All money is a matter of belief.
- Adam Smith
Prime Minister Narendra Modi has delivered an interim budget, likely to boost the government’s popularity ahead of polls that are now just months away. This interim Budget is the sixth and final budget presented by the Narendra Modi-led government. As election-eve budgets go, Interim Budget 2019-20 must rank as one of the most politically expedient ones this country has ever seen. The shadow of the general election falls squarely on the budget proposals, which are aimed at seeking votes in the name of various schemes that rain cash on beneficiaries. Even before Union Minister Piyush Goyal, filling in for the ill Finance Minister Arun Jaitley, begun with his Budget speech, the nation knew the flavour of the same – a populist one. With one eye fixed on the upcoming general elections, the budget had all its ingredients needed for wooing the voters. Goyal’s speech is an overall assessment of the economic policies of last four years, which conveys a picture of a stable and growing economy. Looking through the lens of national interest, the budget was an all-pleasing one. The budget includes big announcements such as a major income support scheme for farmers and a new pension program for workers. It also includes a number of smaller measures that could prove popular, including tax relief for India’s lower middle class.
The Bharatiya Janata Party(BJP)-led National Democratic Alliance (NDA) would have liked to address some key voter constituencies in this budget. The first, of course, is the middle class, which was beginning to get restive and the tax provisions should take care of it. Whether the strategy will work at the hustings or not, there is no denying that a lot of thought has gone into identifying and targeting the sections of population across social segments that are in distress and unhappy with the Centre for a variety of reasons. To make this disgruntled section happy, the Modi government’s last interim budget promises a full tax rebate for individuals with an annual income of Rs 5 lakh. In fact, people with a gross income of as much as Rs 6.5 lakh will also be exempt, given that they make certain specific investments and savings. The interim budget also announced Rs 3000 monthly pension to people above the age of 60 from the unorganised sector. There were other sops as well, aimed at other constituencies (such as the package for the North East), but these were the main ones. The pension scheme and the direct income transfer to farmers are effective from this financial year itself (the second, in fact, from December 1, 2018). And the tax sops will kick in from April 1.
The FM’s claim about maintaining fiscal target despite giving large concessions would critically depend on the growth assumptions underlying the budgetary exercise. Since last summer, things haven’t gone the BJP’s way — it has lost three key Hindi heartland states, and also some allies. The momentum seemed to be with the opposition. The BJP needed a strong counter. The parliamentary elections will likely be held in the second half of April and May. Only time will tell, whether the sops offered in the budget would get translated into votes.