Populist,Political Budget 2019 on Anvil by Modi Govt

Populist, political budget on anvil Major I-T cuts, incentive for oil cos cash deal not ruled out By Shivaji Sarkar

The year 2019 is an election year. After many elections this time the central budget though may be technically “interim”, practically it is likely to be a full budget with if not major ones at least many populist announcements.

It will be another first of the Modi government after it started the presentation of budget to February 1 from the last day of the month.

In an election year, even if a government returns to power for, the practices was to present the interim budget and President’s address was put off to the first session after the new government took over. As per practice, a vote-on-account or approval for essential government spending for a limited period is taken before polls.

 The Article 87 of the Constitution provides two instances when the President specially addresses both Houses of Parliament. The President of India addresses both the Rajya Sabha and the Lok Sabha at the beginning of the first Session after each general election when the reconstituted lower house meets for the first time. The President also addresses both the houses at beginning of the first session of each year.

This time the government is opting for the latter option to exude confidence and give a pregnant political message that it is coming back to power after the polls. The opposition may protest but that would be for academic purposes.

This time unlike other election years the session would not be continuation of the winter session. The session was prorogued mid-January to help the government re-promulgate some ordinances, including on triple talaq.

There is not constitutional bar for making announcements as well. The advisors of the government suggested making the best use of the window. The President’s speech essentially highlights the government’s policy priorities and provides a broad framework of the government’s agenda and direction.

So the unfinished agendas could be completed to attract people. That is a tall order.

The recent state assembly elections brought to the fore growing discontent. The core assessments within the parivar have given warnings on government performance.

It is only likely that heeding to the advice, the budget could have a more expanded sections of tax proposals, including a number of direct tax announcements.

The industry bodies like FICCI and CII have paved the way for announcement of the populist measures, particularly on direct taxes.

The FICCI suggested raising the 30 percent tax rates to individuals earning of over Rs 20 lakh a year, from the current Rs 10 lakh. It also suggested cut in corporate tax to 25 percent.

The CII is for giving more benefits to the employees and retired persons. It demands I-T exemptions on medical reimbursements and hospitalization expenditure for treatments in India or abroad.

The suggestions are there also to avoid double taxations on items like provident fund.

Transporters have been demanding removal of toll gates. They are prepared to pay one-time fee on each of their vehicles. The tolls have been causing congestion and adding to their travel time mounting heavy expenses despite online tags. Besides, Rs 1.13 lakh crore is being collected through Rs 8 a litre road cess on petrol making tolls unnecessary. The government and NHAI are having huge profits.

Since the farmers and rural voters tilted the balance in the recent elections, agriculture ministry and NITI Aayog are discussing possibilities for announcement of a farmer income scheme – a la Telangana pattern – on the basis of their land holding. There may be proposals also for helping the farming class in their marketing endeavours.

There are complaints of tax notices being served on start ups. This has caused annoyance. Simplification of procedures may be considered and a tax holiday may be announced.

The middle class felt ignored in the last budgets. They have a capacity to create political atmosphere. They and the farmers are piqued at the continuous increase of petroleum prices. Recent hike in diesel prices have hit the farmers and transporters hard. They may be expecting a relief. The simplest is to bring the products under GST. The government, however, may avoid doing it.

It instead may announce relief to petroleum companies for investment in exploration and their marketing activities. The proposal looks “rational” as the country needs more of oil. But it is also to benefit some large private companies who want to invest in the sector. The petrol price hikes are also said to have been done to benefit them.

It is likely that in view of the hue and cry on quixotic NGT order on scrapping of ten-year-old vehicles, there could be an announcement.

Some government agencies have also told the government about impractibility of the NGT order. The agencies have told the government that policing and impounding of such vehicles is more expensive. Destroying the cars needs money and they have said that the junk itself would be an environmental hazard. It is also sending a negative message. That may be corrected.

There are also demands for allowing the banks to accept more cash for transfers and ease of online transfer rules. Presently, the businesses and traders are finding it difficult to transfer their cash earnings from remote areas even to their own accounts.

Banks do not allow cash transfer through NEFT/RTGS as per government orders. This has led to a thriving parallel banking. Apart it is causing annoyance. The business class has told the government this generates more black money than preventing it.

The government has also been told to encourage more cash transaction for ease of doing business, make bank’s KYC rules simpler and base it on the permanent account number (PAN), which is linked to Aadhar and do away with cumbersome procedures every now and then.

The World Economic Forum has said that India’s cyber transaction system is fraught with risk. This also led the businesses to stress on cash transactions and they say that this would not lead to any “black” transactions.

That cash is being used in polls. Before assembly polls RBI noted huge cash withdrawals. It means the purpose has not been served.

It is tall list. The government may not do all that. But it is not likely to lose an opportunity to pander to the people’s wishes and reap benefits at the hustings.

Ends

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