Jobs, sops for farmers may figure in Goyal's Budget

Piyush Goyal gestures while giving final touches to the interim Budget at North Block in New Delhi. PTI

Against the backdrop of jobless growth of economy, the Modi government’s last Budget is likely to be high on employment promises and may incorporate a decent package for rural India. There may be direct income support for farmers and benefits to the salaried class, all with an eye on general elections.

But it is highly unlikely that Union Finance Minister Piyush Goyal will be able to give a two-fold hike in income tax exemption limit from Rs 2.5 lakh to Rs 5 lakh, given that the fiscal implication of the move will be huge and unsustainable at a time when the Centre is planning a large direct income transfer to farmers.

A back-of-the-envelope calculation suggests that a Rs 10,000 increase in basic exemptions leads to nearly Rs 2,000 crore of loss in taxes. This will have a serious implication on fiscal deficit, the target for which is already under threat of being breached for the second year in succession.

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Sources said Goyal may go for an increase in standard deduction limit under Section 80C of Income Tax Act from Rs 1.5 lakh to Rs 2 lakh. This will leave more disposable income in the hands of people.

He may even go for a mix of two: Raising basic exemption limit in a small measure coupled with some standard deductions, an official said, adding it is a tightrope walk for the government on fiscal deficit front and that striking a balance between the package for rural India and middle class would be difficult.

On farmers’ front, the interim Budget may give a broad estimate of expenditure on the direct transfer of a certain amount in the account of
farmers.

It will also make provision for a couple of months beyond which a fresh provision can be made by the new government. The scheme of money transfer may not be universal to start with. It will concentrate on poor and marginal farmers.

A scheme similar to Rythu Bandhu of Madhya Pradesh may be in the offing with an estimated expenditure of Rs 1 lakh crore for a financial year. Amid all that, the market may be looking for three most sacrosanct numbers of fiscal deficit, gross Centre’s borrowings and disinvestment. On fiscal deficit front, rating agencies and policy makers have warned the government against crossing the red line. The Centre is far behind its disinvestment target of Rs 80,000 crore in 2018-19. According to Care Ratings, the market will be comfortable if the government does not revise divestment numbers.

Rly fare hike unlikely

The Centre is unlikely to hike railway fare, instead it may give more focus on better passenger amenities and safety.

The government may propose to spend around Rs 1.6 lakh crore in 2019-20 for the improvement of national transporter in its last Budget to be presented by Finance Minister Piyush Goyal, who is also holding the railway portfolio.

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