Once every five years, governments present a ‘skinny budget’, literally. The finance minister’s speech is kept short, devoid of granular details like a full budget, which won’t come until June-July. But these are extraordinary times and the NDA government — defying convention as it often does — may present an electoral budget with massive handouts to the middle class and the rural folk.
Interim FM Piyush Goyal’s first budget could have three parts: One, an income and expenditure statement for FY20. Two, a vote on account covering expenditure for April-July 2019. Three, a report card of the past 4.5 years, and a vision statement which critics may liken to an election manifesto.
First up is the rural and agrarian distress, and a farm relief package as big as Rs 1 lakh crore could be Budget 2020’s biggest takeaway.
As for the middle class, PM Narendra Modi had declared last year “citizens don’t want incentives, but honesty”. But the budget may duck that logic and raise personal income tax exemption limit to Rs 5 lakh from Rs 2.5 lakh.
Chances are the new direct tax code simplifying tax laws may find a mention, though its rollout will have to wait. The much-awaited 25 per cent tax slab for corporates could inch closer to reality, but only in FY20, though Goyal could chuck a few deductions in indirect taxes. Optimists expect tweaks to long-term capital gains tax, which appears unlikely, while angel investors, start-ups and MSMEs all expect their fair share.
The government has a clear majority in the Lok Sabha and can effortlessly pass tax modifications (Rajya Sabha cannot hold up the Money Bill) but Goyal may exercise prudence and present a fiscally responsible budget.
With poor show on the job front is a matter of concern, and as the country remains vulnerable to external shocks like volatile crude prices, or trade wars, the Budget’s thrust will remain on infra, farm and rural sectors.
Like in the past, Goyal may present an expansive budget, but not without raising gross borrowings upwards Rs 6.7 lakh crore for FY20 against Rs 6.50 lakh crore in FY19. Indirect tax revenue, let down by GST collections started to bite expenditure this fiscal, but the government will likely shed fears and project a respectable, high-teens growth in tax collections in FY20.
Like in the past, Piyush Goyal may present an expansive budget, but not without raising gross borrowings upwards Rs 6.7 lakh crore for financial year 2019-20 against Rs 6.50 lakh crore in FY 2018-19.
Indirect tax revenue, let down by GST collections started to bite expenditure this fiscal, but the government will likely shed fears and project a respectable, high-teens growth in tax collections in FY 2019-20.
Disinvestment proceeds, which stood at a historical high in FY 2017-18, will likely disappoint and undershoot FY 2018-19 target.
The non-tax revenue is also expected to follow suit. The National Democratic Alliance government’s first budget in 2014 promised to salami slice fiscal deficit to 3 per cent of GDP in five years.
And for much of its tenure, caution remained its watchword, but given the current revenue run rate, now may not be the time for a spending splurge, unless the government gets a windfall, say from Reserve Bank of India or elsewhere.
Now in its last act, Goyal’s red box on Friday, regardless of dishing out a symbolic interim budget or not, will have a simple imprint and it’s this: political survival against all odds.