The government will present its last full year union budget in February 2018. The same year will have 8 state elections followed by the major 2019 LS Elections. The union budget 2018 is likely to be a populist budegt to attract votes.
Conflict Between Elections and Development
Modi government’s last full year union budget 2018 in February will be more likely to gain votes rather than doing major development projects. The government is likely to invest more in farmers, jobs, infrastructure and tax reforms.
The reason is obviously the elections in the year 2018 and 2019. BJP will contest 8 state elections in 2018 including some major states like Rajasthan, Madhya Pradesh, Chhattisgarh, Karnataka and the four North East states. These 8 elections will definitely lay the path towards the major 2019 Lok Sabha elections.
The recent election in Gujarat saw a desperate win for BJP that got only 99 seats down from 115 of 2012. The reason behind was lack of jobs, farmer stress and GST sufferings. If the bastion of PM Modi and Amit Shah gave a desperate victory to BJP then it is obvious that the next 8 states aren’t going to be easy.
The Annual Farm growth fell to 1.7% in the September quarters while the growth rate was 6.3% unable to provide jobs to youths. The manufacturing sector and the core sector has also struggled since last year’s demonetization drive which is now improving but still is not fully able to pull itself out.
To reduce farmer distress, the Finance Ministry yesterday announced that it will impose 30% import duty on Chana and Masoor as the production will be higher in the upcoming season. In order to ensure that the farmers do not suffer from lower rates, the government has taken this action.
To protect interest of farmers, Govt has decided to impose 30% import duty on Chana & Masoor with immediate effect. Production of Chana&Masoor r expected to be high during the forthcoming Rabi season & cheap imports, if allowed unabated are likely to adversely affect d farmers.
— Ministry of Finance (@FinMinIndia) December 21, 2017
A Populist Union Budget 2018 more likely Pro Rural
The government is more likely to cut the budget of few ministries to use it in the budget for sectors that will impact people directly. The government has sold shares in ONGC that will earn it Rs 40, 000 crores. The government has already raised $8 billion by selling shares by Dec 15.
Officials have noted that there can be 20% rise in the budget allocation for farm and rural development industries. To raise infrastructure and development the government is likely to raise the railways and transport ministry budget to 1.5 lakh crores.
Union Budget 2017-18 also targeted to provide higher agricultural credit & to give impetus to increase employment. Introduction of Goods &Services Tax(GST) provided a major opportunity to improve growth momentum by reducing barriers to trade,business& related economic activities.
— Ministry of Finance (@FinMinIndia) December 20, 2017
It is likely that the government may further ease on corporate tax to give some relief to businesses that have suffered from demonetization and GST. One can also expect some relief in income tax to give some relief to the middle class that has been on receiving end. The government may save Rs 30, 000 crores by cutting the budget of few ministries that may not much impact the people directly.
Overall, the Prime Minister wants a 7.5% growth rate before he enters the 2019 election. The major aim of the government is to use populist schemes like providing housing to poor, electricity to all, gas cylinder to 5 crore people, reducing farm stress and providing jobs.