With the opposition having upped the ante against Prime Minister Narendra Modi, the latter is hard-pressed to dish out voter-friendly offers in the interim Budget to be presented tomorrow by Finance Minister Piyush Goyal, weeks before the Lok Sabha elections (scheduled to be held in April-May).
Ahead of the Budget, there is widespread expectation of the income tax exemption limit being raised to Rs 3 lakh per annum to benefit the middle class and salaried population, even as the increased expenditure over the new 10% reservation for the economically weak is likely to lead to a larger gap in the fiscal consolidation.
Importantly, this is an interim Budget and not a vote-on-account, meaning the government will present the revenue and expenditure side of the Budget tomorrow, while the full Budget will be presented by the new government after the general election.
Goyal’s Budget proposals tomorrow are largely meant to give us a sense of the government’s planned projects.
Immediate concern will be on the fiscal consolidation front as the fiscal deficit for April-November was 115% of the annual targeted level. The 2017-18 fiscal deficit stood at 3.5% even as it was stipulated to be at 3.3%. This year too the fiscal deficit is expected to be no less than 3.3%.
GST collections has been among the spoilsports. The reclassification of many services and reductions in the tax slabs have drastically hit GST revenues. In December, the GST Council cut tax rates on 23 commonly-used items, leading to a tax loss of almost Rs. 5,500 crore.
Additionally, the drop in disinvestment proceeds, the slippages due to MUDRA loans, a revised MSP outgo, and the larger outgo due to a weak rupee weakening and raised crude oil prices will likely drive the fiscal computations.
Industrial growth touched a 17-month low of 0.5% in November on account of low capital goods and consumer goods production. The credit offtake has also not taken shape despite the RBI maintaining the status quo on key interest rates. All these factors are likely to push down the real GDP growth rate to an estimated 7.2% for 2018-19.
Meanwhile, the opposition appears to be consolidating into a mahagathbandhan, while continuing to cock a snook at Modi over farmer distress and unemployment, which are likely to become the main issues of discourse going into the election.
How will the government respond? Among the host of freebies expected to be announced in the Budget, there is strong possibility of a higher pecuniary benefit for farmers through the direct benefit transfer scheme in lieu of a loan waiver, which Modi has largely discounted as a solution to the Indian farmer’s woes.
Now one need only wait and watch to see how far the pressures of an election year push the Modi government to present a Budget to woo the Indian voter.
Sanjay Thapa Jeet is an independent journalist