A Bud­get For All

India Business Journal - - VIEWPOINT -

The Union Bud­get 2018-19 can eas­ily be termed a po­lit­i­cal Bud­get. It has un­doubt­edly been un­veiled with an eye on the eight State elec­tions and the gen­eral elec­tion in 2019. It reaches out to the ru­ral sec­tor, work­ers, small in­dus­tries and se­nior cit­i­zens with­out, how­ever, go­ing over­board with free­bies.

Fi­nance Min­is­ter Arun Jait­ley has pressed all the but­tons he had to press and ad­dressed all the con­stituen­cies he had to ad­dress. The re­sult is an ex­pan­sion­ist Bud­get that sees In­dia miss­ing its fis­cal deficit tar­get - 3.5 per cent of GDP for 2017-18 and 3.3 per cent for 2018-19 - for the first time since this gov­ern­ment came to power in 2014. How­ever, the Bud­get does a tightrope walk by rec­on­cil­ing fis­cal con­sol­i­da­tion with the need to keep the econ­omy grow­ing.

There are two broad ideas driv­ing the Bud­get: boost­ing the ru­ral econ­omy in or­der to push in­dus­trial de­mand and spurring in­vest­ment in man­u­fac­tur­ing as well as job cre­ation by of­fer­ing Cus­toms Duty pro­tec­tion in labour-in­ten­sive sec­tors in par­tic­u­lar.

For se­nior cit­i­zens, this is a Bud­get to savour, with their an­nual in­ter­est in­come up to Rs 50,000 be­ing ex­empt from taxes against Rs 10,000 at present. More­over, the stan­dard de­duc­tion of Rs 40,000 works best for them. How­ever, the other salar­ied classes may not cheer the stan­dard de­duc­tion be­cause a gain of around Rs 5,500 through stan­dard de­duc­tion will be more than off­set by the hike in the Ed­u­ca­tion Cess.

Mr Jait­ley has rightly reached out to work­ers and women by ex­tend­ing the EPF sup­port. Small-scale in­dus­tries, hurt by GST, have also got a fil­lip, with com­pa­nies be­low an an­nual turnover of Rs 250 crore be­ing al­lowed to pay Cor­po­rate Tax at 25 per cent in­stead of the higher 30 per cent for those with turnover of over Rs 250 crore. Bring­ing more com­pa­nies - a ma­jor­ity of them, the MSME seg­ment, in par­tic­u­lar, ben­e­fits a lot from this mea­sure. This cut in Cor­po­rate Tax will leave them with more money, which can be rein­vested in busi­ness ex­pan­sion and can thus help in job cre­ation.

The big-bang an­nounce­ment, of course, has been the world's largest pub­lic health pro­tec­tion scheme, the Na­tional Health Pro­tec­tion Scheme. It will cover over 10 crore poor and vul­ner­a­ble fam­i­lies - ap­prox­i­mately 50 crore ben­e­fi­cia­ries - pro­vid­ing up to Rs 5 lakh cover per fam­ily per year for sec­ondary and ter­tiary care, in­clud­ing hos­pi­tal­i­sa­tion. This marks a wel­come shift to­wards near uni­ver­sal­i­sa­tion of the health scheme. The im­pact though re­mains un­clear with no out­lay be­ing ear­marked and the con­tours of the scheme re­main­ing un­known.

There is a sim­i­lar lack of clar­ity on how the Modi gov­ern­ment plans to give 1.5 times the pro­duc­tion cost to farm­ers while fix­ing Min­i­mum Sup­port Prices (MSP). Some crops - es­pe­cially wheat and paddy - al­ready have such high MSPs. More­over, the Bud­get has not spelt out whether the cost of pro­duc­tion in­cludes only the ac­tual in­put costs or a more com­pre­hen­sive one in­clud­ing the im­puted value of rent on land and in­ter­est rate on cap­i­tal de­ployed. It is this com­pre­hen­sive cost that the Swami­nathan Com­mit­tee had taken into ac­count while rec­om­mend­ing an MSP of 50 per cent over the cost of pro­duc­tion.

Bar­ring these is­sues of a lack of clar­ity, the Bud­get does well not to em­brace sheer pop­ulism with elec­tions loom­ing large. The fi­nance min­is­ter does all that he can within his am­bit to pro­vide a balm to the dis­tressed sec­tions of so­ci­ety - the MSMEs, farm­ers and the in­for­mal seg­ments of the econ­omy.

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