Perhaps for the first time in the history of Independent India, the Union Budget and the finance minister were both simultaneously interim. That is not to say that Interim Finance Minister Piyush Goyal did not have his task clearly cut out. It is obvious that the Interim Budget, which could as well have been just a vote-on-account of the government for the current financial year, was presented as one of the last opportunities to woo the electorate ahead of the shortly upcoming general elections.
Therefore, a populist tilt to the announcements was a given. What was surprising though was an elaborate listing of achievement of this government till date, making it sound more like a political pitch for the BJP/NDA rather than an appraisal of financial affairs of the country. Chants of “Modi, Modi” at one stage gave it even more of an election pitch.
The good news, from the perspective of stock markets, is that the giveaways were not over-the-top. The markets seem to have taken the interim budget positively, primarily because the worst fears did not come true. Despite significant giveaways, it could have been worse.Another big positivity is the curtailment of the current year’s fiscal deficit to 3.4 per cent of the GDP (Gross Domestic Product). While the targets under the Fiscal Responsibility and Budget Management (FRBM) Act have long been forgotten, we are happy to find positives in what could have been a much worse situation for the fiscal balance of the country.
The point to note here is that the increased expenditure and reduced receipts from many of the measures announced would be fully reflected in the upcoming financial year and therefore, it needs to be closely watched as to what estimates have been taken for total revenue collections for the financial year 2019-20.
The main populist measures of providing `6,000 per annum assistance for small farmers and tax relief for income earners up to `5 lakh have been a direct voter-wooing attempt.
Other tax benefits including no notional income on the second house, capital gains exemption of up to `2 crore on the purchase of a second house, no Tax Deducted at Source for rents up to `2.4 lakh per annum and notional rent exemption on unsold inventory for two years are aimed towards reviving the residential housing market and should benefit both the middle class as well as stressed-out real estate developers in the country.
With the ‘10 long-term objectives’ appearing more like an election manifesto wish list, the Interim Budget has served its purpose and will be forgotten quickly with all eyes now on the finale — the general elections in May 2019.
(The author is Founder & CEO, Five Rivers Portfolio Managers Pvt Ltd)