NEW DELHI:
Finance minister Nirmala Sitharaman‘s seventh Budget will do a tight rope walk as she looks to strike a balance between the need to spend more on social sector schemes amid calls from allies for additional assistance to states, while seeking to address demands for a reduction in personal income tax and yet ensuring that she sticks to the fiscal glide path.
Much of the discussion has focused on RBI’s higher dividend of over Rs 2 lakh crore coming to govt’s aid, but the additional money has already been used for the solar rooftop scheme. Sitharaman will need more funds to roll out PM Narendra Modi’s other pre-poll announcement of a new housing subsidy scheme for the poor, while honouring poll promises such as increasing the coverage of Aayushman Bharat to include seniors. There are already demands to enhance the insurance cover to Rs 10 lakh, which requires a political call given that there are complaints of hospitals coming up just to cater to this segment of population.
Her Budget arithmetic will be based on revenue, tax revenue and capital receipts (disinvestment) collections being higher than what she had budgeted for in the interim Budget, which was bereft of any announcements.
Since then the political situation has changed with BJP now dependent on allies to run govt at the Centre although it still has 240 MPs in the Lok Sabha. But the noise of lack of jobs, persistent weakness in private investment, income disparity and regional imbalance has grown, generating expectations of issues being addressed in the Budget with youth, women and farmers being major thrust areas.
For a govt that has so far stayed away from freebies or revdis, checking leakages from schemes has been a key priority — be it tax breaks or benefits under schemes. While that will remain leitmotif, Sitharaman may be constricted to lower the fiscal deficit significantly below the budgeted 5.1% of GDP due to higher expenditure requirements, especially as she presents the first Budget of Modi 3.0, laying out the road map for the period up to 2030, with 2047 being the ultimate target.
There have been demands for employment-linked incentives from some industry groups, but the focus of govt is on production linked sops, where incremental output and investments in creating capacity, which in turn generates employment, has remained the focus. Sitharaman is expected to once again count on the private sector to create jobs through higher investment in creating and adding to capacity.
Overall growth and the sentiment on India has been positive but the focus may be on addressing the requirements of sectors that need hand holding.