As expected, finance minister Arun Jaitley has delivered a politically correct budget that focuses — and rightly so — on agriculture and the tattered rural economy. Prime minister Narendra Modi seems to have learnt his lesson the hard way after a close finish in the Gujarat state assembly elections. Partial resurgence of Congress in his home state and serious reversals in Rajasthan by-elections have certainly laid the plot for opposition unity under the leadership of Congress president Rahul Gandhi.
Huge electoral losses suffered in rural constituencies of Gujarat had forced the NDA leadership to rethink its policies to counter the disenchantment of farmers. Thursday’s budget reflects a serious shift in the policymaking that’s the culmination of protracted brainstorming in the ruling BJP to win back farmers and rural voters, considering the budget has also come ahead of polls to half a dozen states and Lok Sabha elections in April 2019.
History will remember Jaitley for reorienting over Rs 24 lakh crore to farmers and rural infrastructure. Modi government’s last full budget also lays the foundation for a full throttle political campaign to take credit for big re-jig in spending government resources. For long, budget was only relevant to a few million people in this $2.5 trillion economy. Modi can now take full credit for touching over half the 1.24 billion people.
The budget’s biggest move is the 50 per cent higher minimum support price for a host of farm products over the costs incurred by farmers. The government, however, has not yet revealed the total resources outgo in case market prices fall below this benchmark. Centre will have to also come up with the base costs taken into consideration to compute the 50 per cent margins beginning the next kharif crop.
With the huge farm and rural package Modi has attempted to insulate farmers from market volatility and further his dream project of doubling farm income by 2022. Developing a deep market for farm products with Rs 2,000 crore corpus should only be the beginning of Modi’s focused task of transforming rural economy.
Cluster farming, providing 100 per cent deduction to farmer producers’ companies, extending Operation Green to vegetables and fruits with Rs 5,000 crore support, infrastructure development for fisheries and animal husbandry through a Rs 1,000 crore dedicated fund are only a few of the large package put together by the government.
Clutch of measures aimed at appeasing the rural farmers will also put more money in their hands, push up consumption in rural markets to give big push to economic growth. Fundamentally, it’s a sound economic strategy.
Unfortunately, finance minister seem to have royally ignored the salaried class that stood by him during demonetisation and GST rollout. Not only he did not offerrelief by reducing tax liability, but he also slapped a 4 per cent education & health cess, 10 per cent long term capital gains tax on equity-linked mutual funds units gains etc.
On the other hand, Jaitley sacrificed revenues worth Rs 19,000 crore by lowering taxes on small and medium enterprises (Rs 7,000 crore), standard deductions on medical expenses (Rs 8,000 crore) and relief to senior citizens (Rs 4,000 crore). But the long-term capital gains tax on mutual funds and cess alone will fetch him a whopping Rs 31,000 crore if not more.
On the balance, finance minister has taken away much more than what he’s offered to genuine taxpayers. Tax package seems to be the weakest link of the budget. The Modi government could have done better.