The “interim” budget presented today was keenly watched to see if the government sticks to the path of fiscal prudence or makes populist announcements. The speech, while making some important and path breaking announcements, thankfully, did not go overboard with its proposals. It has proposed total expenditure of Rs 27.8 lakh crore during 2019-20, an increase of over 13.3% over revised estimates of Rs 24.6 lakh crore in 2018-19. The three most important proposals of this year’s budget are introduction of minimum income support to small/ marginal farmers, introduction of pension scheme for unorganized sector employees and introduction of the concept of “rural industrialization”. Here are the details on these and other budget proposals.The budget this year has generated lot of interest on whether it would be full budget or an ‘interim” one. “Interim” or “vote on account” means the government is not seeking funds from the Parliament to meet its full year’s expenditure but only for four months. The full budget would be presented after the new government is formed at the centre.
In a first such initiative, the government has proposed to provide an income support of Rs 6,000 per person to all small and marginal farmers. The move will cost about Rs 72,000 crore annually with estimated numbers of such farmers at about 12 crore. While the political angle of the move is always debatable, the scheme would go a long way in helping these farmers meet their basic needs. Further, this should also act as an opportunity to look at the efficacy of other such mega scheme, MGNREGA and tweak it to make it more productive.
The pension scheme is largely similar to the scheme existing for organized sector employees and proposes monthly pension of Rs 3,000 to the workers in the unorganized sector on attaining the age of 60 years. It would be applicable only to those earning up to Rs 15,000 per month. The scheme is not free but based on contribution by the concerned worker to the tune of Rs 100 per month if his age at the time of joining the scheme is 29 years and Rs 55 if the age is 18 years. Government would make an equal amount of contribution to the scheme and the total sum involved could be about Rs 15,000 crore. It expects about one-fourth of total 43 crore workers engaged in the unorganized sector to enroll for the scheme. The scheme is certainly far reaching as it provides a much needed safety net to these small time workers. It may be further tweaked to provide option to the workers to deposit amount in excess of the minimum for additional benefits like available in current PF scheme, loan against these deposits, lump sum payment in case of untimely death of the worker and so on.
The budget speech talks about ten dimensions which would propel India’s growth over next decade to help it become a $10 trillion economy. The most important of these is introduction of the concept of “rural industrialization” which would not only help generate employment and provide a fillip to rural economy but also prevent exodus of population to urban centers. MSME Industries at the grass root level comprising of agro-processing, other village specific industries etc are critical to meet the basic level of rural income and wean people away from agriculture. Public sector enterprises, which helped India develop competency in heavy industries can act as engines of growth here too. The initiative can be clubbed with rural digitization initiatives to help rural India emerge as digital service providers also. However, it is just a concept at the moment and would need focused strategy so that it doesn’t get lost just as the concept of ‘smart cities’.
An important element of budget announcements used to be proposed changes in the indirect tax rates. GST seems to have taken away the charm from the budget speeches where consumers and corporate alike keenly watched the speech to know these changes or the stock market would react to likely winners and losers! However, it does bring about some changes in direct tax regime, the most important being rebate to taxpayers with income up to Rs 5 lakh from earlier Rs 2.5 lakh. Since, it comes in the form of tax rebate and not change in tax slab; tax payers with income over Rs 5 lakh get no direct relief. Among other segmental initiatives is the provision of 2% interest rebate on loan of up to Rs 1 Crore to SME units which are GST registered. The measure is a smart one as not only it provides incentive to the segment, it also pushes them to register and enter the formal economy.