A Half-hearted Budget in the Name of the Poor

by S.S. Sangwan

As usual, the Budget of 2019-20 is a political Budget just three months prior to the 17th lok Sabha elections. After defeat in three States, the first pro-poor compulsion of the government was the constitutional amendment for 10 per cent reservation in educational institutions and government services for the EWS in the general category. The lacklustre attitude of the government and even the Congress stems from the limit of upto Rs 8 lakhs for the EWS and it may prove to be an eyewash for the struggling poor, especially in the rural areas with poor educational facilities. Now the coming elections to Parliament and some State Assemblies have forced the Central Government to present its sixth Budget in the name of the poor in the following aspects.

Farmers’ Income

After creating the lowest agricultural price syndrome from 2014 to 2017 by reducing procurement of pulses and oilseeds, implementation of demonetisation and the hollow slogan of doubling farmers’ income, the Budget has for the first time focussed on small and marginal farmers and providing them some relief. Under the proposed PM-Kisan scheme, these farmers will be provided Rs 6000 per family in three equal instalments and the first one will be given before March 2019 itself for immediate political dividend. This is to supplement their existing income which is not only inadequate but the scheme even excludes the tenants and agricultural labourers unlike the more inclusive kalia (Krushak Assistance for livelihood and Income Augmentation) scheme of the Odisha State.

KCC-type loans have been announced for working capital for the activities of animal husbandry and fisheries with incentive of interest subvention (2+3 per cent) as available in agriculture for a limit upto Rs 3 lakhs. The government has to clarify that it will be a separate limit for animal husbandry or fisheries for farmers doing these as allied activities. Its upper limit for subvention has to be specified. If this requirement is clubbed with a crop loan limit of Rs 3 lakhs for subvention, then it may be a big joke/jumla.

Labour and Workers Dignity

In the event of death of a labourer during service, the amount to be paid by the Employees Provident Fund Organisation (EPFO) has been enhanced from Rs 2.5 lakhs to Rs 6 lakhs. For the workers of the unorganised sector with a monthly salary upto Rs 15,000, the Budget has announced a scheme ‘Pradhan Mantri Sharam Yogi Maandhan’. Under the scheme, a monthly pension of Rs 3000 from the age of 60 years with a monthly contribution Rs 100 from of age of 29 years and Rs 55 from the age of 18 years with matching contribution from the government is to be provided. The scheme will be operational from the current year, that is, before the elections. The Budget claims, it will be one of the largest schemes within the next five years, though this may find limited takers in view of the ongoing old age pension of Rs 2500 by Delhi and Rs 2000 by Haryana States without any contribution.

Moreover, in the allocation under the MGNREGA, the income earning source for the poor workers has been allocated Rs 60,000 crores which is less than the revised estimated (RE) expenditure of about Rs 61,084 crores.

For electoral gains the allocation for welfare of the Scheduled Castes and Scheduled Tribes in budget Estimates(BE) of 2019-20 has been increased by 35.6 per cent and 28 per cent over the BE of 2018-19.

Rebate to Tax payers 

The existing rates of income tax will continue for FY 2019-20 but the Budget has proposed that individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate. If specified savings upto Rs 1.50 lakh, interest on home loan upto Rs 2 lakhs and other investments are availed, then the exemption limit on gross income may go up accordingly. It will provide tax benefit of to about three crore taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens. It will largely cover the mid-income urban based taxpayers. Besides,standard deduction for salaried persons has been raised from Rs 40,000 to Rs 50,000.

Other Tax Benefits to Urban voters

The second self-occupied house has been exempted from levying of income tax on notional rent which was not so hitherto. Even tax deduction at sources (TDS) on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000. Further, the TDS threshold for deduction of tax on rent is increased from Rs 1,80,000 to Rs 2,40,000. Further, a tax-payer having capital gains up to Rs 2 crores from sale of one house under section 54 of the Income Tax Act will be will be allowed to invest in two residential houses hitherto one, once in a life time.

Limiting the Fiscal Deficit

Thus the Budget has oriented towards the small and marginal farmers, urban middle class and the workers of unorganised sectors but the efforts are half-hearted as reflected from the amount and allocation. One of reasons cited for feeble benefits to farmers and other weaker sections is binding of the fiscal deficit as per the FRBM Act. The fiscal deficit of year 2018-19 as per the RE has been kept at 3.4 per cent of the GDP and at the same level in the BE of 2019-20 despite it being the election year.

Overall, the Budget has focussed on a few micro issues with an eye on the coming elections and it lacks macro vision and the vital issues like creating employment, reducing wealth inequality by taxing the rich, management of public debt, improving standard of health and education facilities in government hospitals and schools have been relegated to the background.

Dr Sher Singh Sangwan is a former Professor, SBI Chair, CRRID, Rohtak.