The Centre Hopes To Win Over Farmers, Middle Class With Budget

The Centre Hopes To Win Over Farmers, Middle Class With Budget

The Centre Hopes To Win Over Farmers, Middle Class With Budget(file image) 

New Delhi: Union Minister Piyush Goyal is presenting the Interim Budget 2019, today, in the absence of Finance Minister, Arun Jaitley, who is reported to be in the US for medical treatment. The Budget is very crucial as it comes before the upcoming National elections. The Prime Minister, Narendra Modi and his government is expected to try and shore up its political support with big ticket farm giveaways and tax cuts for the middle class in its final budget.

The Prime Minister, who is facing growing discontent over depressed farm incomes and doubts over whether his policies are creating enough jobs. On Thursday,  a local media report quoted a government survey as saying the jobless rate was the highest in at least 45 years, putting further pressure on the government.

The Centre is expected to step up rural welfare spending by 16 per cent for the fiscal year beginning April to Rs. 1.3 lakh crore ($18.25 billion), the sources in the government said, aiming to boost support in the countryside where more than two-thirds of the country's 1.3 billion people live.

The Interim budget is likely to be followed by a full one in July, is expected to project economic growth of around 7.5 per cent for the next financial year. The capital spending on railways, roads, ports will also be increased by 7-8 per cent, and estimating an increase in revenue of about 15 per cent, officials said.

"The country's macroeconomic parameters are very healthy, the GDP growth has been very good," Gopal Krishna Agarwal, the ruling Bharatiya Janata Party's (BJP) spokesman for economic affairs, told Reuters.

"It will be an important budget as far as the future course of action for some sectors and segments of the economy, that need support, are concerned. They will definitely find a place in this budget, like agriculture, employment and the middle class."

Gopal Krishna Agarwal said rules for small and medium-sized businesses and the manufacturing sector could be "tweaked to address issues such as liquidity, credit, capital formation, demand creation, attracting more private investments".

After facing defeat in three hindi heartland states in December and needing to call a national election by May, PM Modi has already exempted many small businesses from paying taxes under a unified goods and services tax (GST).

The centre is now considering to raise the income level at which people need to pay personal tax, long a demand for the country's influential middle class.

"The pressure to further expand the farmer welfare programme ahead of the 2019 elections is high for PM Modi," said CLSA India.

The President of Congress Party, Rahul Gandhi is closing in on PM Modi's lead, according to polls. His recent promise, of a minimum income for the poor has put the ruling government under pressure, to make populist announcements in its budget.

The sources in the government said that the electoral compulsions mean that major economic reforms, such as tax cuts for bigger companies and plans to bring down the budget deficit, could be put on hold at least until after the election, 

According to one of the sources with direct knowledge of budget discussions, the higher spending, along with a shortfall in tax collections, will push the fiscal deficit up to the equivalent of 3.5 per cent of gross domestic product for the year ending in March, overshooting a previous 3.3 per cent target.

That would fit with the expectations of a Reuters poll of economists.

According to the sources, itv was said that there was a chance that the government could take corrective action in March, with an expectation that the election schedule will be settled by that time and that public focus will shift to campaigning.

"In our view, with the upcoming polls gaining precedence, fiscal consolidation is likely to take a back seat," said Nirmal Bang, a brokerage.