Can finance minister Arun Jaitley prove political pundits wrong when he presents the budget in the Lok Sabha on Wednesday? There are predictions of a populist budget meant to bolster the BJP’s prospects in the upcoming elections in Uttar Pradesh, Uttarakhand, Punjab, Goa and Manipur.
The budget is expected to increase income tax exemption limit, provide incentives for home buyers, unfurl a clutch of welfare measures for the poor, especially the debt-ridden farmers, and launch a host of schemes and programmes targeted at women and students, among others.
The context for such a please-all budget is the absence of a big narrative for the BJP in the assembly elections. The electoral potential of demonetisation has become suspect. Surgical strikes across the border in Pakistan no longer set the adrenaline flying. The BJP has, therefore, returned to its Hindutva agenda and is banking on the finance minister to give it a leg-up in the elections.
A veteran politician and key party strategist, Jaitley, needs no reminder of the political compulsions. But if he were to focus on short-term political gains -— instead of taking tough decisions to offset the projected slowdown in the economy -— the BJP might have to pay its political cost in the long run.
In his 2015 budget speech, the FM spoke of “job” 16 times, “growth” 24 times and “investment” 50 times, leaving no ambiguity about his priorities. There were no sops, no freebies and no grand schemes. He boldly announced the reduction of corporate tax in a phased manner and the abolition of wealth tax.
His 2016 budget speech, however, marked a shift in the NDA government’s economic and political outlook. It offered something to every section -- doubling farmers’ income by 2022, LPG connections in the name of women of poor households, incentives for senior citizens and middle-class people living in rented houses. Lest the opposition parties should again accuse the NDA of being pro-corporate, the FM made cars, especially in the luxury segment, and SUVs costlier.
If the finance minister had used the words “farmers” and “rural” 19 times in his budget speech in 2015, he used them 54 times in 2016. The 2016 budget speech came in the backdrop of electoral reverses to the BJP in Delhi and Bihar and ahead of assembly elections in four states and one union territory.
How much this pro-poor, pro-farmer pitch in the budget contributed to the BJP’s success in those assembly elections is open to interpretation but the party’s hope again hinges on a please-all Budget.
A former finance secretary who was involved in the budget-making exercise for several years told HT that political compulsions have a bearing on the budget but it depends on the government of the day and its outlook. The UPA government, for instance, took “hard-nosed decisions” in its last two budgets. Its decision to stick to the fiscal roadmap and contain current account deficit was “politically not palatable but extremely necessary”.
“The NDA government’s budgets have shown lots of populism. I am expecting the same this year. There are already talks of relaxing the fiscal deficit target and if it happens, it would be the second time that this government would breach it. It will erode the confidence of investors,” he said.
(Views expressed by the author are personal)