Why Finance Minister May Present A Half-Budget And Not Just A Vote-On-Account On 1 February

Even though the next Union budget is just over two weeks away on 1 February, there is very little speculation on what it might contain. One reason could be the media overkill in reporting on the Ram Mandir in Ayodhya — surely a once-in-a-lifetime event — but, equally, there seems to be an implicit assumption that this will be an interim budget, with no major announcements on taxes or duties.

The idea of presenting interim budgets before a general election, which will just be accounting exercises, is dead. It died in February 2019, when the Narendra Modi government made several tax and spending related announcements to make that “interim” budget more than just a vote-on-account. The Kisan Samman Nidhi, which gives farmers Rs 2,000 every four months, came in that budget. So did tax reliefs for senior citizens, and sops for those who owned more than one house.

This was made possible because of a smart thing Arun Jaitley did in 2017, when the 2017-18 budget date was moved from end-February to 1 February. This enabled a shift in the budget date away from the Lok Sabha election time-table, when the model code of conduct would kick in and prevent the announcement of any voter-related inducements.

The net result is that the Modi government, unlike previous governments, has been able to present five-and-a-half regular budgets, including the one just preceding the general elections. 

The chances of Finance Minister Nirmala Sitharaman presenting just a vote-on-account are close to zero, even if one assumes that it won’t be a full budget, which will follow in July after the general elections.

As of now, budget speculation is minimal, and revolves around an enhancement in payments under the Kisan Samman Nidhi, a hike in minimum wages for some workers, and a more generous pension scheme for unorganised sector workers.

With changes in the personal tax regime — which offer higher basic exemptions and almost no deductions — already announced and refined in previous budgets, one cannot expect any major changes here. Corporate taxes are already at lower levels than before, and hence that too cannot be expected. Some import and export duty changes are possible, but these will be commodity specific, not broad policy-driven.

What we should expect are the following.

One, announcements regarding incentives for investments in infrastructure around the Ram Mandir and related places of religious pilgrimage. This would tie in with the BJP’s election calling card for 2024, which is the Ayodhya temple consecration on 22 January.

Two, one should expect a hike in the Kisan Samman Nidhi, and the best way to do this is not to announce an ad hoc increase, but to present it as a form of inflation adjustment. This way the hike can seem reasonable and may not be criticised as a pre-election bribe. 

Three, the same logic can be applied to the old personal tax regime, where a hike in the basic exemption can be explained away as inflation-adjustment. Ditto for medical expenses relief. 

Four, the big announcements will be in terms of spending allocations for social schemes, including hikes in pension targeted at various categories of the poor and the underprivileged. Minimum support prices and support for agriculture will add to the kitty.

These are just some of my expectations, and will form a core voter proposition as part of 'Modiji Ki Guarantee' for 2024.