Any Budget that precedes a general election, particularly one that will be announced a few short weeks after it has been presented, is going to be full of sops for the electorate and on that front interim Finance Minister Piyush Goyal did not disappoint. He announced support for farmers both as a direct benefit transfer to small landholders and improvements in the minimum support price. For taxpayers, the lowest tax slab and the minimum deductions will mean that they can save money, which should drive some improvements in the sluggish consumption economy. But with no proposals to increase revenue, it remains to be seen how exactly the government will pay for all these schemes, including the increased allotments for social sector programmes. That will be a problem for the next government but can this budget help Narendra Modi and the Bharatiya Janata Party (BJP), which finds itself on the backfoot in the face of the mahagathbandhan of Opposition parties, towards electoral victory?

That, of course, is a question that the Indian electorate will determine in April and May of this year but is this too little too late by Modi and his government to win back the affection of voters who propelled him into the prime ministership five years ago? The unemployment data that has been recently released, albeit unofficially, shows what everyone in the country has suspected, that jobs growth has come to a screeching halt. In addition, trust in economic data released by the government has fallen with numbers suggesting that economic growth continued in the aftermath of demonetisation, whose rationale has now been well and truly demolished. And the costs of this budget will be paid by the next government. That said, Goyal promised that these rebates and subsidies have been made without really impacting the fiscal deficit. Whether that is the case remains to be seen but the Indian government will borrow heavily. In fact, any future government will continue to pay high borrowing costs and none of the proposals will drive employment directly at least.

However, the demand for some of these sops have been going on for a while, particularly by income tax payers, who have seen the huge number of social sector schemes and have loudly wondered when their turn would come. After all, effective tax rates have increased, these tax payers have given up their cooking gas subsidies voluntarily or involuntarily and paid far more at the fuel pump to fund the government machine. So the increase in deductions by the government for income tax payers will be welcomed and it will have the benefit of putting more money in their hands to increase consumption spending, which should be beneficial to the economy. That was clearly evident in the way the stock markets reacted to the budget, particularly consumer-oriented firms such as car manufacturers.

Predictably, industrialists came out in support of this budget although many qualified it saying that this was expected to be an election year version. None of them, however, went on record if they believed that this would help Narendra Modi. But this budget will definitely give him some momentum in the final few weeks of his administration. With elections expected to be announced within the next six weeks, the time for action is almost over. The time for politics is well and truly upon us.

Writer and Courtesy: The Pioneer

Any Budget that precedes a general election, particularly one that will be announced a few short weeks after it has been presented, is going to be full of sops for the electorate and on that front interim Finance Minister Piyush Goyal did not disappoint. He announced support for farmers both as a direct benefit transfer to small landholders and improvements in the minimum support price. For taxpayers, the lowest tax slab and the minimum deductions will mean that they can save money, which should drive some improvements in the sluggish consumption economy. But with no proposals to increase revenue, it remains to be seen how exactly the government will pay for all these schemes, including the increased allotments for social sector programmes. That will be a problem for the next government but can this budget help Narendra Modi and the Bharatiya Janata Party (BJP), which finds itself on the backfoot in the face of the mahagathbandhan of Opposition parties, towards electoral victory?

That, of course, is a question that the Indian electorate will determine in April and May of this year but is this too little too late by Modi and his government to win back the affection of voters who propelled him into the prime ministership five years ago? The unemployment data that has been recently released, albeit unofficially, shows what everyone in the country has suspected, that jobs growth has come to a screeching halt. In addition, trust in economic data released by the government has fallen with numbers suggesting that economic growth continued in the aftermath of demonetisation, whose rationale has now been well and truly demolished. And the costs of this budget will be paid by the next government. That said, Goyal promised that these rebates and subsidies have been made without really impacting the fiscal deficit. Whether that is the case remains to be seen but the Indian government will borrow heavily. In fact, any future government will continue to pay high borrowing costs and none of the proposals will drive employment directly at least.

However, the demand for some of these sops have been going on for a while, particularly by income tax payers, who have seen the huge number of social sector schemes and have loudly wondered when their turn would come. After all, effective tax rates have increased, these tax payers have given up their cooking gas subsidies voluntarily or involuntarily and paid far more at the fuel pump to fund the government machine. So the increase in deductions by the government for income tax payers will be welcomed and it will have the benefit of putting more money in their hands to increase consumption spending, which should be beneficial to the economy. That was clearly evident in the way the stock markets reacted to the budget, particularly consumer-oriented firms such as car manufacturers.

Predictably, industrialists came out in support of this budget although many qualified it saying that this was expected to be an election year version. None of them, however, went on record if they believed that this would help Narendra Modi. But this budget will definitely give him some momentum in the final few weeks of his administration. With elections expected to be announced within the next six weeks, the time for action is almost over. The time for politics is well and truly upon us.

Writer and Courtesy: The Pioneer