Budget 2019: When populist perks are directly proportional to missing fiscal deficit targets

Although populist measures may help the Modi-led centre to win hearts of the public, however, these perks will cost missing the fiscal deficit targets to the Ministry of Finance.

The current year’s fiscal deficit target is 3.3%, however, given the pressure the December 2018 poll defeats have put on the BJP, the government will go all out to woo its rural and urban voters, which will decipher to more spending than the budget can allow.

Budget 2019: Interim Budget 2019 is crucial for the ruling BJP government and is speculated as a mini manifesto for General Elections 2019. The centre has mostly distanced itself from being a populist government, however, to gain a second term at the South Block of Raisina Hill, one cannot rule out perks for various sectors of the society especially to the farmers, rural population and the middle class. Although populist measures may help the Modi-led centre to win hearts of the public, however, these perks will cost missing the fiscal deficit targets to the Ministry of Finance. The current year’s fiscal deficit target is 3.3%, however, given the pressure the December 2018 poll defeats have put on the BJP, the government will go all out to woo its rural and urban voters, which will decipher to more spending than the budget can allow. Financial experts are of the view that India is heading towards slightly missing its fiscal deficit and will be closing at 3.5% for FY2018-19. The Modi-government has been quite positive on meeting the fiscal deficit for FY2018-19. The government’s push to generate taxes was the major reason behind a confident outlook. In the first quarter of FY2018-19, the Gross Tax revenue had risen by 22%, Net Tax revenue by 34%, while non-Tax revenue grew 39.1% as compared to last year. Besides tax revenues, the government also banked on disinvestment receipts which collected Rs.8760 Crores during the first quarter of 2018-19. Know CIIs suggestions for Income Tax Restructuring However, by October 2018, a plunge in collection of indirect taxes was seen besides revenues from asset sales and dividend payments from state-run companies were skewed. Substantial spending on infrastructure upgrade as well as various subsidies have also played a spoil sport in meeting the fiscal deficit target so far. If Interim Budget 2019 doles out benefits to the voters like higher tax exemptions to the middle class and more subsidies and interest-free loans to farmers, it is for the government to figure out from where it will fund its perks and promises, and still meet its fiscal deficit targets.