Modi Launches a Startling Pre-Election Budget, Massaged by Creative Accounting -Jayati Ghosh
The aggregate macroeconomic impact of this Budget cannot really be assessed, since the actual fiscal stance is now so opaque.
Let’s get one thing clear. This is not an interim Budget, whatever the government finally agreed to call it. The sweeping promises made on both expenditure and taxation fronts are well beyond the limited minor changes that are supposed to be allowed in a vote-on-account or interim Budget.
For a government that officially has only a few months more to its tenure, this certainly crosses the borders of constitutional propriety. The Budget requires changes in the Finance Bill, which constitutionally should not be made by a departing government, and impose substantial commitments on spending (like cash transfers to small farmers) and taxes (like income tax relief) on a future government.
Maybe we are now, unfortunately, in a world in which all of that does not matter anymore, and there is no one in any position of authority to call the government out on this. In any case, it is obvious that this is a pre-election Budget with a vengeance. However, as has been typical of the Modi government, the Budget speech operated more on the optics than on the actual spending allocations and tax changes, and sought to create a feel-good impression without enough real changes that could change the direction of the economy.
Take the biggest-ticket item, which was widely expected, but still startling in scope. The Budget speech declared that “vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year.” This is declared to benefit around 120 million small landowning families – presumably on the basis of the Agricultural Census of 2015-16 that identified around 12.5 crore operational holdings of less than 2 hectares. It will be paid in three instalments of Rs 2,000 each.
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