The Interim Budget by Finance Minister Piyush Goyal has all the trappings of the BJP launching its political battle rather than the presentation of an economic plan for the country for the next few pre-poll months. In Parliament, Prime Minister Narendra Modi purveyed the scene as a victor, repeatedly thumping his desk when FM Goyal called out the NDA government’s achievements, and each sop and tax concession announced by Goyal was greeted with loud cries of “wah-wah” and “Modi, Modi ...” from the treasury benches.
The concession packages were expected, the flag-waving wasn’t. For the blighted farm sector, the finance minister handed out an assured income support of Rs 6,000 annually for farmers owning less than 2 hectares of land to help them buy seeds and ward off unseasonal debt. This will cost the exchequer Rs 20,000 crore this fiscal and another Rs 75,000 crore next year.
For unorganised workers earning less than Rs 15,000 a month, there is now an assured monthly pension scheme of Rs 3,000. And for the cynical lower middle class came the announcement of full tax rebate for incomes up to Rs 5 lakh a year, doubling last year’s ceiling. Describing the current direct tax regime as one of moderate-tax-high-compliance, Goyal said the concession would release 3 crore poor souls from the tax bracket. This would cost the government Rs 18,500 crore.
The core philosophy of the Interim Budget is to put more money in the hands of farmers and workers via income and pension support, and in the hands of the middle class by taxing them less. An additional Rs 12,500 a year by way of tax saving or Rs 6,000 coming into a farmer’s bank account may not seem a large amount.
But when you look at the volume, it spells increased spending with people shopping for motorcycles and farm equipment. Consumption is good because it drives growth, and in turn generates jobs. A growing economy spells prosperity, which in months to come will translate into plaudits and more votes for the ruling alliance; or so the government believes.
There is no doubt it was an election document. The first half of Goyal’s speech was dominated by the praise of the performance of the BJP sarkar over the last four years - how it was building roads at the rate of 87 kilometers per day and how its demonetisation and anti-black money programme had helped the state recoup Rs 50,000 crore in assets of economic fugitives.
The Budget document is a forward-looking economic plan for the country through a rollout of carrot-and-stick policies. The Interim Budget was more like patting one’s own back.
Then, since there was no economic survey, the Interim Budget became an opportunity to provide a statistical window to the government’s performance—that the sanitation programme had covered 98 per cent of the country and that the cost of stents and knee implants had been lowered in the previous years.
But when a government puts norms and convention to the winds and begins preaching on ‘Vision 2030’ in what is effectively a four-month Interim Budget, then you know its direction.
Is this the right place to declare the creation of one lakh ‘digital villages’ without stating what that means and where the money is going to come from? Again, is the FM’s closing remarks of giving a roof for every homeless family, or creating a pollution-free India where everyone will be driving an electric vehicle (EV) the stuff of Interim Budgets or of lofty promises of election manifestos? Those who delve into the auto industry know that an electric vehicle policy has over the last few years been systematically torpedoed by the gasoline car industry.
And did the finance minister realise that construction of 1.53 lakh ‘affordable’ houses in four years as stated in his speech does not match the promise of ‘Housing for All by 2022’. To reach the target of building 180 lakh homes for the homeless by 2022, the pace required is building 30 lakh homes a year.
In the short-term, the consumption push of the Interim Budget 2019 will generate a positive perception. Whether the sops are large enough to sustain a longer cycle of growth is yet to be seen.
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