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Arun Jaitley to balance populism, fiscal prudence in Union Budget 2018

All eyes are on Union finance minister Arun Jaitley as he prepares to present the last full-fledged Union Budget on Thursday amid expectations that it will contain dramatic announcements to boost a favourable economic and political narrative before the crucial Assembly elections in eight states in 2018 and the Lok Sabha polls in 2019.

An overdose of populist sops in the Budget, say experts, will be biggest indication if Prime Minister Narendra Modi is thinking of conducting an early Lok Sabha election and will outline the plank on which BJP will contest the Parliament elections.

A more financially prudent Budget will be an indicator of the government waiting for the short-term negative impacts of GST on the GDP to fade away and job generation to bounce back before the Lok Sabha polls scheduled in May 2019.

In the Budget, Mr Jaitley has the tough task of appeasing a demanding middle class, revive the rural and agriculture sectors and push growth which is at a four-year low. At the same time he will have to stick to fiscal prudence as any major deviation from it will evoke a strong reaction from investors and rating agencies — something government will like to avoid in a pre-election year.

Mr Jaitley is widely expected to give relief to the middle class in personal income-tax by raising tax slabs to win the support of the vocal segment of the population that has been hit by GST which, among other things, raised the service tax to 18 per cent.

The other challenge for the finance minister will be to cater to the rural and the agriculture sectors, especially after the BJP didn’t perform very well in rural areas during the recent Gujarat elections.

The Budget may see new rural schemes and stepping up of funding towards existing programmes like MNREGA, rural housing, irrigation projects and crop insurance.

Mr Jaitley is expected to increase allocation for infrastructure projects and give relief in corporate tax to industry to help them tide over the slowdown.

There are talks that the tax break on capital gains from stock investments may go.

Small businesses, which have traditionally formed the core support base of the BJP, too may get some sops to ease pain caused to them due to chaotic roll out of the GST and demonetisation.

With crude oil prices rising and subsequently petrol and diesel prices hitting new peaks, the finance minister could also be forced to slash excise duty on petrol and diesel.

The Prime Minister tried to lower expectations of voter-swaying announcements when he indicated that the Budget may not resort to populism and that it was a myth that the common man wants sop.

Some incentives to boost exports in certain sectors may be announced while there may be announcements for start-ups as well as for promoting entrepreneurship.

The Budget for 2018-19 will be the first Budget after the implementation of the GST regime.


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