Pitching a strong re-election bid, India’s BJP-led NDA government announced the biggest income tax sops for middle class, including complete exemption for income up to Rs 5 lakh, and Rs 6,000 annual cash dole to poor farmers in a scheme that will cost Rs 75,000 crore per year.
Converting a vote on account speech into an almost full- fledged budget announcement in Lok Sabha, Finance Minister Piyush Goyal proposed an array of incentives for both middle class and farmers, whose disenchantment was said to have cost the BJP dearly in recent assembly elections.
As widely anticipated, Goyal announced an income support scheme for 12 crore small and marginal farmers by providing Rs 6,000 in their bank accounts in three equal instalments in a year. Farmers owning less than 2 hectares of cultivable land will be eligible for the scheme, christened Pradhan Mantri Kisan Samman Nidhi.
The scheme will be implemented from the current fiscal year, where it will cost the exchequer Rs 20,000 crore. For the next fiscal year, the allocation will jump to Rs 75,000 crore.
The farm income support scheme will result in the government breaching its 3.3 per cent fiscal deficit target from the current year. For next fiscal, the finance minister pegged fiscal deficit at 3.4 per cent of the GDP, up from fiscal consolidation roadmap of bringing it down to 3.1 per cent in 2019-20 and 3 per cent in 2020-21.
“We would have maintained fiscal deficit at 3.3 per cent for the year 2018-19 and taken further steps to consolidate fiscal deficit in the year 2019-20. However, considering the need for income support to farmers, we have provided Rs 20,000 crore in 2018-19 RE (Revised Estimate) and Rs 75,000 crore in 2019-20. If we exclude this, the fiscal deficit would have been less than 3.3 per cent for 2018-19 and less than 3.1 per cent for the year 2019-20,” he said in his budget speech.
Fiscal deficit for 2018-19 has been pegged at 3.4 per cent and current account deficit at 2.5 per cent.
Goyal raised allocation of rural employment guarantee scheme MNREGA to Rs 60,000 crore for 2019-20. Seeking to address concerns over farm distress, the finance minister said the government has taken a “historic” decision to fix the minimum support price (MSP) of 22 notified crops at least 1.5 times of production cost.
Over three crore salaried class, pensioners, self- employed and small businesses will also save Rs 18,500 crore in income tax annually after the minister doubled the exemption limit to Rs 5 lakh per year for the next fiscal from current Rs 2.5 lakh per year. Standard deduction for salaried class has also been raised to Rs 50,000 from current Rs 40,000.