Will FM Arun Jaitley give a rural touch to Budget 2018 or will he hold on to fiscal prudence? -Shantanu Nandan Sharma

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published Published on Jan 28, 2018   modified Modified on Jan 28, 2018
-The Economic Times

After Gujarat returned the ruling BJP with a slim margin, the chorus of the establishment was "jo jeeta wohi sikandar" (He who wins is the king). It seemed apt, considering that the party retained Prime Minister Narendra Modi's home state, bunking anti-incumbency of 22 years. But opposition wags responded with "jo sikha wohi sikandar", he who learns will be king, in 2019, in the next general elections.

Rural Gujarat, particularly its backward and agriculture-dominated Saurashtra, decisively voted against the ruling party, cautioning the establishment ahead of the big battle next year. So, it's not difficult to hazard that the last full budget before the elections will see Finance Minister Arun Jaitley stress the government's agenda for rural India and urban poor. He is also likely to avoid slashing the corporate tax, for example, lest it offer fodder to the Opposition to call the budget pro-rich.

Does that mean, Jaitley will shower largesses on farmers and small scale industries at the cost of fiscal deficit targets? Possibly not, if the officials indirectly connected to the Budget and those who ET Magazine talked to, are to be believed. If the FM discards the Fiscal Responsibility and Budget Management (FRBM) panel's fiscal deficit target of 2.5% of GDP for 2022-23 — India's credibility as an investment destination will be severely dented. And rating agencies could see the move as hobbling the country's ratings.

Besides, the FM has little leeway when crude prices are inching towards $70 a barrel and petrol prices in Mumbai was Rs 80 per litre early this week affecting ordinary citizens.

Future for Farmers

India imports over 82% of its crude requirement and an increase by a single dollar means it inflates the country's net import bill by $0.5 billion when factoring in Petroleum Planning and Analysis Cell's estimates for FY 2017-18. Similarly, a spike in the minimum support price (MSP) to insure farmers against any sharp fall in prices, will push food inflation, something that the government can ill-afford in an election year.

And that's possibly why Prime Minister Modi hinted in an interview to Times Now earlier this week that the forthcoming budget might not be predictably a populist one. "When elections come near, politicians start distributing things and they keep competing about it. One says I will give this much, the other tries to top it," he said. In his 50-minute speech at the World Economic Forum in Davos he chose to drive home the point that India is now among the global financial elite. Such a narrative — just like flying in a seaplane from the Sabarmati riverfront on the last day of campaigning in Gujarat — is also targeted at the domestic audience as it resonates with voters across economic divides.

But how will Jaitley then address farm distress and the tardy pace of employment generation? Without referring to the budget, NITI Aayog vice-chairman Rajiv Kumar says the government is putting in place some actions that will double the income of the farmers without necessarily increasing the MSP.

"We need to quickly change our approach to agriculture so as to increase farmers' income. The use of MSP as the only instrument of raising the farmers' income is unsustainable," says Kumar, adding how a tomato farmer's income will rise at least four times if he produces his tomatoes for tomato puree, currently an import item. Tomato puree is used for soups, stews, sauces and other dishes. Sanjiv Puri, the CEO of ITC, a company with interests in agri-business apart from tobacco, hotels and FMCG, says there's a need for greater corporate involvement in agriculture sector. "Greater impetus on encouraging corporate involvement in spreading best farming practices and post-harvest technologies will go a long way in securing the future for farmers, as also create a large number of new knowledge-based jobs in the agri services sector," says Puri, adding how the food processing sector, which adds value to agricultural produce and combats agri-wastages, can turn into a game changer to help achieve the government's objective of doubling farm income. A government task force, under a special secretary in the Ministry of Agriculture and farmers' welfare and private experts, is in place to find ways to raise farmers' income. NITI Aayog recently facilitated some successful farmers, including a renowned apple and papaya grower from Uttarakhand, to share their success stories with the PM.

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The Economic Times, 28 January, 2018, https://economictimes.indiatimes.com/news/economy/policy/will-fm-jaitley-give-a-rural-touch-to-budget-2018-or-will-he-hold-on-to-fiscal-prudence/articleshow/62676

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