Budget 2019: Announcing sops for farmers would not upset next year’s fiscal math

Interim Budget 2019: With the Modi government’s final budget before 2019 polls expected to be more than vanilla vote-on-account, announcing sops for farmers would not pose a huge problem to the fiscal math for the next financial year 2019-20.

Any such schemes would see “staggered implementation”, Kotak Securities said in a report. Finance Minister Piyush Goyal, who once again took over from Arun Jaitley on account of his medical treatment, will present the Budget on February 1.

The farmers of the country faced two consecutive drought years between 2014 and 2016 and deficit rainfall in 2018-19 causing a huge agrarian crisis in the country. The agitation among farmers, hit by the double whammy of bad monsoon and demonetisation, is said to have led to the ouster of the Bharatiya Janata Party (BJP) government in three states: Madhya Pradesh, Rajasthan and Chhattisgarh.

Soon after the results, the NDA government began mulling several announcements for the farmers, who form a majority of decisive rural voters. The government is soon expected to announce a slew of sops for the farmers including cash transfers and zero-rated farm loans.

The expectation is even as the government will miss the fiscal deficit target of 3.3% in FY19 by 20 basis points, the interim budget 2019 will show fiscal consolidation of 3.2% for the next financial year 2019-20 even with farmers-related populist measures.

“Even if the government announces measures for the rural sector we believe that it will be a staggered implementation with limited implication in the FY2020 (interim budget 2019) budget,” Kotak Securities noted.

While populist sops for farmers may not be a huge problem, lower-than-expected indirect tax collection and disinvestment of PSUs are expected to wreck the fiscal plan for 2019.

In the first eight months of the financial year 2019, the fiscal deficit touched 114.8% of the full-year target of Rs 6.24 lakh crore at the end of November on account of lower revenue collections. At the end of November 2017, the deficit was 112% of the Budget Estimate (BE).