Piyush Goyal delivers conventional Interim Budget, but time will tell if lack of grand vision hurts Modi govt

Finance Minister Piyush Goyal has presented his first, and the government’s last, budget ahead of the Lok Sabha polls. It is indeed an Interim Budget. It is in fact as interim as it can get. There is no break in the convention of not announcing any significant tax changes in an Interim Budget.

Yes, major concessions in direct taxes have been spelled out, not as a general direction, but in specific detail. These should excite the so-called middle class. But effectively there are no changes proposed for the financial year 2019-20. Changes will take effect only from 2020-21. The tax proposals are actually nothing more than assurances that the announced changes will take place if the government is reelected. For the purists, Piyush Goyal’s budget is more faithful to convention than P Chidambaram’s 2014 interim budget, where there was still some minor tinkering around with indirect tax rates.

What about its other features? Is it not a report card plus election manifesto rolled into one? It is indeed. As are interim budgets presented in election years. A rosy sounding report card of the performance of the government in the past five years forms a very large part of the finance minister’s budget speech. Five years ago, the then finance minister presented a similar rosy picture of the achievements of the then government over its ten years in office.

So a report card of the government’s term in office seems de rigueur for an election year budget speech these days. There has been much ado about the ten dimensional vision for 2030 presented in the speech. Coincidentally, a set of ten priorities was presented in the 2014 budget speech. The difference is only that that was a nearer term, more focused set of priorities, and this one is a loftier, grander, less structured, longer-term set of “dimensions”! So we see that there is nothing particularly unusual about the essence and structure of the Interim Budget.

Let’s look at a couple of the issues. Farmers’ distress and jobs, or lack thereof, are the top issues that are thought to have swayed the electorate in the recent round of state elections, and should therefore be of concern to the government with the national elections around the corner. The budget was an opportunity to demonstrably address these concerns, and it’s interesting to see how the finance minister has sought to do so.

The budget speech unveiled a major initiative for farmers. This is the PM-KISAN scheme for direct income support of Rs 6,000 per annum to farmers with holdings up to 2 hectares. It’s an initiative on the lines being recommended by agricultural experts for some time, and similar to the one already being implemented by Telangana. To my mind, coming as it does at this juncture, it hints at a bit of desperation. It doesn’t seem to have figured in the policy thinking. Recall that last year’s budget touted the 50 percent above Minimum Support Price (MSP) initiative as the game changer; there is no mention of whether that worked or not, and why something new was needed. The ruling party victory in the Telangana Assembly elections may have had something to do with it.

The announcement of the scheme with retrospective effect i.e. from 1 December, 2018, is intended to enable cash flow to take place in this financial year before the elections. Is there enough time for it to make an impact? It’s difficult to say. A good initiative, nevertheless, and here to stay, regardless of the electoral outcome.

Jobs. This issue is in the limelight with the controversy over the unemployment figures in the unreleased (draft?) (leaked?) National Sample Survey (NSS) data. Has unemployment gone up in the  recent past or not? Don’t hold your breath for quick answers. Regardless, there must be a ground reality, and that reality will influence voting behaviour.

In the budget speech, much store is being set by the professed benefits of schemes like PM-Mudra Yojana (for disbursement of collateral-free loans for starting own businesses) and PM Kaushal Vikas Yojana (for skilling youth for self-employment). It is not clear though how much gainful employment these schemes have actually created. There isn’t a grand strategy set out, except for a reference in the ten dimensions of the “millions of jobs” likely to be created by Digital India. And in any case, as far as jobs creation goes, there is not much that a last budget can do to dramatically change the ground reality, whatever it may be.

So, in the final analysis, will the budget serve its purpose? Which is to help win the election. Will it lure the salaried, middle class taxpayers with the promise that, if the government is reelected, they would pay less tax from 2020-21? And farmers with (hopefully) immediate cash deposits in their accounts? Maybe. Only time will tell.

The author is a former IAS officer who retired as secretary of heavy industries