#InterimBudget: Modi govt bats on front foot

Indian Finance Minister Piyush Goyal addresses the press conference after presenting the Modi government's Interim Budget on February 1, 2019. (PTI Photo/Manvender Vashist)

Budgetary allocation for cow and middle class core voters; farmers and lower castes pandered; welfare schemes widened for all

It’s a budget for kisan, majdoor, cow, lower middle class – the core BJP voters. Bonanza is showered on them. Even foreign investors have been pandered to. They have been told that India is poised to be $5 trillion economy in five years and beyond that $10 trillion in eight years.

Will it change the 2019 poll dynamics? That is the hope of BJP and possible concern of the opposition, Congress included. BJP’s strategy is sharp and aimed at pan-India reach. The opposition has to redo theirs. It certainly makes the economy and politics interesting. Yes, Piyush Goyal and Arun Jaitley’s budget has thrown new challenges, raised new aspirations.

More so as Goyal in his post budget interaction tells the press that in the main budget, after the elections, the groups now left behind – the income taxpayers — may expect reliefs.

But that’s where the catch is. The I-T (income tax) sops are limited to those earning up to Rs 5 lakh. This is the consequence of the 10% reservation given to economically weaker sections having family income of up to Rs 8 lakh. It’s a wonder why the relief is not extended to the limit of Rs 8 lakh.

Beyond that the taxpayers have a gain of Rs 10,000 a year – Rs 850 a month – as standard deduction is raised to Rs 50,000 from the existing Rs 40,000. But they would pay tax at a minimum rate of 20%. They have other gain on interest accruals up to Rs 40,000 on bank deposits, as it will not be computed as earning and would also be free from TDS (tax deducted at source). Yet this would be added to their income in the tax returns. This is likely to increase tax disputes as the department acts often in a queer manner. Recently it has sent many pensioners unusual demands and has adjusted their refunds against such “demands”. Ideally the entire interest accrual should not be under tax net. Despite various pension provisions, a large section remains and would for long be without a pension. The savings only help them. Goyal’s budget has not taken care of this issue.

Possibly, it’s rightly so. As per government estimates those earning up to Rs 5 lakh constitute about three crore of taxpayers. They create an atmosphere of major gain and would now be out of tax net. Total taxpayer is 6.89 crore now against 3.69 crore a few years back. Once again the number would come down to the level of 3.89 cr.

The number of the higher I-T payer is far less though oppressed by a steep high tax rate but politically less important.

More important are the 12 crore farmers. Those owning up to 2 hectare of land would get Rs 6000 a year – Rs 500 a month– in the new Rs 75,000 crore PM- KISAN scheme retrospectively from December 2018 – a first in any budget.

It is the Telangana model and has paid rich dividends to Telangana chief minister K Chandrashekhar Rao’s Telangana Rashtra Samithi in the recently held assembly elections. The BJP has high hopes that it would change the rural voting scenario.

The southern states are also on the radar. About 1.45 crore fishermen are to have focused attention. They would have a new fisheries department and would have the facility of Kisan Credit Card (KCC) at low interest rate of 2%.

The KCC would also be extended to animal husbandry farmers. They would also benefit from the setting up of Rashtriya Kamdhenu Aayog for genetic upgradation of cow resources and enhance production and productivity of cows, a favourite theme of the Sangh Parivar. The message goes deeper. The allocation is only Rs 750 crore for the Gokul mission but the emotional appeal is deemed to be greater to the rural population.

The farm sector slowdown has caused rural problems. As farm production increases, prices have fallen creating a distressful situation. The new schemes are expected to change it. Many states, including Madhya Pradesh, Chhattisgarh and Rajasthan, where the Congress has recently formed governments upstaging the BJP, have announced loan write offs for farmers to tide over an income crisis.

The overall agriculture and farmers’ welfare budget has increased to Rs 1.29 lakh crore from Rs 67,800 crore, though agriculture research budget has seen marginal rise of Rs 1125.9 crore to Rs 8078.6 crore from Rs 7952.79 crore. This required a larger allocation.

Add to this another 42 crore labourers earning up to Rs 15,000 a month. They would get a pension of Rs 3,000 per month after 60 years of age in the proposed PM Shram-Yogi Maandhan. There is a catch. They have to enter at the age of 29 and pay Rs 100 a month to be eligible for the pension.

So it would not immediately benefit those who are in the age group of 40 to 59. It is, however, expected to create aspirations.

What has evaded attention is the doubling of gratuity limit to Rs 20 lakh. It is to cater to majority of the industrial workers in the organized sector. It is a much needed step and various trade unions have been seeking it. The impending elections have given them the desired benefit.

There has been Rs 14,000 crore hike, 35.6% increase in the allocation for welfare for the SCs and STs to Rs 76,801. It is to nullify their fears raised after introduction of the economically backward reservation. There were campaigns by some political parties that it was the step to end the SC/ST reservation. Of late, sizeable sections of these groups had come closer to the ruling party and it is an effort to retain their loyalty.

The increased tax base has been used to spread out to benefit a large base. Total expenditure rises from Rs 24.57 lakh crore in 2018-19 to Rs 27.84 lakh crore in 2019-20, a rise of Rs 3.26 lakh crore – 13.3%. The revenue base remains strong at Rs 25.52 lakh crore.

But fiscal deficit is likely to go beyond the projected 3.4%. The final budget to be presented after the elections would change many of the figures. Whatever presented now is subject to developing political situations. The next few months would see much acrimony.

The budget does not merely spell out figures. It weaves a dream for the future through ten-dimensional vision. Goyal says, “We will create an India where poverty, malnutrition, littering would be matter of the past”. One hopes Goyal emerges right but to make it happen a lot has to be done.

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