Union Budget 2018: Highlights Jaitley takes cues from Gujarat setback, banks on Modi’s popularity with salaried class

In his post-budget presser, Arun Jaitley made it clear that his primary objective was to improve the condition of rural India and the under-privileged section of society.

It made sense both as good economics and good politics. The Economic Survey showed a clear image of how India’s farmers are bleeding.

Farmer’s distress has rocked several states including those which go to polls this year.

Hence, there was an urgent need for course correction, of sending out a message that government is concerned with agrarian distress and will try to fix it.

Throwing in a dash of Hindi in his English speech, Jaitley tried to convey the same through a series of decisions focussed on farmers and the less privileged which he said would help with ‘ease of living’.

A corpus of Rs 14.34 trillion has been allocated for the rural sector.

“This year’s Budget will focus on strengthening of agriculture and rural economy, provision of good health care to economically less privileged, taking care of senior citizens, infrastructure creation, and working with the states to provide more resources for improving the quality of education in the country,” said Jaitley during the PTI.

Some in rural sector are extension of schemes which have already worked well. 

Hence, 8 crore beneficiaries under Ujjwala scheme, free electricity for 4 crore household under Saubhagya Yojana, spreading the Swachh Bharat Scheme with 1.88 crore toilets and 50 lakh new houses in rural areas was promised.

Jaitley added that apart from employment due to farming activities and self-employment, the expenditure of Rs 14.34 lakh crore will create employment for 321 crore person days, reports PTI. 

But the most significant decision was to give farmers 1.5 times of cost of inputs as Minimum Support Price (MSP).

Niti Aayog has promised to work with state governments to ensure that farmers get due price for their produce. The Centre has also announced plans to develop and upgrade 22,000 rural haats to Gramin Agriculture Markets.

Giving 1.5 times MSP for input cost across the board is tough to implement on the ground owing to several bottlenecks, but if done can be a huge game-changer.

BJP got a lashing from the rural voters of Gujarat, where Hardik Patel could use the feeling of unrest and channelled the frustrations to give a boost to Congress.  

The lack of MSP for groundnut farmers was a major source of discontent in Saurashtra, where BJP did poorly.

Hence, Jaitley’s decision makes perfect political sense, considering the upcoming state elections are also in largely rural states of Rajasthan, Chhattisgarh and Madhya Pradesh.

Mandsaur in MP became a major flashpoint last year after agitating farmers were shot dead by police. Expect that to be a prominent issue in the polls and BJP needs to show more than just empty promises to assuage the voters there.  The government has pledged to double farmers income by 2022. The Economic Survey predicts farmer’s income will decrease by 25% owing to climate change in the coming years. Thus, government clearly has its task cut out to meet its ambitious promise. 

But the biggest talking point of the budget is surely the National Health Protection Scheme christened Ayushman Bharat. It plans to give medical insurance benefits to 10 crore poor families, which is around 50 crore people with coverage of up to Rs 5 lakh per annum.

A token allocation has been made in this budget, so it is unlikely to be fully implemented before the next general election. But even with a pilot project in place, BJP can certainly make it a major poll plank in 2019.

With tax cuts to MSMEs, extending fixed term employment to all sectors, taking onus of employer’s contribution of PF for new workers for three years - government is looking to address another burning issue - jobs or the lack of it.

A recent survey showed that at least 48% think it’s more difficult to get a job now. Lack of quality jobs is a big cause of headache for a country where nearly a crore enters the labour force every year.

The perceived demographic advantage can become a nightmare, if promised jobs are not created and the government has tried to incentivize various sectors to facilitate new openings.

There is around 12% increase in outlay for schemes regarding SC/ST population, who are likely to play a key role electorally especially in a state like Chhattisgarh.

However, there is very little for the salaried class in the budget. A standardized deduction of Rs 40,000 has been introduced. Sadly, it subsumes the transport and reimbursement allowance, hence the actual benefit is extremely modest.

This alongside increased education cess means there is no acche din for the salaried class and the larger middle-upper middle class. According to experts, tax liability will be reduced by Rs 214 for those earning up to Rs 6 lakh, and by Rs 610 for those earning up to Rs 12 lakh/annum.

Senior citizens though have been offered some sops in the budget. Deduction for interest on savings bank accounts and post office accounts have been increased five times. Deduction for medical insurance and deduction for critical specific illness too has been increased.

The Centre’s decision to impose tax on LTCG though stocks and equity mutual funds is unlikely to go down well with the market. Jaitley though defended the expected Rs 20,000 crore windfall through this move as essential for ‘nation building’. But the overwhelming sense on social media on Thursday was BJP is taking its main voting block for granted.

The urban middle and upper-middle class vote bank was the edifice of BJP’s meteoric rise in 2014. They trumpeted every move made by then challenger PM Modi and post 2014 too, they have stayed with BJP through thick and thin. This is the aspirational crowd that wants to be part of the Madison melee, who believes that India should no longer be a fiefdom of a single dynasty.

Sadly, this budget offers precious little for them. In 2004, when the NDA slumped to an unexpected defeat, there was a stark decline in support for Vajpayee among urban India. NDA parties including BJP slumped to defeat in Delhi, Mumbai, Kolkata, Chennai and other metropolises.  Is BJP staring at a similar result by taking its core vote base for granted?

BJP would like to believe that Narendra Modi still has the charm to attract urban India. They won’t jump loyalties just because a tax-break was denied.

Every budget is about expectation management and every party likes to increase its core voter base to hedge its bet ahead of elections. BJP by going for a massive rural and poor outreach has tried to solidify its base among voters who have allied with Congress traditionally and voted for the saffron party feeling an acute urge for change.

However, it is also looking to be frugal in a fiscal sense, and don't want to overshoot the fiscal deficit target of 3.3%. Hence the middle class had to miss out on freebies this time around.

With several big-ticket projects planned, the BJP also looks to be no hurry to go hurry to go for a snap poll, contrary to what many experts believe. But for now, the economic right can wait, it’s time to harp back to good old socialist roots to solidify base for BJP. For rest, there is always NaMo magic and RaGa comedy!