India is perhaps the only country in the world where the annual exercise of presentation of the Budget excites so much comment, speculation and at times, even outrage. At the outset, it is pertinent to keep in mind that the general elections are scheduled for later during the year. Normally, it is a custom (though not a legal obligation) that the government of the day forbears from making any grandiose announcements and merely allocates the expenditure required for functioning of existing schemes and government initiatives till the elections are held. The rationale being that the new government, if any, may have free rein to bring in policies as it so desires. This version of the Union Budget is known as the ‘vote-on-account’ or the ‘interim budget’.
Having said that, we would not be surprised if substantial policy announcements are made at the time of the budget. With respect to the education sector, the stage is already set with the historic 10% quota announced just a few days back. Consequently, the budget may not see too many major announcements in this sector. However, we can expect some minor sops in terms of reduction in GST rates as already indicated by the Minister of State, Shiv Pratap Shukla. Such measures may drive down education costs in the short term for the middle class. This may be particularly relevant considering the impending General Elections.
On the agriculture front, Union Minister Radha Mohan Singh has made an emphatic assertion that the Union Budget 2019 will be dedicated to farmers. We can certainly expect measures aimed at alleviating the agrarian unrest that threatens to derail the government’s attempt at getting re-elected. Finance minister Arun Jaitley, who is currently on a sojourn in the US for medical reasons, has hinted at a farm relief package. A scheme involving direct cash transfer rather than convoluted measures such as increase in MSPs may be something which can be expected.
Despite the best efforts of US government, the world is moving towards sustainable development and cleaner energy sources. India has not shied away from this trend by recognizing the importance of solar and wind energy sources. We can expect some more sops for the solar and wind energy sectors. Major investment announcements in the power sector may be all but ruled out considering the fetters imposed by the impending general elections. However, the renewable energy sector can expect some encouragement in terms of tax breaks and subsidies.
On the tax front, the importance of indirect taxes in the budget has substantially decreased with the introduction of the GST regime. At the most, tweaks in the customs law can be expected. On the direct tax front, raising of the personal income tax threshold can be expected with the Government keeping a canny eye out on the General Elections. Trade bodies have made other demands such as addressing tax concerns of angel investors, decreasing the tax rate on LLPs, etc. It remains to be seen if the Government announces major changes in these other areas.
On the whole, the Union Budget will be an intriguing insight on how the Indian economy pans out in the near future.
Rashmi Deshpande is partner and Abhishek Deodhar is associate at Khaitan & Co.
First Published: IST