Budget 2018 – Populist or Not?

Jan 25, 2018 | 1 year ago | Read Time: 2 minutes | By iKnowledge Team

Less than a week remains for the annual budget 2018-19 and all eyes remain fixed on Modi and Jaitley. Will the duo bend to popular expectations or brave it? That’s the million-dollar question.

Budget 2018 - Populist or No? - Aegon Life Blog

This is perhaps the final budget that will be presented by the BJP government before the 2019 general elections. Most expect the budget to be a populist one considering the upcoming elections in many states and Lok Sabha elections next year. Even past governments have resorted to delivering a populist budget if elections are nearby.

But if Prime Minister Modi’s words at a recent interview are anything to go by, we should not keep our hopes high for a populist budget. He said it was “a myth” that people wanted sops and freebies.

A populist budget will drive demand in the short-run but will run the risk of inflation along with it. This would make it hard for the government to maintain fiscal deficit level; something it is already struggling with.

While populism may not make the tables, the ‘aam-aadmi’ is expecting what one would term, a popular budget, one where sound logic and emotive issues are balanced.

Take the clamour for raising income tax exemption limit. A State Bank of India (SBI) report stated that post the implementation of the 7th Pay Commission, the rise in disposable income warrants the increase of income tax exemption by INR 50,000 to INR 3 lakh from the existing INR 2.5 lakh.

Another prudent hope is increasing the deductions limit on investment. Under Section 80C, one can claim deductions on life insurance, NSC, PPF, etc. However, the space has become cramped and considering the aforementioned rise in disposable income, there is a real need for an increased deductions.

While these are consumer demands, industries hope for a restructure of GST prices. The implementation left a lot be desired, a relook is definitely required. For instance, the change of GST on insurance from 15% to 18% left a heavy burden in the form of increased premiums on consumers. Many life insurance and health insurance buyers faced hardships.

With a rising fiscal deficit and GDP numbers that remain unsure for best, meeting people’s expectation may become a hard task to achieve for the government.

While the Prime Minister has given his stand on populism, politics can create fickleness out of the strongest minds in no time. On February 1, 2018, India will look towards Finance Minister Arun Jaitley delivering the budget and Narendra Modi sitting beside him. Will the duo bend to popular expectations or brave it? The question will be answered.

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