By TJEF Editor Junitha Johnson
The Telecom Sector is deeply disappointed that Budget 2018 has not addressed any of the key issues of the financially stressed telecom industry that is already plagued by brutal price wars and high debt, upwards of Rs 7 lakh-crore. Quoting Rajan Matthews, director general of Cellular Operators Association of India (COAI) –
“The telecom industry is disappointed that none of its key asks have found mention in finance minister Arun Jaitley’s budget. We had sought a reduction in the high levies and taxes, and an urgent intervention for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition,”
In the past few years, the Telecom Sector has seen considerable reduction in the profitability primarily due to reduced tariffs, increased competition and increase in costs due to spectrum purchases. Further, unprecedented increase in adoption of digital services such as payments, e-governance and entertainment has made further investments in the telecom infrastructure sector a necessity.
In the above backdrop, this sector has been pushed into a wave of consolidation as also increased investments in networks, to keep pace with changes. This has increased the pressure on the already debt laden companies in the sector.
The Telecom Industry’s expectation from the Budget 2018 were high, following are the certain expectations –
- Clarity on tax treatment of spectrum payment
- Characterization of telecom services as royalty
- Amendment to the definition of ‘industrial undertaking’ to include telecom infrastructure service providers
- Benefit of Investment Allowance should be provided to telecom infrastructure service providers
The salient points of the Budget 2018 with regards to the Telecom industry are as follows: –
- Custom duty on mobile phones up from 15% to 20%
- Corporate tax rate cut to 25% for companies with up to Rs 250 crore turnover
- 1 lakh Gram Panchayats are connected to optic fibre; 5 lakh Wi-Fi spots to be created in rural areas
- Rs 10,000 crore announced for creation and augmentation of telecom infrastructure
- Broadband access to over 20 crore rural Indians in 2.5 lakh villages
In our opinion the Budget has not been in line with expectations of the industry. The Government, as per Mathews said the finance minister “had completely ignored” the sector’s four key demands, including the immediate reduction of high and unsustainable levies & taxes, cut in basic customs duty on 4G network gear, clarity on right of way (RoW) related taxation at the state level and the industry’s call for a lower tax rate to 1% on discounts extended to small dealers.
By TJEF Editor Gandhali Inamdar
The Union Budget 2018-19 has provided a big opportunity to the entire Healthcare industry and allied services to address the healthcare needs of a large population of the country. As envisioned under the National Health Policy 2017, the Union Budget 2018–19 has taken a long stride towards Universal Health Coverage, with focus on increasing the health coverage for the underprivileged and the bottom-of-pyramid section of the society. This budget is in line with industry expectations of an increase in insurance coverage, especially for those below the poverty line.
Under the cover of ‘Ayushmaan Bharat’, the government has announced measures to holistically cover primary, secondary and tertiary care services. The National Health Protection Scheme is at the forefront of this programme. This scheme will cover 10 crore families with an annual coverage of 5 lakh per family. This is a significant increase from the coverage under the ‘Rashtriya Swastha Bima Yojana’, which benefits 45-50 crore families by providing access to secondary and tertiary care services. The proposal of setting up 1.5 lakh health and wellness centres will bring primary health care to every household by providing essential drugs and diagnostics free of cost. By increasing government support and coverage, this will boost demand for medical services in the country, giving an opportunity to healthcare providers and insurance companies to partner with the government. It will also reduce the financial and mental burden of healthcare costs on the less privileged. Reduction in household Out-of-Pocket (OOP) expenditure on healthcare will lead to increased disposable income which with time will give an impetus to the economy. Support for Tuberculosis (TB) patients during the period of treatment will further lead to increase in demand for nutritional supplements and is a welcome step to ensure a TB-free India.
The budget also proposes steps to address the shortage of qualified medical personnel. It propagates setting up of at least one medical college for three parliamentary constituencies and one Government college per state. Further, 24 new government medical colleges and hospitals will be established by upgrading existing district hospitals. This will further enhance quality and accessibility of medical education and healthcare. Amidst all the initiatives, more clarity is required regarding the breakdown of allocated Budget and a roadmap to implement these plans. Convergence with existing government schemes needs to be considered to reduce hurdles during implementation. Barring the announced efforts to increase medical colleges, more efforts are required to reduce the existing manpower and skill gap. There was also no mention of measures to support investment and collaboration with technology to upgrade the quality of care. The government needs to incentivise healthcare providers to imbibe technology and digitise the healthcare sector.
India has been long lagging in its expenditure on health at a global level, the Union Budget 2018 does help in increasing it from 1.5% to 2.5% of GDP, the first positive step on a long path for healthy India. Implementing these measures on the envisioned scale will require close coordination of the centre, state, and districts with healthcare and insurance providers. Even with good intentions, there is need to ensure adequate quality measures are adopted and adhered to.
By TJEF Editor Laxmi Mishra
Challenges faced by the Industry
- Gross enrolment pattern: At present, in India, there are about 1.86 crore students enrolled in various streams of higher education including Business Management. The ratio is just 16%. The government needs to focus on strategies to increase this ratio.
- Infrastructure facilities: There is an imperative need to ensure quality physical infrastructure by managing apolitical private sector participation in the establishment of colleges.
- Student-teacher ratio: India has Student-teacher ratio is 22:1 while the average for developed countries is as low as 11:1. It brings the necessity to hire quality teachers and strengthen the backbone of Indian education sector.
Expectations from Budget
- The Government’s budgetary expenditure on health, education, and social protection was INR 8.18 lakh crore in 2017-18. It is expected to increase by 3-5%.
- The National Testing Agency (NTA) which was proposed by Mr. Arun Jaitley is expected to be the main focus of this year’s budget.
- Students are expecting some relation on education loans considering the ever-increasing cost of higher education.
- Expenditure towards recruitment of teachers is expected to be high.
- Initiation of more programmes to increase the gender parity in educational institutions.
- The Government has allocated INR 8.5 lakh crore this year, an increase of approx. 4% over last year.
- Also announced Rs. 1, 00, 000 Crore initiative to drive research and infrastructure over the next four years.
- The government proposes to move to “Digital Board” over the next few years to mark the involvement of technology in Indian education system.
- “Revitalising Infrastructure and Systems in Education (RISE)”, a major initiative dedicated towards revamping the education infrastructure, will be launched.
- An integrated B.Ed. programme for teachers will be initiated to ease the training of teachers during service.
- Launch of ‘‘Prime Minister’s Research Fellows (PMRF)’’ Scheme to encourage students to undertake Ph.D. in IITs and IISc with an attractive fellowship.
- To ensure quality education for tribal children an “Ekalavya Model Residential School” will be setup in every block with more than 50% ST population and at least 20,000 tribal persons.
- A specialized Railways University at Vadodara also to be setup under the scheme of setting up Institutes of Eminence.
- 18 new Schools of Planning & Architecture (SPAs) will also be established in IITs and NITs as autonomous schools.
- Press Information Bureau, Government of India. (2018, February). Education will be treated holistically from pre-nursery to class XII. Retrieved from: http://pib.nic.in/newsite/PrintRelease.aspx?relid=176050
- The Hindu. (2018, February). Allocation of funds in Union budget 2018-19. Retrieved from: http://www.thehindu.com/business/budget/allocation-of-funds-in-union-budget-2018-19/article22637589.ece
By TJEF Editor Kriti Kanchan Sinha
Finance Minister, Mr. Arun Jaitley presented the much-awaited Union Budget on 1st February, 2018. The budget was focused on rural India with agriculture, insurance, housing and MSMEs being the biggest gainers. There were no big announcements regarding the banking sector apart from a reiteration of the bank recapitalization plan. Some of the key aspects of the Union Budget that will impact the banking, insurance and financial services industry are listed as below:
- Long-Term Capital Gains Tax – Long-term capital gains exceeding 1 lakh will be taxed at the rate of 10%. However, all gains up to 31st January, 2018 will be grandfathered which means all gains made up till 31st January, 2018 will not be taxed. Distributed income by equity oriented mutual fund will also be taxed at the rate of 10%. This may introduce some investor churn in the short-term however as major capital gains are accrued to corporates and LLPs, a long-term impact on equity markets is unlikely.
- Bank recapitalization – This recapitalization will help the public-sector banks in lending additional credit of 5 lakh crore.
- Uncollateralized Deposit Facility – The RBI Act will be amended to institutionalize Uncollateralized Deposit Facility which will act as an instrument to manage excess liquidity without offering any securities as collateral. The funds parked with the RBI through this facility by the banks could earn interest.
- Better Financing for MSMEs – Online loan sanctioning facility for MSMEs will help in prompt and larger financing of MSMEs and also considerably ease cash flow challenges faced by them. Tax rate reduced to 25% for companies who have reported turnover up to 250 crore in the financial year 2016-17. This will benefit the entire class of micro, small and medium enterprises which accounts for almost 99% of companies filing their tax returns.
- Rural Regional Banks – Strong Regional Rural Banks will be allowed to raise capital from the market to enable them to increase their credit to the rural economy.
- Tax Exemptions – The government has put forward a proposal to exempt transfer of derivatives and certain securities by non-residents from capital gains tax in order to promote trade in stock exchanges in IFSC. Further, non-corporate taxpayers operating in IFSC shall be charged Alternate Minimum Tax (AMT) at concessional rate of 9% at par with Minimum Alternate Tax (MAT) applicable for corporates.
- Agriculture Credit – A 10% increase in the volume of institutional credit for the agriculture sector to 11 lakh crore for the year 2018-19 along with 1.5 times hike in Minimum Support Price of all crops will improve rural income and improve the banks’ credit offtake and asset quality for this segment.
- Affordable Housing – The government will establish a dedicated Affordable Housing Fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India. Affordable housing will have a positive retail loan growth of banks and NBFCs.
- National Health Protection Scheme – The National Health Protection Scheme will provide free medical care of up to Rs five lakh each to 10 crore poor families – about 50 crore beneficiaries (assuming five members per family). This will improve penetration of the Insurance industry in the rural markets.
- Financing of NBFCs – Refinancing policy and eligibility criteria set by MUDRA will be reviewed for better refinancing of NBFCs. Public sector banks will be onboard the Trade Electronic Receivable Discounting System (TReDS) platform and linked with GSTN.
- Bond Market – Reserve Bank of India has issued guidelines to nudge Corporates access bond market. SEBI will also consider mandating, beginning with large Corporates, to meet about one-fourth of their financing needs from the bond market.
- Cryptocurrencies & Blockchain – It has been clearly mentioned that Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system. However, it is open to exploring block chain technology for ushering in a digital economy.
- No announcement of any change in foreign holding limit in private sector banks from the present 74%.
- Ministry of Finance. (2018, February). Budget 2018-2019 Speech of Arun Jaitley. Retrieved from: http://www.indiabudget.gov.in/ub2018-19/bs/bs.pdf
- Press Information Bureau, Government of India. (2018, February). SEBI to consider mandating corporates to meet one-fourth financing from bond market. Retrieved from: http://pib.nic.in/newsite/PrintRelease.aspx?relid=176041
- The Economic Times. (2018, February). Govt to set up affordable housing fund under NHB. Retrieved from: https://economictimes.indiatimes.com/wealth/personal-finance-news/govt-to-set-up-affordable-housing-fund-under-nhb/articleshow/62744458.cms
By TJEF Editor Vasudeva Kamath
Challenges faced by the Industry
- Large number of marginal farmers in India: There are a large number of marginal farmers in the country due to the fragmented land holdings. The fragmentation is to such an extent that it is economically unviable to cultivate crops by using mechanized farming methods.
- Lack of storage facilities: About 10% of the agricultural produce gets wasted due to lack of proper storage facilities in the country. There also the problem degradation of the quality of produce due to improper storage.
- Lack of proper irrigation channel: Indian farmers are largely dependent on the monsoon for irrigation. There is no proper implementation of irrigation facilities to grow the crops around the year.
Expectations from Budget
- The budget amount allocated to the agriculture sector was to the tune of Rs.1.5 lakh crores. The expectation this year is at least 8-10% increased allocation.
- Establish fund to guarantee credit to encourage investment in agriculture
- 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
- Government has decided to keep minimum support price (MSP) for all unannounced Kharif crops at least one and half times of their production cost after declaring the same for the majority of Rabi crops
- The government has allocated a total of 1,87,223 crores, which is 24% more than what was allocated in the previous financial year.
- The volume of credit for agriculture is proposed to be at Rs. 11 lakh crores from the present Rs. 10 lakh crores, thus catering to the expectation from the budget.
- A new Scheme ‘‘Operation Greens’’ was announced with an outlay of Rs 500 Crores to address the price volatility of perishable commodities like tomato, onion and potato
- Agri-Market Infrastructure Fund with a corpus of Rs.2000 crores will be set up for developing and upgrading agricultural marketing infrastructure
- Rs 200 crores allocated for organized cultivation of highly specialized medicinal and aromatic plants
- National Bamboo Mission will be initiated with an outlay of Rs.1290 crores to promote bamboo sector in a holistic manner
- Ministry of food processing has got an almost double increase in allocation from Rs. 715 Crores to Rs. 1400 Crores
- Under Prime Minister Krishi Sinchai Yojna, 96 deprived irrigation districts will be taken up with an allocation of Rs 2600 crores
- To realize the full potential of Indian agricultural exports (about USD100 billion), the export of Agri-commodities will be liberalized
This year’s budget is termed as the “Next Green Revolution” by many experts. With normal monsoon forecasted for the year, there would be a good pickup in agricultural activities during the sowing season. We can expect a significant contribution from agriculture sector towards the GDP this year.