Piyush Goyal sounds poll bugle: Direct cash to farmers, pension for unorganised workers, tax break for middle class

Budget 2019_Piyush Goyal

Finance Minister Piyush Goyal weathered a boisterous Opposition to present an interim Budget that sought to balance fiscal discipline with welfare necessities in an election year, as he announced a direct cash transfer plan for distressed farmers and a mega pension plan for unorganised sector workers.

This Budget, the last before the country votes for a new Lok Sabha in April-May, also broke the convention of not announcing major income tax changes when governments are in transition.

Goyal promised to put more money in the hands of the salaried and middle class by offering a full tax rebate for those  with an annual income of upto Rs 5 lakh from Rs 2.5 lakh currently, implying those with an annual income of less than Rs 5 lakh will not have to pay any taxes. For those whose income exceeding Rs 5 lakh, the existing rates and slabs will apply.

He also raised the "standard deduction" – a flat amount on which taxes are not paid—to Rs 50,000 from Rs 40,000 annually. He also raised the income tax exemption on bank deposit interests was also raised to Rs 40,000 from Rs 10,000 currently.

There will also be no tax deducted at source on house rent upto Rs 2.4 lakh a year, while capital gains exemption on houses raised to Rs 2 crore.

"Our aim is to reduce the tax burden on the middle class," Goyal said.

He presented a stirring account of the Modi-government’s economic and reform policies, generously peppering his 100 minute speech with details of signature initiatives such as Ayushman Bharat, Pradhan Mantri Jan Ausadhi Yojana, Make in India, Jan Dhan Scheme, Start Up India, MUDRA and the Insolvency and Bankruptcy Code (IBC).

Reiterating its commitment to rooting out corruption, the government vowed to continue the crackdown on India’s bustling parallel economy.

The Real Estate Regulation Act (RERA), the Benami Properties Act and the Fugitive Economic Offenders law have enabled this clampdown in a manner not seen during previous governments, he said.

Demonetisation, Goyal said, was part of this broader strategy that had yielded significant results, sounding a warning to those who continue to evade taxes. Demonetisation has come under renewed attack from the opposition that says the decision failed to check corruption and led to job losses.

"We have ushered in a new era of transparency. We have walked the talk," he said.

The government sought to blunt the claims of lack of opportunities for the millions entering the job market every year by handing out statistics on formalisation of India’s labour market, self-employment opportunities through MUDRA loans, growing start-up entrepreneurship and jobs created by infrastructure projects such as roads and bridges.

FOCUS ON FISC

Goyal did not concede too much on the fiscal consolidation goals, something that stock markets raised a toast to.

Amid looming risks of slippage, the minister pledged to keep the fiscal deficit — a measure of how much a government borrows to meet its expenses—at 3.4 percent of GDP in 2019-20, from a revised 3.3 percent in 2018-19.

It is a deviation from the medium-term consolidation target the government set last year when Finance Minister Arun Jaitley said the fiscal deficit would be contained at 3.1 percent of GDP in 2019-20.

Goyal avoided the temptation of populist spending that can worsen the fisc, particularly when the stress is showing up. Revenues from the goods and services tax (GST) and disinvestment have remained well below the target, accentuating fiscal pressures. Despite this, the minister pegged the fiscal deficit for 2018-19 at 3.4 percent of GDP.

It could have been better, but for the additional setting aside of Rs 75,000 crore for farm income support scheme, Goyal said.

Markets cheered the adherence to fiscal discipline, with the BSE Sensex rising 400 points during the course of the budget speech.

A part of this, however, may have been achieved by window dressing the balance sheet by deferring capital expenditure and rolling over some bill payments to the next financial year.

HELPING HAND TO FARMERS

Between all the juggling and with some nifty tweaking, Goyal offered farmers—battling falling prices barely enough to cover costs—something to cheer about.

He announced Pradhan Kisaan Samman Nidhi that will enable farmers to receive Rs 6,000 a year directly into their bank accounts. About 120 million farmers owing upto two hectares of land will be eligible scheme.

The scheme, which will be funded entirely by the government, will kick in retrospectively from December 2018. Beneficiary farmers will get the money in three equal instalments during the year.

The scheme will cost Rs 75,000 crore in 2019-20, and Rs 20,000 crore for the remaining part of the current financial year, Goyal said.

This could either prove be a masterstroke or too-little-too-late for a government going into elections, given that it comes four days after Congress chief Rahul Gandhi promised a minimum basic income to the country's poor.

The pointed attention to farmers, an important electoral constituency, was not unexpected. The BJP is still smarting from its defeat in assembly elections in Madhya Pradesh, Rajasthan and Chhattisgarh, which together account for 65 Lok Sabha seats.

Rural distress exemplified by farmers dumping their produce and the inability of the ruling party--the BJP in all the three states-- to lift farm incomes were seen as main reasons for the setback.

The new scheme, which Goyal announced on February 1, is an attempt to demonstrate the government’s intent to walk the talk on offering a structural solution to a persistent farm economy challenge that will only worsen as landholdings shrink.

MNREGS, the world’s largest job guarantee scheme, received top billing with budgetary allocation of Rs 60,000 crore in 2019-20, a 9 percent jump over the previous year’s Rs Rs 55,000 crore.

WORKERS' PENSION

Goyal announced the launch of a new pension scheme for millions working in India’s bustling unorganised sector who continue to remain outside any social security net.

A monthly pension of Rs 3,000 to unorganised workers that will possibly include tens of thousands of migrant labourers and the household help.

The pension will be transferred directly to their bank accounts once they attain the age of 60 years.

The National Sample Survey Office (NSSO) study has estimated there were 474.1 million employed people in 2011-12. More than 8 out of ten of these (82.7 percent) or 391.4 million persons were working in the unorganised sector, employed without social security benefits, job contracts or even the guarantee of getting paid on time.

In a recent pre-budget meeting, Jaitley told trade union representatives during the weekend one of the major priorities of the government is to ensure social security benefits for those working in the unorganised sector.

While the details were not announced, the scheme is likely to be enforced through the Unorganised Workers’ Social Security Act, 2008, (UWSS Act) that gives a legal framework for providing social security benefits to workers in the unorganised sector.

The Act provides for the registration and issuance of identity cards to unorganised workers.

EYE ON TRADERS

The government also showed its support for India's trading community which has complained of being pushed out of business by transnational online retail giants that offer deep discounts by getting into exclusive deals with preferred vendors.

Goyal announced a new retail trade policy department empowered to redraws the rules of the game while sending out the message that the government stands steadfast behind neighbourhood stores, whose owners are considered to be BJP supporters.

The Confederation of All India Traders (CAIT), led by Praveen Khandelwal, a BJP leader who contested the Delhi assembly election from Chandni Chowk, has led a campaign against the foreign-funded e-commerce players.

Goyal’s announcement came on the day when a new set of rules kicked in, disallowing cashback schemes and barring a vendor from selling more than 25 percent of products on a single e-marketplace firm.

Global e-tail giants such as Flipkart and Amazon were lobbying to get the deadline for the new rules extended beyond February 1, giving them enough time to refit the operational contours.

Local traders saw this lobbying as an attempt to hoodwink the government. CAIT put the government on notice: any change in the deadline or rules would mean a loss of 70 million votes for the BJP.

The Swadeshi Jagran Manch, an affiliate of the BJP’s ideological fount Rashtriya Sawyamsevak Sangh (RSS), has been pushing for a clampdown on "predatory behaviour" of e-commerce giants.