Faltering economy or impending polls

Rajeev Jayaswal

Finance Minister Arun Jaitley will present his fifth Budget in a row on the first day of February. By now, he must be a master funambulist, a veteran tightrope walker like most of the Indian housewives, who manage their households despite rising inflation and shoestring budgets. 

FM Jaitley also needs to do a similar jugglery, find a balance between dwindling revenue and the party's clamour to woo voters, particularly the urban middle class and the farmer.

The ruling BJP now realises that it has estranged the rural voter. It has been quite evident in the Gujarat assembly election. The party had somehow managed to win Gujarat after making a huge sacrifice in terms of the GST revenue. The Modi government's largesse ranged from the banal and populist Gujarati namkeens like 'khakra' as also rendering the controversial 28 per cent GST slab redundant by moving 178 items to the lower 18 per cent slab to win over the state's business community. While the move swayed the urban Gujaratis, the rural voters remained sullen. 

The General Election now looms ahead and the party faithful would like Jaitley to unveil exclusive packages for rural India in the Budget. Even if FM Jaitley would be tempted to win over farmers with a mega loan waiver plan, his hands will be tied because of the resource crunch. He is almost certain to breach the 3.2 per cent fiscal deficit target for the current financial year. Even if he were to recalibrate next year's borrowing target, a greater priority has to be on productive public expenditures to boost the economic growth and generate employment rather than freebies that would be distressful for the economy. 

It is the moral duty of the Modi government in general and the finance minister in particular to bring the economy back on the track. The economy, particularly the informal sector, is still reeling under the double whammy of demonetisation and ill-prepared GST. The Budget 2018-19 provides an opportunity to FM Jaitley to make a course correction to retain the upper hand in the coming general elections. 

MAJOR FACTORS TO INFLUENCE THE BUDGET 

The GST

• Don't expect changes in tax rates of goods and services 
• Low GST collection will restrict FM's largesse 

The 2019 General Election

• Budget may try to woo estranged rural voters
• Expect tax sops to entice the middle class

Tepid GDP growth

• Expect increased public expenditure to boost growth, create jobs 
• The 3% fiscal deficit target could be missed 

Crude oil prices 

• Will raise inflation concerns
• Pressure to govt to reduce taxes on petrol and diesel