Union Finance Minister Arun Jaitley in Parliament. Photo: Reuters
In 2015, Congress vice-president Rahul Gandhi criticised the Narendra Modi Government
as a ‘suit boot ki sarkar’, or a government
of and for the moneybags. It had hurt the Modi government
grievously. After its electoral triumphs in the Lok Sabha and Assembly elections in 2014, the Bharatiya Janata Party (BJP) faced embarrassing defeats in Delhi in February of 2015 and in Bihar in November of that year. On Wednesday, Finance Minister Arun Jaitley’s penultimate Budget
strived to neutralise the perception that it was a government friendly to the rich. He also reached out to the middle classes, the traders but also to the BJP's new found constituency of the poor.
Jaitley was careful about not delivering upon his promise of reducing the corporate tax. This can wait until the Budget
in 2018, which will be held with no major assembly polls barring that in Karnataka in May, 2018. But, the BJP already believes it is in a comfortable position in that state. To further buttress the perception that the government wasn't pro-rich, the finance minister has also imposed a tax surcharge of 10 per cent on individuals who earn above Rs 50 lakh to 1 crore and proposed a legislation to sell assets of those who flee the country. Henceforth, it will make it difficult for any opposition leader to convincingly argue that the Modi government is devoted to moneybags.
The FM has also reached out to the middle classes by not only reducing the income tax, delivering them the “gain” after the “pain” of demonetisation, but by proposing a big dent in the manner that political funding is done. He has proposed that all political donations above Rs 2,000, reduced from the current limit of Rs 20,000, can only be made by cheque or digitally. According to analysis by the Association for Democratic Reforms (ADR), this Rs 20,000 limit is cleverly exploited by political parties and over 70 per cent of political funding is done in cash.
Consistent with Modi government’s stress on Garib Kalyan, or welfare of the poor, the Finance Minister has also reached out to the Dalits, backwards, youth and women. Budgetary allocations have been increased for schemes for Scheduled Castes and backwards, allocation has also been increased for rural and infrastructure sector and allocation for Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) has not been tinkered with.
The finance minister has also reached out to the traditional support base of the BJP and Rashtriya Swayamsevak Sangh (RSS). The micro, small and medium enterprises (MSME) sector had borne the brunt of demonetisation. As a relief measure, he has offered to reduce income tax of companies that have annual turnover below Rs 50 crore by 5 per cent. Concessions have also been announced for the indirect tax for the markets.
The finance minister will have an opportunity to consolidate on his penultimate Budget
in his final Budget in 2018, when the goods and services tax (GST) would have already rolled out. The gamble to advance the Budget by a month and present it immediately before the assembly polls to the five states could pay off. It is possible that the Budget proposals might sway enough voters in Punjab, Uttar Pradesh, Goa, Manipur and Uttarakhand.
But the target of the Modi government remains 2019 Lok Sabha elections, and with this Budget the government has washed off some of the negative perceptions and taken a firm step towards repeating its 2014 performance.