Eye on Election: Rebates, Sops and Largesse in Budget 2019

A number of major announcements made in the budget seem to have an eye on election.

With less than 100 days to go for the general elections, Budget 2019 was always going to be a platform for the government to score political brownie points. Unsurprisingly then, Piyush Goyal breached the convention of not announcing any major schemes or reforms in interim budget, especially those related to taxation.

Here is a lowdown of all the Budget 2019 decisions which seem to have been taken with an eye on the upcoming elections:

Wooing The Middle Class

The blockbuster announcement of the budget has to be the full rebate that the government has proposed for all taxpayers with taxable annual income of up to Rs 5 lakh.

The announcement aimed at the salaried middle class can potentially benefit 3 crore taxpayers, according to Piyush Goyal’s estimates. The estimate cost of this giveaway is going to be nearly Rs. 18,000 crore.

The government has also announced other tax sops for the salaried class. The standard tax deduction for salaried persons has also been increased from Rs 40,000 to Rs 50,000, while the TDS threshold on interest on bank and post office deposits has been raised from Rs 10,000 to Rs 40,000.

Will this be enough to woo middle class voters?

PM Kisan Yojana: Eyeing The Rural Votes

In recent times, the ruling BJP has seen their rural votes chipping away considerably. The trend can be traced back to the Gujarat assembly elections in December 2017, where Congress performed better in the rural pockets despite losing the election.

More recently, in the three states of Rajasthan, Madhya Pradesh and Chhattisgarh, the saffron party received an even severe blow. In the three states together, BJP had won 294 rural seats in the 2013 assembly election. The tally nearly halved to 153 seats in 2018.

With agrarian distress and subsequent anger in the rural pockets escalating, the government has now introduced the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)”. The scheme will provide farmers owning up to 2 hectares of land with a direct income support of Rs 6,000 annually.

Quite like the income tax rebate, this scheme is expected to cover a huge majority of its target group. The 10th agriculture census shows that 86.2 percent of all farmers in India hold less than 2 hectares of land.

Will the last minute placating work especially when rural distress has assumed an alarming proportion? Experts aren't too convinced.

This decision too holds huge political capital. The scheme will provide the amount in three installments, Goyal said in his budget speech. Since, the scheme has been announced retrospectively from 1 December 2018, the first installment is expected to reach the farmers by March.

Assuming that the installments would be of Rs 2,000 each, it would mean a huge number of farmers getting the amount right ahead of the general election.

Furthermore, the government has also announced a Rs 60,000 crore allocation towards MGNREGA, up from Rs 55,000 in the last budget. The scheme has seen a constant increase in allocation under the NDA regime even as PM Modi termed it as “living monument of UPA’s failure” in 2016. Amid the furor over drying up of employment, the government simply cannot afford to overlook a scheme that promises 100 days of work in a year in rural areas.

Addressing The Burgeoning Unorganised Sector

A direct fallout of the agrarian distress is people migrating to cities in search of jobs beyond farming. This implies to a burgeoning unorganised sector which makes up about 90 percent of India’s workforce comprising of domestic help, drivers or construction workers, for instance.

The government has announced a pension scheme named 'Pradhan Mantri Shram-Yogi Maandhan' for the unorganised sector workers, which will provide a monthly pension of Rs 3,000. Those joining the scheme would pay a monthly contribution of Rs 100 if they are over 29 years of age, and lesser if they are younger.

The challenge that the government might face in case of this scheme is on the level of implementation. The very fact that the potential beneficiaries of this scheme are ‘unorganised’ might make it difficult to maintain a seamless execution of the process.

Attempt To Win Back the SC-ST

Much like the rural voters, those belonging to the SC-ST categories have also handed the BJP a raw deal in the recent elections on the Hindi heartland. The party which had won 128 of the seats reserved for SC and ST categories in 2013 in the three states combined, managed only 59 of them in 2018.

Besides, increasing incidents of caste atrocities have exposed the fault-lines. A number of experts have pointed out that the ruling party might find it difficult to repeat its performance of the 2014 general election, which saw a consolidation of votes in its favour, across caste divisions.

Accordingly, the government has increased its allocation for the both SC and ST welfare.

The allocation of Rs 56,619 crore made in BE of 2018-19 for Scheduled Caste has been further increased to Rs 62,474 crore in the revised estimate. Moreover, Rs 76,801 crore has been allocated in the budget estimate for 2019-20, an increase of 35.6 percent over BE of 2018-19.

For the Scheduled Tribes also, proposed allocation in 2019-20 is Rs 50,086 crore as against Rs 39,135 crore in 2018-19, an increase of 28 percent.

Real Estate: The Real Champion?

Following the budget, a number of experts are of the opinion that the real estate sector has scored a big win. In a major announcement, the government has proposed to extend the benefit of self- occupied property to two houses via exemption of notional rent on second self- occupied homes.

Thus, if an individual has two houses and one is self occupied, he/she will not be charged income tax on the notional rent for the second house. Earlier, one had to pay income tax on the second property even if it was lying vacant, based on notional rent calculated as per tax rules.

The budget also seeks to extend the benefits under Section 80-IBA of the Income Tax Act for one more year - to housing projects approved till March 2020, which will boost supply of affordable housing.

The two proposals can also be seen as an extension of the tax sops given to attract the urban middle class, often billed as a core vote base of the BJP.