The general consensus among the media and independent economists is that the Budget presented by Finance Minister Arun Jaitley on Thursday is a pre-election one. Their opinion is that the Budget’s eyes are firmly focused on the next Lok Sabha elections, which some say could come as early as late 2018.
A pro-farmer Budget was largely expected, especially after the jolt the ruling BJP got in the Gujarat elections. The Congress wresting two Lok Sabha seats in the by-elections in Rajasthan this week must also be setting off alarm bells in the ruling camp.
This year, there seems to be a concerted effort by the government to reach out to sections of the population that have been hit hard by demonetisation and GST — the rural populace and the informal and small industry sector.
Post-Budget discourse
But the narrative that is emerging over this Budget is interesting. The way the focus on the farm sector and the pro-poor measures is easily dubbed as ‘popular’, even ‘populist’, gives one the sneaking suspicion that budgets are supposed to address only the concerns of the corporate sector.
Though all commentators have welcomed the thrust on health — termed, rather fancifully, Modicare — and agriculture, somehow the term ‘popular Budget’ seems to have a pejorative taint to it.
There are two important takeaways from this Budget. One is the ‘National Health Protection Scheme’, which aims to provide medical coverage up to ₹5 lakh for over 10 crore people — almost 40 per cent of the population. The government has dubbed this as the largest scheme of its kind in the world.
Though this scheme is most welcome, given how the poorer sections of the population have been groaning under the burden of crippling health costs, the details are yet to be fleshed out. Also, there is no word yet on how the government proposes to fund this ambitious scheme, though Finance Secretary Hasmukh Adhia said ₹2,000 crore would be earmarked for it.
Given how over the last few decades the health sector has been surreptitiously privatised by letting public hospitals languish (and here both the Congress and the BJP governments, and the various State governments are to blame), one wished there was a higher allocation for revitalising the creaking public healthcare system.
Grand schemes
For the farmers, the most important announcement was raising the minimum support prices (MSP) to one-and-a-half times the cost of production for all crops. But as agriculture economist Ashok Gulati has said, it remains to be seen how the ‘cost’ aspect is calculated here.
There are already alarm bells ringing on the impact the MSP hike will have on food inflation. It was the substantial hike in MSP during the last phase of the UPA-II regime that led to runaway inflation, which played a part in its defeat in the 2014 elections. Given that a majority of our farmers are net buyers of food, high food inflation may hurt them too.
The other major schemes for farmers are the conversion of 22,000 rural haats into digitally connected Gramin Agricultural Markets exempt from the APMCs which is expected to help farmers sell their produce directly to buyers.
There is also an impressive ₹10,000-crore infrastructure fund for fisheries, aquaculture and animal husbandry.
Corporate frown
The corporate sector is likely to be disappointed with this Budget as there’s hardly anything for it. The corporate tax rate has been cut to 25 per cent for firms with up to ₹250 crore turnover. This is expected to help the MSME sector — hit hard by the note ban and GST — and spur job growth.
The markets have shown their anger over the return of the long-term capital gains tax on investments in equities and mutual funds. The markets tanked 840 points the day after the Budget was announced.
The fiscal conservatives and ratings agencies will frown on the slippages on the fiscal front. The fiscal deficit has been pegged at 3.5 per cent for the current fiscal against a target of 3.2 per cent and the target for the 2018-19 fiscal has been set at 3.3 per cent.
The Budget is silent on reviving ‘animal spirits’ in the economy and spurring private investments, which have been languishing for some time now.
It’s hard to please everyone in a budget, especially in a large and diverse economy such as ours, but it is depressing that the disadvantaged sections become the focus only in the election years.