Finance Minister Piyush Goyal in absence of Arun Jaitley will present the Interim Budget in the Lok Sabha on 1st Feb that will be a full-fledged budget of the BJP led Government ahead of the upcoming Lok Sabha Polls in which tax benefits for the working class and the corporates are expected along with relief packages to farmers and the small scale sector.
Goyal was given charge of the finance portfolio in place of Arun Jaitley who is in the US for medical treatment, is expected to make this budget a “please all” budget considering the elections just around the corner.
Traditionally, in the run-up to the general elections, an Interim Budget is presented primarily to seek a vote-on-account for a few months to keep the official expenditure running for existing programmes so that a new government could present a full budget.
The income tax benefits are rumoured to include an increase in the threshold exemption limit for middle-class taxpayers, considered loyal voters of Modi. The exemption threshold may go up from the present Rs. 2.5 lakh to Rs. 5 lakh per annum as per media reports. The corporates have also been expecting a reduction in the peak rate from 30 to 25 per cent.
Farmers are also expected to receive good attention from the BJP Govt after the recent election defeat of the BJP in the Hindi heartland states of Madhya Pradesh, Rajasthan and Chhattisgarh on the back of stress.
Direct investment support up to Rs. 15,000 per hectare for small and marginal farmers along with interest-free loans and nominal premium on the crop insurance scheme are expected to be announced by Goyal.
Micro, small and medium enterprises (MSME) sector which was hit badly by the demonetisation decision of 2016 and GST implementation last year, the budget could incentivize this sector and may ease their flow of credit.
There are concerns that the expected giveaways could lead to ballooning of the fiscal deficit, especially in the wake of the shortfall in tax collections, particularly GST revenue.
These goodies may pose a major challenge to the government meeting its fiscal deficit target of 3.3 per cent of the GDP as the GST revenue targets have also not been met by the government this year.
Although Modi Government has been known as a government which do not believe in taking only populist measures to woo voters, this interim budget may be aimed at defying this logic due to upcoming Loksabha elections.
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