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Policy: A Budget Favouring Rural India

After the Gujarat Assembly elections result, it’s likely the NDA, in its final budget before the Lok Sabha polls in 2019, will go all out to appease the rural voters

Photo Credit : Shutterstock

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Exactly a decade ago, then finance minister P. Chidambaram, while presenting the Union Budget 2008-09, announced the country’s biggest farm debt waiver package of over Rs 60,000 crore. The announcement that stunned policymakers was clearly seen as a political move, aimed at appeasing rural voters.

Sure enough, it had far-reaching political implications. The UPA government came back to power in 2009. By the end, the government had to increase its spends from the proposed Rs 60,000 crore to about Rs 70,000 crore.

According to estimates, about three crore marginal and small farmers benefitted from the government’s one-time settlement scheme. Cut to 2017.

Though the Bharatiya Janata Party (BJP), in December, managed to win the Gujarat assembly elections — a big face saver for the ruling party, its not-so-stunning performance  was a wake-up call for the Narendra Modi government. The BJP grabbed 99 seats compared to 115 in the previous assembly elections. More than the number, this threw up a worrying aspect for the NDA government at the centre.

A large chunk of the rural votes went to the opposition Congress. In a country like India, keeping the rural voters happy is essential to winning elections.

Much like what happened during the erstwhile BJP-led-NDA government under former prime minister A.B. Vajpayee, the divide between the rural and the urban voter-base could once again be expanding.

Despite the much-hyped India Shining campaign by the Vajpayee government, the NDA had failed to win the 2004 Lok Sabha polls. The Union Budget of 2003-04 that was presented by former finance minister (FM) Jaswant Singh was more or less a balanced one with very few sops, but it did not help the party in the general elections. The NDA lost to the Congress-led UPA. So naturally, the latest shift of a large number of rural voters in Gujarat is bound to make the BJP nervous.

One of the toughest jobs for any FM is presenting the Union Budget. He is expected to play Santa for over a billion people. While the poor expect sops, subsidies and freebies, the taxpayers expect tax cuts and exemptions.

Not just that. Budget announcements even win votes, as it did in 2009.

So, what will FM Arun Jaitley do? A consciously populist budget is what India can expect this time from the finance minister. The focus will be on the rural sector with an aim to bring cheer to the “aam admi,” underprivileged and farmers. Taxpayers — both companies and individuals, especially those in the higher income groups — can expect little or no relief.

With general elections just a year away and as many as eight state elections expected to be held in the current year, much will depend on Jaitley’s upcoming budget. Prime Minister Narendra Modi, too, held a meeting with the country’s top economists on 10 January to discuss the current state of the economy. Insiders say that issues such as job creation, doubling of farmers’ income and boost for the agriculture sector were discussed at length.

“The shadow of the Gujarat elections, with its urban-rural divide, will loom large over the budget’s fiscal policy,” says Ficci secretary general Sanjaya Baru, who was media advisor to former PM Manmohan Singh. He adds that the urban-rural divide also led to Vajpayee’s defeat in 2004.

Almost all policymakers, this time, have been unanimous in underlining the need to push and focus on rural India, especially sectors such as agriculture and micro, small and medium enterprises.

This time too there were jitters. A section of the policymakers underlined the need for a stimulus package after the GDP growth rate for the April to June quarter clocked 5.7 per cent. However, the government refrained from announcing any package and now with the disinvestment target set to exceed in the current financial year, it looks comfortably placed. The dust of demonetisation and implementation of the goods and services tax has settled down and growth is set to pick up steam.

On 1 February, the Union Budget is expected to outline a host of measures for the farmers and micro traders, who were the worst impacted by demonetisation and GST implementation. The agriculture sector, providing employment to over 45 per cent of the country’s total workforce, is likely to be happy. Income security schemes for farmers could be on the table.

What has, however, become a cause for worry is the fact that data from Central Statistics Office (CSO) suggests that growth in the agriculture sector will be at 2.1 per cent in the current financial year against 4.9 per cent in the year-ago period.  

“The agriculture and social sectors need to be pushed, and jobs have to be created to ensure that economic growth is back on track,” D. K. Joshi, chief economist at Crisil, points out.

The Budget will also focus on boosting the infrastructure, rural and social sectors. The housing sector, too, is expected to get a big push.
Union Budgets that happen to be the last before the country goes to polls are always keenly examined.

The Union Budget 2013-14 that came just after the “Nirbhaya” rape incident — that took place on 16 December, 2012 — was seen to be aimed at women and senior citizens. A host of announcements were made, though without having any major impact on the fiscal situation. After the ghastly incident that shook not only Delhi and the national capital region but the entire nation, the Congress government under former chief minister Sheila Dikshit came under severe criticism. The Congress-led UPA government in the 2013-14 budget announced setting up of an all women’s bank — Bharatiya Mahila Bank. Chidamabaram also proposed a Rs 1,000-crore Nirbhaya fund, while another Rs 1,000 crore was allocated for women and the youth.

“The government of the day also had limited resources to push spends,” adds Baru.