The interim budget for 2019-20 is Narendra Modi’s bold gambit to win the perception war ahead of the Lok Sabha elections. If ever there was a pure Politically Correct budget, this is it. Designed as pro-poor, anti-corrupt and growth-oriented, it has something for every influential section of the society, and that too without any additional tax burden. There are only gainers, no losers. Adversaries may call it “aakhari jumla”, an “account for vote rather than a vote on account”, “bribe to the voters” or anything else, but they will find it tough to oppose any of the schemes or roll back any of the relief.
An interim budget or vote-on-account, presented shortly before an election, is normally devoid of policy announcements. However, the present times are anything but normal. The coming Lok Sabha election will be fought as fiercely as the last one, if not more. As investigative agencies are zeroing in on scamsters and as wanted Indians as brought back, the election has literally become a battle of survival for the old and dispossessed establishment. An atmosphere is assiduously sought to be created that the government is on its last legs and that bureaucrats and investigative officials will be well-advised to heed the signals and subvert all investigations and new initiatives launched by it.
The budget is Modi’s counterattack against this sustained assault of the opposition. It seeks to address both perception and reality about the government. Through it, Modi government has seized the opportunity to provide a detailed account of its achievements, make new promises and provide relief - small and big - to the target groups. The interim budget presented in the Lok Sabha on Friday last is not a colourless vote-on-account; it is a ringing battle cry of a defending champion raring to confront his adversaries head-on.
Its most outstanding features include a direct income support scheme for small and marginal farmers, income tax relief for middle class and a pension scheme for workers in the unorganized sector.
Piyush Goyal has targeted his arrows well. The much expected income support scheme for farmers has been launched. No fewer than 12 crore small and marginal farmers (with holdings up to two hectares or about five acres) will be paid Rs. 6000 a year in three installments. The first installment of Rs. 2000 will be disbursed in the current fiscal year itself boosting farmers’ income and, hopefully, BJP’s electoral prospects.
Finance Minister Piyush Goyal proposes to fully rebate tax on annual taxable income up to Rs. 5 lakh, benefitting three crore middle class tax payers including businessmen who form part of the Bharatiya Janata Party’s core support base. He has lifted the threshold for TDS (tax deduction at source) on interest from bank and post office deposits from the current Rs. 10,000 to Rs. 40,000 a year. This saves enormous trouble for small depositors and pensioners who fall below the taxable income limit in requisitioning their banks/post offices to hold off TDS.
The third major announcement pertains to a pension scheme for about 10 crore workers in the unorganized sector. Hawkers, rickshaw-pullers, construction workers, farm workers, domestic help and such others will get a monthly pension of Rs. 3000 after they turn 60 by paying a small contribution, which will be fully matched by the government.
Together, the three schemes cover a majority of the population. At the same time, the finance minister has taken care to restrict the sops to the poor and lower middle class. The government wants to avoid the impression of being pro-rich. Thus, those earning more than Rs. 5 lakh got little relief. The promise of reducing corporate tax to 25 per cent remains a promise even after six budgets.
Goyal took care to list government’s actions and achievements in great detail. Northeastern states, film industry, scheduled castes, nomadic and de-notified tribes, women, armed forces - the finance minister remembered them all and reminded of the good work government has done for them so far. We were also told what it has done and plans to do for the cow, animal husbandry, fisheries, digital India, infrastructure projects, solar energy and what have you. This was important to convey the message that the government has been working continuously for their welfare, and had not suddenly woken up at the last minute. Goyal rounded it off by presenting a futuristic vision. He made all the right noises and said nothing that should not have been.
It is possible to pick holes in the schemes. Rs. 6000 per year to a farmer is too little, too late, and unlikely to address the issue of agrarian distress, we are told. However, the latest giveaway is in addition to the existing subsidies and schemes; nothing prevents non-BJP state governments from offering top-up incomes. Since it is fully funded by the Centre, the Mamatas and Naidus will neither be able to block its delivery nor claim any credit for it. Moreover, it cannot be denied that the relief is well-deserved in the all three cases. Finally, those who indulge in nitpicking lack credibility. “Janeudhari” champions of farmers who did not pay them a dime through decades cut a sorry figure when they mock at the modest amount offered now.
So, where is the catch? The catch is breach of financial discipline and loss of credibility. Showering sops without additional revenue raising measures has taken its toll on fiscal consolidation. The budget numbers about revenue, expenditure and fiscal deficit are doubtful. The fiscal deficit for the current year (2018-19) will be 3.4 per cent of the GDP instead of the targeted 3.3 per cent, and will remain at the same level for the next year. There is reason to believe that the actual numbers will be worse.
However, making ends meet is a worry for the next government (whichever), while the present government is basking in the glory of being pro-poor. The budget has vastly boosted the morale of BJP workers. Goyal received resounding applause from his colleagues, with the Prime Minister thumping him on the back. In Parliament, most ruling MPs and ministers were excited by the Budget, asserting that this was the “Brahmastra that will get us 300 seats”.
Undoubtedly, the budget has changed the political mood of the country. For a while, it looked as though the Modi government was on the back foot. The Family courtiers thought that the Prince had delivered a fatal blow to the current dispensation by promising a minimum basic income to the poor. The NSSO data showing unemployment at 6.1 per cent was regarded as a knock-out punch by the same lot, hoping that in a few months power would return to those who had a divine birthright to rule the country.
Little did they realize that they were facing a foe who revels in adversity. Through this budget, Modi has sent a strong signal that he is very much in the game, that he is fighting back and expects to be in a winning position by the time elections are announced. His success will depend on the closeness (or gap) between his presentation and people’s experience. Time will tell how far he succeeds, but he has left no one in doubt about his determination and political acumen. I wish him well.