The Winter Session of Parliament ended today. The Budget Session will commence on January 29 with the joint address of the two Houses by President Ramnath Kovind. Finance Minister will present Unoin Budget 2018 on February 1.
This will be the last full Union Budget for the Narendra Modi government before the 2019 Lok Sabha elections. This is expected to be a Budget to please everyone as it comes close on the heels of a tough electoral fight in Prime Minister Narendra Modi’s home state, Gujarat.
Among the reasons for the mighty scare that the BJP got in Gujarat even after being in power for more than two decades are agrarian crisis and rural distress accentuated by the loss of employment on account of poor growth in manufacturing and farm sectors.
Arun Jaitley has a tough challenge to manage fiscal discipline in Budget, maintain upward GDP growth rate and keep voters happy for 2019 general elections. Here is what the country may expect Arun Jaitley to broadly do in his Union Budget presentation this year.
FOCUS ON WELFARE SCHEMES
The Union Budget 2018 is likely to be election budget for the NDA government. Having been accused of being anti-Dalit, the Narendra Modi government is expected to focus more on the welfare schemes targeting Scheduled Castes (SCs) and Scheduled Tribes (STs) population.
The government had constituted a committee under Ratan Watal, the principal advisor for social sector in the NITI Aayog, to suggest a formula for making budgetary allocations for SC/ST welfare schemes.
The Wata committee has suggested an allocation of half the percentage of their share in countries population. As per 2011 Census, SCs and STs constitute about 25 per cent of thepopulation. A corresponding allocation in the Union Budget 2018 will, at least, double the allocations meant for SC/ST welfare schemes.
SOCIAL SECURITY AND MINIMUM WAGES
The government is also likely to increase allocations for social security schemes. Noted activists Baba Jadhav and Aruna Roy recently wrote a letter to Prime Minister Narendra Modi on the behalf of the Pension Parishad, a body linking over 100 civil society organisations working in the field of social security.
The current the old age pension scheme provides an assistance of mere Rs 200 to vulnerable senior citizens. The activists have sought to increase to the level of half of the monthly minimum wage notified by the government.
After the labour ministry raised the minimum wages substantially in 2016, the current floor level monthly income for a family is fixed at Rs 9,100 taking Rs 350 as the daily minimum wage. The labour ministry is said to be in the process of revising the minimum wage.
The minimum wage is likely to be doubled in Union Budget 2018 to Rs 18,000 per month. On the other hand, traders’ bodies have demanded that minimum wage for all the labourers across the sectors and states should be fixed at Rs 21,000.
PUSH TO FARM SECTOR
Farm sector is passing through a difficult phase despite relatively good monsoon and ensured irrigation in most parts of the country for consecutive years. Agrarian crisis and rural distress is the cause of worry for the BJP-led NDA government.
Rural distress had led to defeat of the Atal Bihari Vajpayee government, which went to the Lok Sabha polls in 2004 with the India Shining campaign. The achchhe din campaign brought the Modi government to power in 2014. Rural distress in Punjab and then in Gujarat has given enough indications to the Narendra Modi government that if the burden on farms does not improve, retaining power in 2019 may be an uphill task.
The government has desisted from doling out loan waiver from central coffer but on February 1, Arun Jaitley may announce some measures in Union Budget 2018 to directly benefit the farmers in the country. The Madhya Pradesh government’s scheme for ensuring income security to farmers is being talked about.
To ensure that the farmers get the minimum support price (MSP) for their crops, the Madhya Pradesh government has brought scheme under which if the farmers don’t get the price at par with the MSP, the state pays the difference to them. Arun Jaitley may announce such a scheme through direct benefit transfer route and make Aadhaar linking mandatory for it.
RELAXATION IN CORPORATE AND INCOME TAX
In his 2015 Budget speech, Arun Jaitley had said that he would gradually bring down the corporate tax from 30 per cent to 25 per cent. This has not happened yet.
When GST was rolled out, Jaitley said that as the revenue collection stabilises, he would offer relaxation in direct taxes. Corporate India expects him to announce a relaxation.
The argument by the corporates is simple that the twin reforms – demonetisation and GST – have impacted the industry adversely in the short term and a tax relaxation would give the sector a boost.
Having offered some rebate in income tax for salaried class in the last Budget and implemented the recommendations of the Seventh Pay Commission, the government may not give further relaxations to the middle class in this year’s Union Budget.
But, speculations are being made that Jaitley may actually announce no tax slab for income up to Rs 5 lakh in Union Budget 2018 before going into election mode for 2019 Lok Sabha polls.
FISCAL DISCIPLINE UNDER SCANNER
With increased public spending, including an almost Rs 3 lakh crore bank recapitalisation, a fiscal slippage is on the cards for 2017-18. The Budgetary target for fiscal deficit for 2017-18 was set at 3.2 per cent of the GDP. It is expected to be around 3.5 per cent of the GDP.
Arun Jaitley may prefer a higher fiscal deficit target in Union Budget which will allow him more borrowing during 2018-19 giving him wider elbow space to push social welfare schemes in order to ameliorate rural distress.
However, an increasing fiscal deficit may bring another headache for him if Narendra Modi government is voted back to power in 2019.