Elections and beyond

Interim Budgets often tend to be long on populism and short-termism. However, the last Budget of the Modi government contains proposals that seem politically irrevocable. The move to transfer ₹2,000 thrice a year to farmers holding less than two hectares is one such. Income support is likely to assume a central role in farm policy (and beyond) from now, possibly blunting the edge of agitations based on falling prices. A new social security architecture is taking shape, with Ayushman Bharat and PM-Kisan (alongside State variants) as its prominent features, even as MGNREGA allocations have been increased. This trinity is here to stay. Meanwhile, there are lending sops for farmers and MSMEs thrown in. For the unorganised sector, a contributory pension scheme has been unveiled. Income support as the kingpin of social security holds out considerable promise, given the role of digital technology. However, it cannot substitute the need for quality public health and schooling.

The Budget includes a vision statement for the next decade with a focus on affordable housing, roadways, waterways, electrification of vehicles as a self-sufficiency principle, besides digitisation. It is not without its usual electoral fare, with something for everyone. The tax relief on interest income and post office savings will go down well with risk-averse groups and senior citizens. The tax rebate for those earning below ₹5 lakh may along with the rural payouts, spur consumption and investment in the private sector.

However, the devil lies, as always, in the detail. Whether it is the income support for farmers or the pension scheme, the challenge lies in targeting. As a Businessline report in this edition points out, digitisation of land records is not complete in many States, while still fewer have linked these digitised records to the banking network. A sum of ₹75,000 crore for ‘PM Kisan’ does not seem to have clear sources of funding, as allocations for existing subsidies remain at elevated levels. Tax buoyancy has been assumed at 1.29 (tax receipts projected to go up 14.5 per cent in 2019-20, against a nominal GDP growth of 11.2 per cent), which is a trifle optimistic but in line with recent trends. The Centre has assumed benign oil prices, and hence projected an additional revenue of ₹10,000 crore on crude oil cess alone. Income tax revenues are expected to go up by ₹1 lakh crore (to ₹6.2 lakh crore), and surprisingly even customs duty by ₹15,000 crore, despite the pressure on India to cut tariffs. A ₹1.4-lakh-crore spike in gross market borrowings to ₹7.1 lakh crore is troubling. Welfarism cannot be funded in this way. Some subsidies will have to give. That task, however, cannot be expected of a pre-election Budget.

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