Finance Minister Nirmala Sitharaman has many firsts to her credit―from being India’s first full-fledged woman finance minister to presenting the first paperless budget to giving the longest budget speech. She will have another first when she presents her seventh budget in a row on July 23―the first non-Congress finance minister to do so.
Sitharaman is expected to make more than just statistical history―a lot will be riding on her budget speech. And there have already been some hints. “This budget will be an effective document of the government’s extensive policies and futuristic vision,” said President Droupadi Murmu in her joint address to Parliament a month ago. “Alongside major economic and social decisions, many historic steps will be highlighted.”
The new Modi government had signalled continuity by retaining most of the cabinet even though the Prime Minister had to rely on allies to secure a majority after the Lok Sabha polls. The budget, however, will have to address political considerations while maintaining fiscal consolidation and pushing growth. The massive mandates Modi received in 2014 and 2019 had given the government a lot of elbow room to push reforms. With an energised opposition trying to corner the government on every possible occasion, the government may be inclined to take a more populist route.
Two key allies―the Telugu Desam Party and the Janata Dal (United)―run governments in Andhra Pradesh and Bihar, respectively, and they have been vocal in demanding special packages for their states. They seek financial assurances to let Modi pursue his political agenda. How far the Modi government goes to address their needs would set the contours of the remaining term of the government. The budget, which is the first major policy document of the government, is expected to rely on the BJP’s manifesto for fulfilling many of its promises on social welfare, cultural and reforms fronts.
The Rs2.11 lakh crore dividend given by the Reserve Bank offers the government sufficient financial cushion. It would come in handy in addressing the needs of the alliance parties and extending carrots to the sections of the population that ditched the party in the Lok Sabha elections.
A lot has changed since the interim budget in February, when the government, confident of getting a third term, did not announce any pre-poll sop. The marginalised, poor, rural population, women and middle class, affected by the spiralling inflation, voted for a stronger opposition.
The salaried class has not been given any significant relief of late. Though less than 2 per cent of the total population, they account for a large chunk of direct tax collection and play a crucial role in shaping public opinion. Sitharaman may give some relief to them by revising the tax limits so that they get more money in their pockets, which in turn would boost consumption and savings. Though the economy grew 8.2 per cent in the last fiscal, consumption has not been keeping pace with it.
“When the finance minister presents the budget, we are sure she will consider every aspect of tax structure, asset class, where all taxpayers can be benefited,” said a party leader.
Several review meetings were carried out by the BJP leadership to analyse how the rural population and women were swayed by the Congress’s promise to give Rs1 lakh every year. The government may opt for enhancing the workdays under the MNREGA scheme. “Women have emerged as the main swing voters who can change the elections,” said a BJP leader, indicating that the budget would have enough for them. “The government has given 33 per cent reservation in seats, last year, indicating its intent. But the population needs something tangible in their hands.”
Job creation remains a potent emotional factor among the people, not just the youth, as the recent election campaign and the results have shown. Creating job opportunities will come through continued focus on building infrastructure and enhancing the manufacturing and the services sectors.
In the past, the BJP had cited electoral mandates behind its ideological commitments, be it abrogation of Article 370 or implementation of the Citizenship (Amendment) Act. The humbling mandate in the recent polls seems to have forced the party to recalibrate. Would it provide immediate relief through sops rather than schemes that have long gestation periods? A certain salutary message to those impacted by policy changes and unexpected events in the recent years is a political need it cannot ignore.
The BJP even set up a six-member panel to collate feedback and sent it to the finance minister. “In the last few budgets, it was laying of the tracks. Most of the structural reforms are already there. Now, we will move ahead. More reforms will be there. It will be a growth oriented budget for sure,” said party spokesperson Syed Zafar Islam, also a member of the panel. “We are already contributing 18 per cent to the world GDP. The kind of momentum we have in economic activities, we expect the government to capitalise on the momentum for more job creation and higher private investments.”
Modi could deliver the electoral message using his appeal with consistent nurturing of the beneficiaries. However, when beneficiaries get used to a particular facility or do not get it, resentment grows. That is when attractive sops influence the voting patterns.
Since the Lok Sabha poll results, the BJP governments in Uttar Pradesh, Madhya Pradesh, Haryana and Rajasthan have presented state budgets where sops have been announced for the poor, women and farmers through stipends, increased spending, free bus rides and reduction in oil prices. This was to address the immediate concerns of the population.
“Budget is an exercise where inputs are taken from every section of the society,” said Islam. “It has nothing to do with the elections. We are the single largest party with 240 seats. We make policies after feedback from the diverse groups.”
As assembly elections in Haryana and Maharashtra are round the corner, the government may focus on target groups like the farmers, women, youth and the OBCs. There have been indications that earnings of farmers would be increased by strengthening the PM Kisan Samman Nidhi (Rs6,000 a year), expanding infrastructure for farmers for storage of grains and crops, extending credit and promoting crop diversification to tide over the increased political pressure for legalising minimum support price for crops.
Schemes like MNREGA and Agniveer also have a strong salience in rural India. As the opposition has turned the lacunae in the Agniveer scheme into a political weapon, the Modi government has major work at hand. Former Madhya Pradesh chief minister Shivraj Singh Chouhan, who has been given agriculture and rural development ministries, would need something more in the budget to navigate the tough terrain ahead.
While Nitin Gadkari may continue to raise capex for building highways, he would also need budgetary support to keep up the pace. The budget is expected to increase allocation for the health sector to increase the number of hospitals, set up more medical colleges, and even increasing the scope of health insurance from the current Rs5 lakh. The BJP had promised the benefits of health insurance to the senior citizens. Sitharaman may announce the new scheme in the budget.
The BJP had also promised more trains, be it Vande Bharat or even bullet trains. Given the political significance of the ministry, as it serves a large section of the population, the allocation is set to increase.
The budget session is likely to be stormy with the opposition trying to put the government on the mat on issues like question paper leaks, inflation and rural distress. The budget, however, will provide an opportunity for the government to grab some positive headlines by giving people something to cheer about.