Why PM Modi seems to have given up on hopes of transforming India

Modi’s promise of a new political economy, one oriented around the private sector, productivity and growth was illusory

Budget 2019 Highlights: India’s Prime Minister Narendra Modi is in a spot of trouble. He has to face reelection in a few months amid growing dissatisfaction with his government’s performance; he’s likely to use every lever available to eke out a win. One such lever, unfortunately, was the interim federal budget that his lame-duck government presented last week, to keep official machinery running till the next government can come in with a mandate and make decisions about taxation and spending. As many of us feared, Modi broke with bipartisan convention: He used the occasion essentially to launch his election appeal to India’s voters. And, unfortunately, it’s one that they have heard before.

The big news in the interim budget was that Modi intended to give smallholders a small annual income to supplement their earnings. Many other countries support their farmers similarly; India, in fact, uses a complex system of agricultural subsidies that is both inefficient and, arguably, breaches World Trade Organization rules. But, Modi’s intent in introducing the scheme at the very last moment — in fact, past the very last moment — isn’t to reform agricultural policy; he’s clearly hoping to address his rising unpopularity in rural areas. To some degree, his hand was forced: The main opposition Congress Party had announced plans for a minimum income guarantee just a few days earlier.

Modi didn’t stop there; he had a bunch of other goodies in the budget to throw to undecided voters, including a tax cut for low earners. As a consequence, the government won’t make its fiscal deficit target for the financial year and shifted its target for the next year by an even greater margin. The worst part is that there isn’t really any great crisis that would justify breaching fiscal rules, only electoral considerations…Read More

Interim Budget 2019: What’s in store for investors, taxpayers, economy?

From doling out sops for the farm sector and providing some relief to the individual income-tax payers, here’s what leading brokerages expect from the budget

Interim Budget 2019: With barely a few days left for the NDA (National Democratic Alliance) government to present the Interim Budget 2019, most domestic and foreign brokerages expect the measures to have a populist undertone ahead of the general elections scheduled for April / May 2019. From doling out sops for the farm sector and providing some relief to the individual income-tax payers, here’s what leading brokerages expect.

CLSA

The pressure to further expand the farmer welfare programme ahead of the 2019 national elections is high for PM Modi. A possible announcement of a nationwide direct farmer support scheme is quite likely, or possibly even earlier. A Telangana-style scheme could cost ~ Rs1.2trn, further complicating fiscal maths, as it could be a recurring liability. The RBI’s possible large dividend might help just one time.

The GST-led tax revenue shortfall of 75-80bps of GDP is not reflected in the reduced government expenditure for FY19 due to off-balance-sheet funding, which is not a sustainable solution and will create its own problems later and distort the reported fiscal deficit for FY19…

Bank of America Merrill Lynch

We expect the Center to target a fiscal deficit of 3.5% of GDP in FY20, after ending FY19 at 3.7%, 40bp higher than target. This should be funded by running down the Center’s surplus with the RBI without additional issuance. While a pre-election Budget should ideally not propose new direct taxes, the finance minister should take steps to alleviate stress in rural India (metaphorically Bharat) via subvention or direct income transfer and for small industries via subvention…

Contain Source by Business Standard or BS

Explainer: What is an interim budget? What FM Jaitley can and cannot do

This will be the last Budget of the current BJP-led NDA government before the 2019 General Elections

Interim Budget 2019: With just a few months left before the Narendra Modi government formally completes its tenure, Finance Minister Arun Jaitley will present NDA regime’s first interim budget on February 1, 2019.

As this will be the ruling BJP government’s last budget before the upcoming Lok Sabha elections, here’s an explanation of what an interim budget actually means.

What is an interim budget?

An interim budget is presented by a government which is going through a transition period or is in its last year in office ahead of the general elections. Traditionally, an incumbent government cannot present a full-fledged Union Budget in the election year. Instead, the Finance Minister presents an interim budget during the joint sitting of Rajya Sabha and Lok Sabha in the Parliament, the livemint reported.

With an interim budget, the incumbent government seeks a vote of approval from the Parliament to draw money from the Consolidated Fund of India to meet its budget expenses before the end of the financial year, i.e; March 31st, 2019. It is a traditional practice which takes place in the run-up to every general election, according to an India Today report.

The full-fledged Union Budget is presented by the newly-elected government after Lok Sabha polls. In recent times, interim budgets have been instrumental for the incumbent governments to list out their achievements to draw voters’ support.

What can be done?

An interim budget is similar to a Union Budget. In interim-budget, the ruling government tables estimate of its expenditure, revenue, fiscal deficit and financial performance and projections for the upcoming financial year. The ruling government at the end of its tenure, presents an interim budget for three to four months so as to keep the country running unhampered. The likely focus of the incumbent government in the interim budget can be to outline its economic vision for the next five years if it may remain in power, said the livemint article…

Contain By: Business Standard

Interim Budget 2019: Will Jaitley double I-T exemption limit to Rs 5 lakh?

The Union Budget will precede the unveiling of the Direct Tax Code Report on February 28

Interim Budget 2019: The 2019 interim budget on February 1 is likely to bring some good news for taxpayers. Ahead of 2019 Lok Sabha elections, Finance Minister Arun Jaitley may double the income tax (I-T) exemption threshold for the salaried taxpayers from the present Rs 250,000 to Rs 500,000, according to an IANS report.

With financial apathy on the rise after demonetisation drive, this pre-poll sop tactic by the PM Narendra Modi-led government is expected to benefit the middle-class segment of the society. FM Jaitley may also reinstate a tax-free status for medical expenses and transport allowance.

The demand to double the I-T exemption limit to Rs 500,000 was made by the Confederation of Indian Industry (CII) as one of its pre-Budget recommendations. The industry has also sought an increase in the deduction under Section 80C to Rs 250,000 to incentivise savings.

As the ruling BJP government is trying to outline its economic policy vision to remain in power, it would be interesting to see how these major changes could be made in the interim budget or vote-on-account budget, considering that not too many policy changes should be made….

Contain Source: Business Standard or BS