In the short-run, the behavior of the share markets can be discounted while considering the impact of the Budget on the economy. For, markets are expected to react angrily whenever some benefit is withdrawn. The twin blow of a higher than estimated fisc for the current year and, more importantly, the re-introduction of the long-term capital gains tax after a gap of thirteen years has caused the markets to throw a big sulk. Last Friday, the Sensex slid a record 840 points, while the Nifty tanked by 256 points.
Considering the record high the markets were ruling at, frankly, this is not something over which anyone should lose his sleep, certainly not the Finance Minister. It is not the birthright of investors in share markets to reap the windfall of global growth; let the meager national cake be evenly spread. But, then, the question arises whether there is any cake for the others, especially the less-privileged sections. Despite the marked shift towards addressing the growing agrarian crisis, there is no denying that even if all the measures announced in the Budget were to be implemented in earnest, their benefits will take years to reach the targeted rural communities. Dismantling the monopoly of the agricultural produce marketing committees and instead creating clusters of e-markets in districts is a good idea, but it would require political courage to replace them with a more equitable way of selling farm produce.
That farmers actually receive a fraction of the retail price for their produce is the main reason for replacing or, failing which, drastically reforming the nation-wide APMC network. Besides, it is for the State governments to take the initiative to break the stranglehold of the vested interests in grain mandis. Again, the other bold initiative to provide the much-needed healthcare to the rural poor is the promise regarding the insurance cover to ten lakh families of Rs five lakh each. The scheme is set to be launched by the Prime Minister on the coming Independence Day. Allocation of Rs 12,000 crore per annum should not be a problem, given that nearly forty percent of the population stands to benefit. However, the lack of public health centers and the greed of private medical practitioners and hospitals could lead to the abuse of the scheme, more so because the insured are mostly unaware and gullible rural folks. Another promise aimed at addressing the farm distress pertains to the payment of fifty percent more than the minimum support price for specified crops.
Given that farmers in some States are unable to recover even the minimum support price, the implementation of this promise seems doubtful. In States like Madhya Pradesh, the State governments have earmarked funds for procurement of certain crops at the minimum support price or by paying the difference between the actual realization from open market sales and the minimum support price. The allocation for the scheme is unclear as is the agency that will undertake the stupendous operations.
Admittedly, one segment that has been left seething by the Budget is the salaried middle class. It has received nothing from Arun Jaitley’s last offering before the next Lok Sabha poll. The niggardly raise in the deduction limit after doing away with the specific medical and transport allowances is not sufficient to neutralize the growing burden of inflation and other expenses. The FM ought to have raised the exemption limit by at least Rs 50,000. Politically too this would have served the ruling party since the salaried classes constitute a solid vote-bank for the party.
Indeed, come to think of it, there is no particular class of people whom the Budget has given a particular reason to be happy. The share markets have gone into a huge sulk, the salaried middle class is displeased, the farm sector must wait for years for various schemes announced to bear fruit, and the business class must cope with the newly-introduced GST. Given that elections to the eight State Assemblies are due in the current year and a general election next year, the Budget underlines the sheer audacity of the Prime Minister to persist on the correct fiscal path without being deterred by populist urges and currents. Not a bad thing if the PM can find support for this unusual display of courage in the face of the difficult electoral challenges ahead. But, then, Modi is not your usual-run-of-the-mill politician. He is determined to set things right, the way he sees them. You may not like what he does, the way he does, but at least give him credit for not being swayed by the electoral considerations.