The interim Budget for 2019-20 that Finance Minister Piyush Goyal presented on Friday was clearly intended to please key constituencies, especially farmers, the middle class (especially the salaried), and small traders and businessmen. These are the sections which have been particularly unhappy with the Narendra Modi government. The ruling party, it seems, hopes that by the forthcoming poll it would be able to conciliate those whose feathers it has ruffled in the last five years.
In his Budget speech, Goyal said, “To provide an assured income support to the small and marginal farmers, our Government is launching a historic programme namely Pradhan Mantri Kisan Samman Nidhi (PM-Kisan). Under this programme, vulnerable landholding farmer families, having cultivable land up to 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year.”
The income will be transferred directly into the bank accounts of beneficiary farmers. Fully funded by Union government, it will benefit about 12 crore small and marginal farmer families. The programme, to be made effective from December 1, 2018, will cost about Rs 75,000 crore in 2018-19. Which means that the taxpayer will be further tormented.
Another big takeaway is the Pradhan Mantri Shram Yogi Maandhan scheme. This intends to provide a fixed monthly pension to 10 crore unorganized sector workers at the rate of Rs 3,000 per month after 60 years of age with an individual contribution of Rs 55-100 per month.
“A sum of Rs 500 crore has been allocated for the scheme. Additional funds will be provided as needed. The scheme will also be implemented from the current year,” the Finance Minister said. The numbers don’t add up though, but then who cares about such nitty-gritty in the poll period.
A major relaxation is to the middle class, a big constituency of the Bharatiya Janata Party’s. Annual incomes up to Rs 5 lakh have been fully exempted from the income tax. This translates into over Rs 23,000 crore tax relief to three crore taxpayers. Standard deduction has been raised to Rs 50,000 from the present Rs 40,000. The TDS threshold has gone up from Rs 10,000 to Rs 40,000 on interest earned on bank and post office deposits.
It may be recalled that there was a huge expectation that the Modi regime would do this immediately after coming to office. The government, however, dragged its feet, giving only incremental benefits to Middle India. It is a few months before the general election that it has woken up to the concerns of the middle class.
The incomes above Rs 5 lakh per year will continue with the existing rates.
Further, tax has been exempted on notional rent on a second self-occupied house. The housing and real estate sector to get a boost, as the TDS threshold for deduction of tax on rent will be increased from Rs 180,000 to Rs 240,000.
The benefit of rollover of capital gains has been increased from investment in one residential house to two residential houses for capital gains up to Rs 2 crore.
The tax benefits for affordable housing have been extended till March, 31, 2020, under Section 80-IBA of Income Tax Act.
The tax exemption period on notional rent, on unsold inventories, extended from one year to two years.
On the macroeconomic front, the government’s performance has been okay. The government will now focus on debt consolidation along with fiscal deficit consolidation programme. The fiscal deficit has been brought down to 3.4 per cent in 2018-19 Revised Estimates from almost 6 per cent seven years ago, Goyal said. For the next fiscal, the fiscal deficit has been pegged at 3.4 per cent of GDP. It is expected to come down to 3 per cent by 2020-21.
Total expenditure will go up by over 13 per cent to Rs 2,784,200 crore in 2019-20 BE. Capital expenditure for 2019-20 has been estimated at Rs 336,292 crore
On the whole, the interim Budget was on expected lines. The defining feature was populism. Unsurprisingly, there was not even a mention of the economic reforms that the government wants to carry out. If it wants to carry out in the first place.