In this Great Theatre of Democracy, the game of one-upmanship between the ruling BJP and the Congress in offering sops has rightly brought the electorate in the spotlight as key beneficiaries. Expect the season of sops to continue as the wooing gets more intense in the Budget speech. Interim Finance Minister Piyush Goyal is likely to deliver a speech full of all the razzmatazz associated with Budgets-sops, new schemes, tax changes. Specifically focused on the three most aggrieved constituencies–Farmers/Rural, middle class/women/senior citizens and small businesses as the government winds up its tenure to face the electorate in three months.
Here’s what to expect:
A direct benefit transfer scheme prepared by the agriculture ministry was meant to be an atonement for the betrayal of farmers and the inability to deliver on the promise of betterment of their lives. It got stuck for 2 key reasons: government had to find the resources and the scheme benefited landed farmers but ignored the landless farmers. The scheme proposed DBT of Rs 4,000 per acre (capped at Rs 10,000 per annum) per season plus zero interest farm loans up to Rs 1 lakh. Its bill of Rs 2.28 lakh crore has deterred the Centre from making the announcement. However, the Centre may now add a minimum guarantee scheme for the poor farmer to cater to the landless farming community and cover the entire rural hinterland. These will be over and above the programmes to link farm to fork to ensure the best price of the produce to farmers, including processing, using technology to link Mandis and farmers’ markets. The announcement is now likely before or during Budget.
MIDDLE CLASS/WOMEN/SENIOR CITIZENS
Finance minister cannot ignore this community because of the sheer numbers it represents. With the 10 per cent reservation quota proposing all up to Rs 8 lakh of annual family income as economically weaker, there’s pressure on the Centre to take provide relief in personal tax to get the non-taxable portion as close to the new Rs 8 lakh benchmark as possible. Expect a Rs 50,000 increase in basic exemption limit to Rs 3 Lakh; Rs 3.5 lakh for senior citizens (60 to 80 years of age) and Rs 5-5.5 lakh senior citizens above 80 years of age. Working women who enjoyed a higher basic exemption limit until a few years ago are likely to be given the privilege yet again with a limit of Rs 3.5 lakh.
Yet another effort at edging towards the Rs 8 lakh limit could be in raising the 80C limit (towards deduction in home loan payment, investments, children’s tuition fees) from Rs 1.5 lakh to Rs 2 lakh, leaving higher disposal income in hand. If the FM feels still more generous, he may even raise the standard deduction limit of Rs 40,000 to Rs 60-70,000. If the exemption towards loss from occupied house property is also raised from Rs 2 lakh to Rs 3 lakh, it would be a bonanza for the middle class.
Stung by DeMo and further hit by a rushed GST rollout, small businesses have been smarting under the twin blows. Last year’s Budget had reduced the corporate tax on companies with turnover of under Rs 250 crore from 30 per cent to 25 percent. With cess, their median tax rate was 34 per cent. SMEs have been particularly affected by lack of access to loans. Centre may ensure greater availability of loans, reduce regulatory compliance for greater ease of doing business and may even consider the industry’s demand for a further cut in tax rates to 20 per cent. The latter is least likely though.
On the other hand, rising protectionism will help all domestic businesses as the Centre is likely to raise customs duty to promote Make In India. Last year’s Budget too made a departure from years of cutting customs duty and actually raised them which increased the domestic prices of automobiles, mobile phones, toys, perfumes, even diamonds and footwear. This Budget is likely to follow suit, specifically in components. Consumer Electronics and Appliances Manufacturers Association has prodded the Centre to raise import duties on finished goods such as ACs, TVs, washing machines and refrigerators. Society of Indian Automobile Manufacturers too has asked for an increase in import duty on fully-built commercial vehicles from the current 25% to 40%. These would raise the cost for the consumer but will benefit domestic businesses indirectly as they will be able to raise prices.
If the outgoing government could bring cheer to these 3 constituencies, it may have achieved its objective of appeasing the most unhappy before the model code of conduct kicks in.