The interim budget is anticipated to have “interesting features”, possibly including measures to tackle the farm crisis as well as tax benefits for the middle class, as it reaches out to key constituencies ahead of this summer’s general elections.
The nature of tax concessions that may be announced on Friday is not clear but sources indicated some of the sops may be available during the first few months of 2019-20 fiscal with the government promising to increase them if voted back to the office.
The government was widely anticipated to tweak tax rates in the 2018 Budget but refrained from doing so due to the fiscal implications, though it has repeatedly stated its philosophy to leave money in the taxpayer’s pocket for higher consumption. The government had announced the Ayushman Bharat scheme which required public spending and the GST regime was still settling down.
While there has been an expectation of the Modi government delivering on the most-watched element of the Budget this year, it was felt that conventions involving the interim budget may come in the way. But senior minister Arun Jaitley currently indicated that the government could initiate steps to address immediate challenges confronting the economy.
In February 2014, then finance minister P Chidambaram had undertaken “some interventions” in the form of a reduction in indirect taxes, arguing that they could not wait for the regular budget, which was issued in July. Similarly, in 2009, Pranab Mukherjee announced a stimulus package while responding to the debate in Parliament.
This time, addressing matters over farm distress and its impact on the overall economy is seen to be the top priority for the government, with interim finance minister Piyush Goyal expected to dedicate a major chunk of his maiden Budget speech to the government’s initiatives and outline the agenda for the future.
There is already speculation on how far Goyal would go on tax breaks — whether it will be a reworking of slabs or higher standard deduction, or be limited to concessions on the purchase of medical insurance. Like the bill to amend the Constitution for providing quotas to economically weaker sections, any proposal on tax-related changes may be tough to oppose by political parties though they may accuse the government of deviating from the convention.
There was considerable confusion on Friday over whether the government would present a full Budget or an interim one. Finally, there was clarification from the finance ministry that Goyal will present an interim budget.