1. Budget 2018: No bitter pill this time? 5 reasons that make union budget a tough task for Modi government

Budget 2018: No bitter pill this time? 5 reasons that make union budget a tough task for Modi government

Budget 2018: PM Narendra Modi and FM Arun Jaitley will be much cautious in 2018 - as it will the last regular Union Budget before 2019 Lok Sabha elections. Significantly, after coming to the helm in 2014, Modi had spoken of a 'bitter medicine' to treat the ailing economy.

By: | Updated: January 18, 2018 1:05 PM
Budget 2018: PM Narendra Modi and FM Arun Jaitley will be much cautious in 2018 - as it will the last regular Union Budget brfore 2019 Lok Sabha elections. Budget 2018: Union Budget 2018 will be Modi government’s last regular budget before 2019 General Elections.

Budget 2018: Narendra Modi came to power in 2014 with big promises of development and job creation. Required for the same were some tough economic reforms and a model which would bring transformational changes in the India economy. The government made unprecedented moves in terms of advancing the budget, merging the Railway Budget with Union budget, the scrapping of old notes, steps for ease of doing business, and most recently – bringing in the Goods and Services Tax (GST). Significantly, after coming to the helm in 2014, Modi had spoken of a ‘bitter medicine’ to treat the ailing economy. “Taking tough decisions and strong measures in the coming one or two years are needed to bring financial discipline which will restore and boost the country’s self-confidence”, Modi had said at a time when his political catchphrase of “Acche Din” was still fresh in voters mind. However, the prime minister will be much cautious in 2018 – as the budget will be his government’s final bid to please people before 2019 General Elections. Let’s look at some aspects which can affect PM Modi’s Budget 2018:

Last full-fledged budget of Modi government

With general elections scheduled to take place in first half of 2019, Budget 2018 will bring a number of challenges for Modi government. First and foremost, Finance Minister Arun Jaitley will face the task of bringing in a popular (if not populist) budget and at the same time sticking to the fiscal discipline. Many experts believe the government, which has been facing the flak from the middle class, may bring in some income tax relief and other sops for the people. However, with the introduction of new tax regime and a subsequent fall in revenue collections, it’s almost certain that government will not meet the fiscal deficit target this year. It has already announced an additional borrowing of Rs 20,000 crore in the current financial year.

Read | Budget 2018: Cut taxes, ease labour laws and spend more – It’s time to be bold, Mr Arun Jaitley

First since the rollout of GST

A big difference in Arun Jaitley’s Budget 2018 speech will be that it won’t include tinkering with indirect taxes. With the introduction of Goods and Services Tax, the task of making changes in the indirect taxes — except for customs duty — has been transferred to GST Council – a body which comprises representatives from the Centre and the state. Hence, this time the government will not be able to tweak indirect taxes in accordance with its political goals. The aftermath of GST introduction and its visible impact on Gujarat elections remains a cause of concern for the BJP. Like Gujarat, the party has to address the needs and wants of small entrepreneurs of the entire country.

Rural India on top

If Gujarat elections were an indication of the national mood, Bharatiya Janata Party is in an urgent need to address the concerns of rural India in Budget 2018. Also, there have been a number of farmer protests across the country, significantly in large states – like Maharashtra, Rajasthan and Madya Pradesh – that contribute significantly to party’s Lok Sabha count. Numbers also echo the story of farmers’ misery. In a sharp decline, the farm and allied sector grew at 2.1 per cent in the current financial year as compared to 4.9 per cent last year. Reforms in the sector may also contribute in terms of job creation – another challenge the government is facing. Jaitley needs to formulate a roadmap which adds

New path to fiscal consolidation

The introduction of GST has brought in heightened fiscal deficit challenges for the government. In the current year, the fiscal deficit is likely to stay lower than 3.5%, but the government is not expected to meet the target of 3.2% laid out in the Budget for current financial year. In Budget 2018, the government will face the task of making a road map for reaching it fiscal target. The government has proposed to lower the fiscal deficit to 3.2% of GDP in FY18 from 3.5% in FY17.

Watch | Budget 2018: Why There’s A Good Case For Bringing Petrol Under GST

Eye on the incomplete work

The government is facing some tough questions on the account of job creation and economic growth. Despite whirlwind efforts from Modi government, the investments have declined from 34.3 per cent of the GDP in 2011-12 to 27 per cent in 2016-17. For 2017, some of the advanced investments have further fallen to 26.4 per cent in 2017-18. Estimates of the Centre for Monitoring Indian Economy (CMIE) show that new investment proposals are likely to amount to around Rs 8 trillion ($126 billion) in 2017-18. Also, an analysis by Mahesh Vyas for the agency shows that 1.5 million jobs were lost during January-April 2017. In this period, the estimated total employment during the period was 405 million compared to 406.5 million during the preceding four months, September-December 2016. As Modi goes to elections, he will have to face the youth, which overwhelmingly rallied for his vows on providing employment opportunities in the country. The Budget 2018 must focus on job creation.

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