A Budget For All
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.