A sort of election promise
The interim budget garners big expectations from the current government – with an eye on the upcoming Lok Sabha elections
Come January, rent-seeking starts from various pressure groups for tax sops and other concessions in the budget and it is always a tight-rope walk for any finance minister as lobbyists, industrialists, agriculturists, exporters, et al seek relief but none will advise the government on how to mop up additional resources for various social infrastructural schemes, which are equally important.
But one advantage Finance Minister Arun Jaitley has this time is that he will be presenting only an interim budget and he will have the privilege of presenting a populist and please-all budget with an eye on the 2019 elections and leave the difficult task of mobilising resources and fiscal prudence to the next government.
But whosoever comes to power, it is going to be a tough task managing the economy, which is in a mess because of a monumental blunder – demonetisation, which has set the clock back on the economy by several years, analysts say, adding that the budget will not be without big-ticket announcements if not reforms.
Technically there is nothing called an interim budget. Every budget is a budget by itself. Usually budget is presented once a year, except the election year when the outgoing government presents just a vote on account to seek parliamentary approval to the government expenditure for the first four months of the new financial year beginning on April 1 so that there is no constitutional crisis in spending until the new budget is presented by the newly elected government on assuming office in May.
But lately, outgoing governments, deviating from the past convention, have been making a few populist but election-oriented announcements, basically a sort of election promises, along with a vote on account.
There are already talks of the salaried class getting some income tax relief. But there is also a view why should an outgoing government provide tax sops to salaried class, which is not a vote bank for any political party. Still, there are expectations that the income tax exemption limit will be raised to woo the middle class. This is something which no new government will attempt to reverse.
Renowned economist and former chief statistician Pronab Sen says that some are already talking of raising income tax exemption limit but this will not "cut much ice" with voters as salaried class form a very small percentage of voters in the country.
But more importantly the Modi government, like any other in the past, will certainly utilise the opportunity to make announcements in the budget, which would be virtually the ruling party's economic manifesto ahead of elections.
Two areas that need immediate attention are the farm sector and unemployment, particularly after demonetisation. "The Modi government has always been very good at making big announcements but fell short on implementation," Sen said.
Both Sen and NR Bhanumurthy of NIPFP were of the view that there will definitely be major announcements for the rural and farm sector, which is in doldrums particularly after demonetisation.
Certainly, Modi government cannot announce a populist farm loan waiver as it has been hijacked by Congress president Rahul Gandhi and other opposition parties and if the BJP government announced any such loan waiver, it would certainly be seen as a reactionary measure.
What is more likely is a universal income scheme on the lines of Ryota Bandhu scheme, the one launched by regional TRS party government in Telangana, which helped K Chandrasekhar Rao to come back to power in the recent assembly elections, they said.
But the headache of implementing such a massive scheme will be left to the new government, which will have to grapple with it as finding resources at a national level is not going to be easy.
Sen said income support as against price support may work in southern states barring Kerala as they follow the ryotwari system, where the farmer owns and tills the land. In Northern India, it is difficult to implement farm income support schemes as persons owning land and tilling the land are different as they follow the tenancy system, where tenants till the land and not the owner. The problem will be how to provide income support to the tiller and hence makes implementation complicated.
Some sops are likely for small scale sector, which is facing huge NPAs, particularly after demonetisation. Mudra too has been a good scheme but bad in implementation.
"It will take years for the new government to set right the irreversible damage that demonetisation has caused to the economy," Sen said.
"The fiscal situation and growth slowdown are worrying and actual numbers would be known only in June and by that time the new government would have been elected and that would have to face the music," Bhanumurthi said.
"There is bound to be major announcements to rural development and farm sector," Bhanumurthi said, adding that "being an election budget, there will be some big surprises."
The Indian real estate sector, after years of slowdown, has done well last year, according to CREDAI. Realty developers, therefore, expect some sops and major boost from the government in the upcoming budget.
(The views expressed are strictly personal)