As election-eve budgets go, Interim Budget 2019-20 must rank as one of the most politically expedient ones this country has seen. The shadow of the general election falls squarely on the budget proposals, which are aimed at seeking votes in the name of various schemes that rain cash on beneficiaries. Whether the strategy will work at the hustings remains to be seen. But there is no denying that a lot of thought has gone into identifying and targeting the sections of population across social segments that are in distress and unhappy with the Centre for a variety of reasons. There is an income support scheme for farmers who are reeling under the impact of falling realisations for their crops, and a pension scheme for informal sector workers earning up to ₹15,000 a month. There are income tax concessions for the middle class that have been carefully framed to target the lower rung. The ₹6,000 a year income support to farmers will benefit 12 crore households, which is almost half of the total number of households. Similarly, the increase in standard deduction from ₹40,000 to ₹50,000 may be small but it will cover three crore taxpayers, which is again almost half of the 6.8 crore taxpayers. The income tax rebate on those with taxable annual income of up to ₹5 lakh a year will benefit three crore middle class voters that includes traders, small businesses, those who have just joined the formal workforce and pensioners.
While these sops will benefit sections of the population, the question is whether it is correct for a government that will be in power for less than two months in the next financial year to write into the statute books proposals that are permanent. Though some past governments have announced sops in their interim budgets with an eye on elections, this budget has gone much further by announcing very significant measures. In political terms, the strategy cannot be faulted as it appears to have put the Opposition in a difficult spot — protesting too much about the concessions given to those in distress may be counter-productive. That said, some of these ideas may actually work in economic terms as they put money in people’s hands. The housing-related tax proposals can give a leg-up to the real estate sector, which is a job-creator and is now in trouble. The sops come with a cost, though. The Centre will miss the glide-path for reducing the fiscal deficit , yet again. The estimated slippage of 0.10 percentage point is not significant if we assume that the concessions will spur spending by the beneficiaries. This is, of course, assuming that the gross tax revenue projection of ₹25.52 lakh crore, which is a 13.5% growth over the revised estimates of 2018-19, is achieved. But this arithmetic will be the headache of the next government.