New Delhi: Finance Minister Arun Jaitley will present arguably his toughest Budget yet on Thursday as he seeks to address agriculture distress, create jobs and boost growth while at the same time stick to fiscal prudence.
There are a lot of question marks over what is there in store for the taxpayers – will the farmers get any incentives, should the middle class expect any income tax relief, what will be done about jobs and what role will the upcoming elections play.
In view of upcoming assembly polls in eight states - including three major states ruled by the BJP - and general elections next year, the Budget may see new rural schemes and stepping up of funding towards existing programmes like MNREGA, rural housing, irrigation projects and crop insurance.
With the recent elections in Gujarat indicating erosion of BJP's rural vote base, Jaitley may also unveil incentives for the farm sector.
Small businesses, which have traditionally formed the core support base of the BJP, too may get some sops to ease pain caused to them due to chaotic rollout of the Goods and Services Tax (GST) and demonetisation.
There is also an expectation that common man may get some relief in income tax by way of a raise in the exemption limit.
Also on Jaitley's menu may be upping spending on infrastructure projects like highways and modernisation of railways to boost economic growth that is at a four-year low.
But he has to do all this while sticking to the road map of narrowing one of Asia's largest budget deficits, as failing which, India may fall on the wrong side of global investors and credit rating agencies which had late last year handed out a rare sovereign upgrade.
The target Jaitley had previously set out was to lower the fiscal deficit to 3.2 per cent of the GDP in the current fiscal and to 3 per cent in 2018-19, the Budget for which he would present in the Lok Sabha on Thursday.
Prime Minister Narendra Modi seemed to have already lowered expectations of mass voters swaying announcements by indicating that the Budget may not populist and that it was a myth that common man wants sops.
This will be India's first post-GST Budget and is being keenly watched to see what Jaitley does to boost growth in Asia's third largest economy.
There are talks that tax break on capital gains from stock investments may go and it remains to be seen if Jaitley will finally show some movement on his 2015 promise to lower corporate tax rate to 25 per cent from 30 per cent over four years.
He has to manoeuvre all this within limited scope of tinkering with tax rates given that central excise duty, which was levied on goods manufactured in the country, and service tax have both been subsumed in the GST and he no longer has the sole power to fix rates on them.
Also constraining him would be the rise in global oil prices, which can stoke inflation as well as widen current account deficit.
There have been mixed signals on deficit target, with Chief Economic Adviser Arvind Subramanian earlier this week stating that a pause in the fiscal consolidation plan can't be ruled out while Niti Aayog vice chairman Rajiv Kumar saying the government is likely to stick to the target.
In the first eight months of 2017-18, fiscal deficit reached 112 per cent of the target, stoking fears of a fiscal slippage. The shortfall was largely due to reduced dividends from government companies, which the government looks to bridge through stake sale in state-owned firms like HPCL.
Scrapping the colonial-era tradition of presenting the Budget at the end of February, Jaitley had for the first time presented the annual accounts on February 1 last year. The Budget presentation was advanced by a month to ensure that proposals take effect from April 1, the beginning of the new financial year.
Also, the nearly century old tradition of having a separate budget for the railways was scrapped and merged with the general budget.
The Union Budget 2018-19 would be the last full Budget of the BJP-led NDA government before the 2019 general elections. As per the practice, a vote-on-account or approval for essential government spending for a limited period is taken in the election year and a full-fledged budget presented by the new government.
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