The BJP-led NDA government at the centre made a fervent and full pelt election pitch in Budget 2019, fraught with sugar-coated sops for the farmer, the small industry, defence and the marginalised. What’s more! There is even something for the middle and lower middle class, a group the government had conveniently forgotten for most of its five years in rule as well as the social sector, which had its scanty attention so far.
Striking a very clear populist note, interim Finance Minister Piyush Goyal’s maiden budget made a prominent pro-poor and pro-farmer pitch to please a large part of the electorate in the election year.
While there are a lot of sops and schemes, revenue generation and source of funds remains a question. What is, however, a matter of worry is the increasing fiscal deficit. The finance minister stated that the fiscal deficit for 2019-20 will be at a higher side at 3.4 per cent of the GDP.
Killol Pandya, Head, Fixed Income, Essel Mutual Fund, said, “From the fiscal deficit angle, the borrowing is higher than expected and the revenue sources might be seen as ambitious. Concerns over fiscal deficit pressure may cause bond markets to remain cautious.”
The budget speech, a large part of which was in Hindi keeping with the BJP tradition, made a last ditch attempt to woo farmers as if in response to the Congress Party’s farm loan waiver.
The most prominent among them was the new Pradhan Mantri Kisan Nidhi Yojana that promises to provide a minimum income of Rs6,000 to small farmers annually. This largesse will be given to them in three installments of Rs2000 each. The government has promised to allot Rs75,000 crore for this for 2019-20.
Not only this, the government has also announced a two-five per cent interest rate subvention for farmers engaged in animal husbandry. A separate department of fisheries has also been proposed. Keeping its engagement with cows, the government had announced the Rashtriya Gokul Yojana and had increased allocation Rs750 crore for this in ther current year. Alongside, a National Kamdhenu Aayog has also been set up for genetic development of cows.
According to Goyal, the Prime Minister’s target in this budget was the poor and the marginalised. Accordingly, the government has announced a largesse for them. A new pension scheme Pradhan Mantri Shram Yogi Maandhan Pension has been announced for workers in the unroganised sector where people with an income of up to Rs15,000 will get a pension of Rs3,000 after superannuation on payment of Rs100 per month. The government will allocate Rs500 crore for this scheme.
Ashok Varma, Leader, Social Sector, PwC India, said, “The Pradhan Mantri Shram Yogi Maan Dhan Yojana seems to be an extension of the existing Atal Pension Yojana (APY). While APY was meant for workers in the unorganised sector, the new scheme includes marginal wage earners from organised sector as well. Another difference is the upper age limit of 60 years in the new scheme as against 40 years in APY. It is a welcome move and would further provide social security to a larger number of marginal wage earners in the country. Being contributory and designed in line with NPS (National Pension Scheme), this also makes economic sense.”
Looking at the social sector afresh, the government has increased the outlay for Mahatma Gandhi National Rural Employment Guarantee Act to Rs60,000 crore from Rs55,000 crore. The budget also announced an about Rs5,000 crore increase in the outlay of the National Education Mission. To monitor and implement all social sector schemes, the government also announced the setting up of the Welfare Development Board.
Looking forward, the government laid down a 10-point vision statement for the next decade which includes setting up of social and physical infrastructure, creating a digital India with one lakh digital villages in the next five years, highway development, food self sufficiency and health among others.
Like every year, taxpayers were eagerly awaiting for some announcement of re-jigging of the tax slabs or some relief. What came was far and few and is likely to affect only a small section while most of the middle class salary earners will get almost nothing.
What will benefit everyone is the increase in the standard deduction fromRs40,000 to Rs50,000. This year, the government has upped it by a mere Rs10,000.
The bigger announcement of course is that people with annual income of up to Rs5 lakh will get complete exemption from income tax. Along with investments, those with income of up to Rs6.5 lakh will also benefit from this. This, Goyal said, would provide tax saving of up to Rs12,500 for all taxpayers. While there is ambiguity on how this will play out, a clearer picture will emerge once the fine print becomes clear.
Partho Dasgupta, Partner and Tax and Regulatory Services, BDO in India, said, “Complete tax rebate up to Rs5 lakh is a populist measure, however, it is important to understand how the loss of tax collection equaling Rs18,500 crore, will impact the overall economy.”
According to Paresh Parekh, Partner, Leader Consumer and Retail Tax, EY, pointed out three changes. First, higher personal disposable income due to higher tax rebate. Second, higher rural disposable income because of farmers package, interest subventions, and third, real estate sector proposals like no notional tax on second home, capital gains tax exemption for two homes and no notional tax for unsold real estate inventories up to two years. “All these are potential game changers for entire economy and consumer sector in particular,” he said.
Ranen Banerjee, Partner and Leader, Public Finance and Economics, PwC India, said, “The first installment of the direct benefit to farmers has led to the government missing the fiscal deficit target. However, it has managed well to still have a target to be at 3.4 per cent with the concerns on level of revenue realisation. The disinvestment target is still being maintained while it looks increasingly difficult to achieve. The actual deficit numbers will depend on the realised GST collections over the next two months and the government’s ability to meet the disinvestment target over a time line of one month left for actions before the election code kicks in.”
The government is though hopeful that numbers will add up, encouraged by an over `1 lakh crore collection in GST in January this year. But it has sounded the bugle for the elections and would expect these measures to pay off. The clearer picture would emerge in a few months.
arindam@outlookindia.com