‘Dream state’ comes alive

It was hardly an ‘interim Budget’ but rather a grandiose one — if not in scale but in content. Finance Minister Piyush Goyal unfurled it with great flair and confidence. He made sure that no voter’s welfare was perceived to be excluded. There were expectations over the past few weeks that the NDA government would spare no efforts to make all the right political moves through its sixth and last Budget to win the elections. But no one would have anticipated that it would go the whole hog to appease farmers, workers from the unorganised sector, the middle class, women and senior citizens. It was no doubt an unprecedented coup on the part of the NDA government which left Rahul Gandhi’s eyes glazed in wonder.

Listening to the list of achievements of the government in the past four years from the newly appointed Finance Minister, one would have thought India is not only the fastest growing, but also the best governed country. ‘India is marching towards prosperity to a New India 2022… It will be clean, healthy, with access to water and farmers would have doubled their incomes.’ India has also achieved inflation control and experienced increased FDI inflow. He promised that India will be without corruption and free of communalism. It seemed like a ‘dream State’ that he was talking about rather than the real India with millions of problems.

The reality is that the state of agriculture needs immediate attention and the youth needs jobs. Out of his kitty came a big dollop of dole for farmers. The small and marginal farmer will get a basic income of Rs 6,000 annually, which he will be thankful for because it would come from the government and not the moneylender, to whom he would have to pay high interest. The government has turned Keynesian in believing that an increase in purchasing power in the hands of the people will create demand that will create jobs and make the economy grow.

In the same vein, the government has reduced the income tax for the middle class. The standard deduction has been raised to Rs 50,000 from Rs 40,000. The basic income tax slab has been raised to Rs 5 lakh from Rs 2.5 lakh. Expenditure on medicines and medical insurance are subject to exemption. This will be highly appreciated by senior citizens. This generous act of the government will benefit 3 crore employees and win the hearts of the middle class.

Regarding capital gains in real estate, the rollover benefit of capital gains from property has been increased from one residential house to two. This rollover on capital gains,  up to Rs 2 crore, can only be exercised once in a lifetime.

Workers in the unorganised sector have also received due and much-needed attention and a scheme has been devised, which will give them a monthly pension of Rs 3,000 after the age of 60. The contribution of Rs 100 a month will be matched by the government contributing an equal share. The government is already providing Rs 500 crore for the scheme. This measure will benefit 10 crore workers. It is no doubt a big and unprecedented step by any government at the Centre and will offer some amount of social security to the 42 crore informal sector workers who are otherwise without any social protection. They are vulnerable to being fired and remain jobless for months and also have no means of support in case of an illness or accident. It will be a boon for many and they will thank the government with their votes.

For the MSMEs, the government has already done quite a lot, especially after their productivity and employment was adversely affected by demonetisation. They are of special importance because of the large numbers involved in the sector. The Budget has granted 2 per cent interest subvention for MSMEs with

Rs 1 crore loan, which will provide relief to their strained finances.

Many economists would think that by not being able to meet the fiscal deficit, the government has made a big mistake. But having a fiscal deficit of 3.4 per cent of the GDP,  instead of 3.3 per cent for 2018-19, is no great sin, especially when the slippage was due to a good cause and was aimed at giving the farmers income support in difficult times.  A sum of Rs 75,000 crore has been allocated for the scheme. The Budget also announced an allocation of Rs 19,000 crore for the construction of rural roads and Rs 60,000 crore for MNREGA scheme that will guarantee incomes to the rural population for 100 days of work.

The Finance Minister also announced that the debt-GDP ratio, which is high at 70 per cent, will be reduced to 40 per cent by 2024/25. This would, however, be difficult when the mega schemes pan out as states would run into deficits. A high debt-GDP ratio indicates a huge outgo towards interest payments by the government which could have been used for supporting social schemes.

The government has also pleased the defence services sector by enhancing the allocation to it by over Rs 3 lakh crore. The minister also pledged to have clean energy, with more electric vehicles on the roads which would mean less pollution in the future.

On the job front, the minister did not disclose any specific plans. The expectation seems to be that the economy will keep growing at a fast rate and jobs will be created alongside. The government seems to be reluctant to accept the latest jobless data produced by NSSO, which clearly says that unemployment is at a high rate of 6.1 per cent. Jobless youth are to be found in both rural and urban areas in large numbers. Many of them would be first-time voters. They may not be so easily convinced by the varnishing of real problems provided by the government in the interim Budget and their votes will matter.

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This commentary originally appeared in The Tribune.

• Indian Economy
• Agriculture
• India
• Budget 2019

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