Aspirational Budget 2019

Union Budget 2019 – Exceeded Expectations

Amidst the honco of high growth and reducing retail inflation this pre-Election Budget largely fulfilled the expectations of farmers, middle class, real estate. Disposable income in the hands of salary earners and the middle class would jump due to the increase in IT exemption limit to Rs.5.lakhs, up to Rs.50000 standard deduction and non-taxable income from bank and post office deposits up to Rs.40000 and this would surely spur the domestic savings stagnated at around 30% till now and also stimulates the demand.

Farmers certainly have something to cheer. All farmers having less than 5acres would get monthly income of Rs.6000 under direct benefit scheme. There were 12.76cr operational holdings under the command of farmers owning below 5 acres according to Agriculture Census. At the allocation of Rs.75000cr against this item of budget at Rs.6000 it can reach only 12.5cr if there was no further subdivision and fragmentation. But such a measure alone is a big bonanza for farmers. Integrated look at agriculture sector – animal husbandry and fisheries also got a big boost. One can’t expect more from interim budget. Tenant farmers are just ignored although 80% of suicides occurred in this group that has a share of 14% of land under cultivation according to the NSSO data.

Micro and small enterprises having loans up to Rs.1cr would get interest subvention of 2% for the first time. We should hope that this benefit would reach the intended and the banks would not take advantage of this concession.

NDA did well in the cleanliness drive; but performed poorly in providing safe drinking water. While the NDA spent 77% of allocation on this score, still its reach to the poor is far too distant. If the reach improves, expenditure on health may decline. Coupled with this, environmental clean up providing for fresh air should have been provided at least 2% of the Budget in line with the Climate commitments to the UN.

In this backdrop well calculated Fiscal Deficit would cross even the 3.4% of GDP. CAD at 2.3% is on sensitive border. If the oil prices go northwards, then this will upset the apple cart of growth and lead to higher inflation than the one taken forgranted at little above 2%. It will cross 5.5% during the next six months. Even RBI inflation expectation at 4% will have a zolt. 

Mention was made about Banks and NPAs. While the reforms like the IBC code accelerated the recovery process from the corporate loans much more clean up is required in the stables of banks, looking at the staggering frauds of Rs.41,500cr and the recent sacking of ICICI Bank CEO. Lot more is needed in improving governance over which the FM had no word.

Education is in a big mess and Employment is in doldrums. It is strategy rather than spending that requires attention in both the cases and real time monitoring is the need of the hour. This did not get any attention. Draft Employment Report of NSS unfolded a big rise in unemployment. When 55% of the population is below the age of 25 years, strategies for employment and enterprise promotion, and education are clear areas of neglect in the budget.

Budget understandably is at best an estimate. Although NDA has displayed better spending of the allocations, outcomes need regular monitoring and this should be done within the public glare.