Interim Finance Minister Piyush Goyal will present the Union budget in Parliament on Friday. This is the last Budget of the Narendra Modi government’s current term, which ends in May.
Though the finance ministry has said it will present an interim Budget, a report claimed that Goyal implied a full Budget would be presented. By convention, outgoing governments present an interim Budget of expenditure and receipts instead of a full one. Through an interim Budget, the government seeks the Parliament’s approval to spend money for a few weeks until its term lasts.
The income tax slabs – a major talking point for the common man in Union Budgets – do not usually see major changes in an election year. The basic exemption limit for income tax has remained at Rs 2.5 lakh for four years.
Other major announcements are not common either in an interim Budget, but the government may use the opportunity to make grand election promises. This Budget comes close on the heels of defeats for the Bharatiya Janata Party in three key states.
Congress President Rahul Gandhi has already dared the government with his own idea of a welfare measure – a variant of the much-anticipated universal basic income. The idea has been part of the public discourse in India’s context for two years, but is far from finding its way into actual policy. On Monday, just days before the Budget, Gandhi said his party would provide a minimum income to “every poor person” if voted to power.
Unemployment and farmer distress
Key aspects to look out for in the Budget are the government’s latest response to the jobs problem and farm distress, which have been critical issues for far too long and are starting to hurt the ruling party electorally. On Thursday, a report not yet released by the government was leaked, showing unemployment at the highest it has been since 1972-’73. Multiple reports have also suggested that farmers may have a relief package on the way.
Doubling farm incomes and giving houses to all by 2022 have been among the government’s top aims Budget after Budget, and may see new announcements this time too. Higher minimum support prices continue to remain among the list of demands for farmers. A likely increase in allocations for the ambitious Ayushman Bharat scheme, which provides health insurance to the poor, will also be in focus as the scheme completes six months in March.
One of the government’s weak points has been its ability to contain its fiscal deficit – which represents how much more the government spends than it earns – within its targeted limit. The limit for 2018-’19 was 3.3% of the Gross Domestic Product, but it is likely to exceed it even though Finance Minister Arun Jaitley has repeatedly said the government will be able to keep it in check. The fiscal deficit had already expanded to 114.8% of the budgeted target by the end of November.
The role of the Reserve Bank of India in that effort is seen as crucial – a report said last week that the Centre had asked the central bank to pass on some of its dividend. The RBI’s surpluses have been a contentious point in its relations with the government in recent months. The tussle had culminated in the resignation of RBI Governor Urjit Patel.
Unidentified officials told Reuters last week that major economic reforms such as tax cuts for large firms and cutting the budget deficit could be put on hold until after the election. They also said the Budget is expected to project economic growth of around 7.5% for 2019-’20 and push capital spending on railways, roads, ports up by 7%-8%.
This Budget is Piyush Goyal’s first as finance minister. Arun Jaitley, who presented the previous four Budgets of the Modi government, is away for medical treatment in the United States.