A sense of realism and lack of populism mark the first budget of the Modi government in its second term. Expectations were less from the common man this time as some huge welfare-pension schemes had been announced a few months before the 2019 polls via a short-term budget. There still is eminent stress on the rural sector, attending to the needs of the poor, and promising faster steps for infrastructure development.
Curiously, the outlook of the budget presented by finance minister Nirmala Sitharaman is more on long-term growth and less on what the government aims for the current fiscal, for which nine months are left. The PM has said this budget is of “Aasha, Vishwas and Akansha.” Yet, no major reform has been hinted at.
Fiscal deficit has been brought down from 3.4 per cent to 3.3 per cent. Hopes about reducing the tax burden on the salaried class have been dashed, and slabs remain unchanged, even as mega cities like Mumbai, Pune and Delhi are soon set for assembly polls. A fuel cess of one rupee and an additional tax of one rupee per litre of fuel have, instead, been added to the burden of the middle class. This could also result in inflationary trends.
The government plans to impose more taxes on the super-rich. Vis-a-vis direct taxes, a surcharge would be levied on those with taxable income under two brackets – one, with income of two to five crore; and the other with above five crore. The tax rate for these two categories would increase by 3 percentage points to 7 respectively.
The Budget talks about raising the scenario of Foreign Direct Investment (FDI) to new levels. Notably, this initiative of the Modi government in its first term had not been impressive. Emphasis is on the government’s goal of turning India into a $5 trillion economy in a matter of five years from the present level of $2.7 trillion. Five years ago, it stood at 1.85 trillion. An eight per cent growth is a pre-condition to such a rise, but the economy now grows at the rate of seven per cent.
There are the feel-good factors for the poor and the middle class – like the housing loans being granted an additional Rs 1.5lakh relaxation over and above the existing Rs 2 lakh. There is promise to reach water, electricity and cooking gas to all homes. More retail traders have been brought into pension scheme. Overall, the optimism is moderate yet sustainable.