this increase.
  • It has also been decided to merge the three big public sector general insurance companies- United India insurance, Oriental insurance and national insurance.

That is all. Though this is an election year budget, the Finance Minister has attempted to strike a balance between populism and fiscal prudence in this budget,


Have any Question or Comment?

3 comments on “Highlights of the Budget 2018 – Economyria

Sandeepan Bose

If the Govt buys grains at 1.5 times the cost of production will it sell it at the same price? If so then whats the big deal. Yes, it is a step forwards to bring down the difference between the rich and the poor. The rich can pay 5 times the price of grains. But there are people at the borderline who can not, otherwise i would suggest an MSP = 10 x cost of production and free rations for those in the border line cases.


The Government will subsidise the grains for the people below the poverty line as well as maintain a buffer stock. It will compensate the farmers in case of inability to purchase the grains. Hence, MSP is basically a price below which the market price of the crop will not be allowed to fall. It has the potential to fuel food inflation which will impact the middle class.


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