With a focus on agriculture, and promising to reduce poverty and improve infrastructure, there was a sense of déjà vu that the 2018 Budget brought along with it. It was almost the kind of speech that Finance Ministers in India have been making in Parliament since Independence. Of course, this was in the early minutes of the Budget speech, and there later came the ideas of digital India and other more modern elements of finance and economy, including the shift from ease of doing business to the ease of living, but this Budget speech makes it very evident that poverty still exists in the country and we are still far from achieving the objectives of the garibi hatao campaign that was introduced in 1971.
It, however, isn’t surprising that the focus of this Budget is on the rural poor and farmers. On the eve of the Budget, there was already speculation that since this Budget will the last that will be presented by this government for a full financial year, it could have many sops for the rural residents. The country is due to go to the polls in April and May next year, and Union Finance Minister Arun Jaitley would surely not be expected to leave out the largest component of the electorate from his Budget. So, while many have been politically expedient for the government to focus on the rural poor, the general feeling among the economists and financial analysts in the country is that the Budget has not met the expectations of a wide range of sectors and may not give the economy that much-needed boost.
Some of the first reactions that came in, referred to the Economic Survey that had shown the need for some ‘creative incrementalism’, but that this was missing from the Budget, which is neither bold nor radical, though the Finance Minister did mention that the economy is on track of an 8 percent growth. There are economists who even fear that another year may be lost as the Budget does not give investors the necessary boost to place their capital into the market. In fact, an immediate reaction of investors to the Budget was the Sensex dropping by 464 points after the announcement of long-term capital gains of 10 percent on gains exceeding Rs 1 lakh.
On deeper analysis of specific points, salaried people, who annually wait for every Budget for some changes in the Income Tax slabs, had their hopes dashed yet again, as there have been no rate cuts or slab adjustments and the tax structure remains unchanged. On the other hand education cess has been increased by 1 percent, though there is some rebate in the form of a standard deduction on reimbursement of transport allowance and medical expenses. This comes after there was much speculation in the earlier years of this government’s tenure of possibly doing away with the Income Tax, and replacing it with other means of revenue earning. There, however, it has been good news for the people where health is concerned, with the proposal of a National health protection scheme for poor vulnerable families.
The Budget does give indications that the government may be looking to have the general elections sooner than they are due. There has already been speculation that the polls may be advanced to November-December this year, and the Budget that looks at improving the lives of the rural people fuels this assumption. In that case, the final analysis of the Budget could therefore actually be written after the next general election, where it will remain to be seen whether rural India delivers the Lok Sabha to Prime Minister Narendra Modi and to the BJP.
