Implications of the Interim Budget 2019–2020
Interim Budgets have almost always been statements of political intent, and the 2019–2020 budget was hardly the one to break the trend. Presented at what could be said at the twilight of a Central Government which pleased and pained the people with remarkable ease, this statement of account has a lot riding on its shoulders as the BJP-led Government strives to appease several key constituencies and communal sectors, on top of which, they have little time left to home in the import of the several landmark events which have transpired over the course of their term, especially the ones which caused severe inconveniences such as the demonetisation of high-value currency and the haphazard implementation of GST. In our previous article, we looked at how interim budgets have been significant opportunities to bolster the presiding party’s re-election claims and in this one, we make an attempt to analyse how the budget proposed on the 1st of February fits in with Prime Minister Modi’s vision.
This interim budget has been expressively populist, introducing tax rebates for the lower middle class( people earning below 5 lakhs per year) and somehow wiggling in space for even more handouts for farmers (agricultural and rural spends have been hiked significantly to the tune of 30%). In general, the context to be gleaned off the budget is that substantial efforts have been made to ease the lives of citizens of now and of future as well, cue Vision 2030.
A general understanding of the measures proposed by the Government and their impact on us can be seen in the accompanying infographic:
This budget begets a really important question though. The Government has abandoned it’s budget deficit target for the coming financial year ending on March 31, 2020. The reasons for the same aren’t really confounding since the Centre is struggling to manage its expenses, especially the rural income crisis triggered by the low crop prices. Albeit, even with the revised goal of 3.4% of GDP instead of 3.1%, economists feel the assumptions made into the math for such forecasts are far too aggressive, especially the forecasts for strong tax revenue growth. So, the question of the hour is, how will things pan out for the next ruling party, be it BJP or someone else, or maybe even a coalition?
No one can deny, the measures proposed in the interim budget were long overdue, but at what cost? With further decrement in tax collections, and an overcast slowing global economy playing truant, the incoming government is barely left with any breathing room to meet the fiscal targets and improve the lacking infrastructure of our country and would have to dig deep to deal with any possible fallout, a task which will be only hardened in the scenario where a coalition regime is established. The waning market sentiment is certainly a cause of concern, but all said and done, it would be unwise to read too much about the present state and markets will in all probability be in a nervous state ahead of elections. Nevertheless, for the time being, the interim budget was a move well played and a move much needed.
