The Narendra Modi government’s fourth budget, outlining India’s financial plans, is a mixed bag. There is a huge emphasis on agriculture and health care, perhaps with an eye on national elections next year. With a major focus on promoting the rural economy, the government has made several announcements towards creating more employment opportunities for rural voters, a large majority of whom are not too happy with the government’s policies. Billions have been allocated to infrastructure for villages, with the government unveiling its flagship health insurance programme for 500 million poor. A liberalisation of agricultural exports, which will increase from $30 billion (Dh110.34 billion) a year to $100 billion, is likely to help push up crop prices for farmers.
In the bargain, India may miss its deficit targets. Although the government has noted that the country’s economic growth will surge above 8 per cent, but some fiscal slippage looks likely. India’s fiscal deficit will be 3.5 per cent for 2017-2018 (target was 3.2 per cent) and 3.3 per cent for 2018-2019 (target was 3 per cent). The markets had expected the government to go for a higher fiscal deficit target but the budget chose populism over fiscal prudence. Reintroduction of long-term capital gains tax, a tax on profit realised on sale of a non-inventory assets, could prove to be somewhat negative for investor sentiment. Expectedly Sensex, India’s stock market index, fell by more than 450 points as soon as the budget was presented.
On the sunnier side, India’s announcement of the world’s largest health-care programme will cover 100 million families with each household entitled to get medical reimbursement for treatment at hospitals up to a maximum of Rs500,000 (Dh28,703) every year. The scheme is expected to benefit a whopping 40 per cent of the country’s population. Likewise, tax incentives in the budget for senior citizens are both meaningful and relevant. In what is seen as an incentive for senior citizens to provide a dignified life to them, the exemption of interest income on deposits with banks and post offices will be increased from Rs10,000 to Rs50,000.
The budget document has also clarified on the confusion around cryptocurrencies. Cryptos will not be deemed legal tender and strict actions could be taken against investors dealing in cryptocurrencies. However, the budget has made provisions to explore ways to use Blockchain technology for digital transactions.
In its last full-year budget before the 2019 parliamentary elections and ahead of eight state elections this year, the Modi government has done a balancing act aimed at reaching out to voters, while trying to keep investor confidence intact.
