Editorial round-up: A budget for an election year

Thursday saw the Finance Minister present his highly anticipated budget - his government’s fifth. With subdued economic growth over the past year, the budget was aimed at easing farm distress and addressing a challenging fiscal situation. The budget also came before elections in eight states this year and ahead of the 2019 polls.

The budget, as any, aims to strike a balance between spending and cuts to expenditure. The fiscal responsibility always remains the tight rope the finance minister has to walk.

The Hindu editorial described the budget as one which will be judged on whether it can bridge the gap between populism and fiscal prudence –

“…populism seems to have gained an upper hand in Arun Jaitley’s latest effort. The Budget has reported a fiscal deficit of 3.5% (of GDP) for FY18 and pegged it at a high 3.3% for next year. Mr. Jaitley has homed in unerringly on the root causes of distress — unremunerative farm incomes, unemployment, lack of social security nets and the squeeze on the middle-class taxpayer”.

The budget brings with it sops for farmers and rural households in the form of free gas connections to three crore new households, free electricity connections to four crore homes, two crore new toilets under the Swachh Bharat Mission.

“Mr. Jaitley has announced a laundry list of ameliorative measures. While his intent is clearly welfarist, resource constraints have forced him to rely significantly on extra-budgetary resources and external agencies to give life to many proposals. If they fail to materialize, it can lead to a gap between promise and delivery”.

For rural India, the policies are liberal in terms of incentives, understandably given the stress the farming sector has endured. For the middle class and corporates, the budget isn’t very giving in terms of changes in Income Tax exemption limit and a corporate tax rate cut.

The Times of India editorial stated that the budget was filled with old ideas –

“The Narendra Modi government’s last full Budget has chosen to tilt heavily in favor of its political priorities. This is a Budget mainly with an eye on the next general election. India’s restive rural economy was the focus of much attention in finance minister Arun Jaitley’s speech”.

The policies, particularly the rural schemes, were similar to ones past in terms of plans to increase farmer incomes through increasing Minimum support prices (MSP) for monsoon-sown crops such as rice, soybeans, cotton and pulses. In the wake of widespread protests by farmers last year due to falling commodity prices and high debt levels, it comes as no surprise that they were the main focus in the budget.

“Jaitley announced a generous increase in the Centre’s health insurance package with a cover of Rs 5 lakh annually per family for hospitalization. But to what extent it can be funded and what its reach will be remains to be seen”.

“On balance, this is best described as an election budget. Triggering the economy’s animal spirits is not what it is about. This is odd as the absence of fresh investment will help no one and hurt economic growth”.

One of the major announcements in the budget was the National Health Protection Scheme. This is an ambitious healthcare programme that would cover 10 crore families with a medical insurance of Rs 5 lakh per annum.

The Indian Express editorial called the budget one with a blurred vision in terms of spelling out how certain initiatives; especially the ambitious healthcare programme will be paid for –

“The proposal to have a flagship scheme providing over 10 crore poor and vulnerable families with an insurance cover of up to Rs 5 lakh for secondary and tertiary care hospitalization is certainly welcome. The fiscal cost of subsidizing the premiums on this scheme — without which no insurer would be willing to take it up — is not known. But it is something that is worth funding”.

The government had to also deal with the deficit targets that it had set. Breaching the targets and seeing how interest rates changes, if any, will impact the economy remains to be seen. With the stock market at highs, though the day after the budget it noticeably took a fall, there was imposition of a long term capital gains on stocks and equity mutual fund units.

“The overwhelming feeling is of an opportunity missed again — at a crucial time when there is synchronized global growth and many of the so-called fragile economies the FM referred to are also slowly bouncing back”.

While some coined the budget as being politically calculating and fiscally expensive, the Livemint editorial stated that the budget stuck the right balance, even though the focus was on the rural sector –

“As was widely expected, the focus of the budget was agriculture and the rural sector, though there was something or the other for most stakeholders in the economy. Overall, the increase in expenditure and reduction in taxes have meant that the fiscal consolidation will be slower than initial targets”.

“It was always going to be a difficult balancing act between addressing rural distress, which is bound to have electoral consequences for a democratically-elected government, and maintaining the record on fiscal discipline. Any analysis of the budget should be done in this context”.

Heading into a year with state elections and 2019 on the horizon, the Hindustan Times editorial stated that this budget, the last full budget of this government, is the budget that India needs. It points out that the budget is a good bellwether of what BJP and Modi sees as the main voters to court in the coming months –

“Union budget 2018 will be remembered for its political finesse. The result is an expansionist budget that sees India missing its fiscal deficit target for the first time since this government came to power in 2014. The government expects to miss next year’s target as well”.

The editorial also points to the ambitious healthcare initiative launched and echoes what others have stated that this being the world’s largest public health insurance programme can help in the long run if structured properly.

“The contents of Union budget 2018 are a good indication of what the Bharatiya Janata Party under Narendra Modi considers its main political constituencies. And, in a year with eight state elections, and ahead of the 2019 Parliamentary polls, it is exactly the kind of budget the BJP needs”.

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