Budget 2018: How Budget 2018 takes from the wealthy and urban consumers and gives to the poor Indians – The Economic Times–02.02.2018

Suits and boots now finally know whose sarkar this is: the government is for garib (poor) and gram (rural).

Poor and rural voters are both more numerous and in some cases angrier than rich and urban voters, and therefore the last full Budget before general elections in 2019 took from wealthy and urban consumers and promised better healthcare, housing, credit and farm incomes for poor and rural Indians.

And political messaging in a highly competitive electoral marketplace is more important than fiscal orthodoxy, so deficit targets were allowed to slip a bit, never mind carping markets and pundits. That’s why, too, parts of the Budget speech were read out in Hindi — no mistaking the target audience.

Including general elections, there are a dozen polls coming up and BJP, in power in 19 out of 29 states and determined to return at the Centre, has plenty of messaging options from the Budget.

Investors will have to pay a long-term capital gains tax and that additional revenue inflow, officials said, will help fund Modicare — the Rs 5 lakh per family government-subsidised health insurance scheme for 10 crore poor families.

So a few thousand welloff investors will pay for good healthcare of 50 crore (assuming 5 per family) poor Indians. Plus high-income earners will pay higher cess. If implementation of Modicare is quick, it will be a big election message. As will be free LPG connections for 8 crore poor women.

Wealthier urban consumers typically buy high-end imported goods: top-of-therange phones, pricey items of personal care and entertainment. All of these will cost more as import duties go up. And farmers, who are struggling with low crop prices, will get a sharp hike in minimum support price across all major crops. Benefits will be apparent quickly for kharif, or summer-sown, crops.

However, higher MSPs may put pressure on food prices and therefore stoke inflation: a possible political risk for BJP.

Include higher farm credit, greater spend for non-farm rural population, and better targeted spending for Dalits and tribals, and you have the quasi-launch of BJP’s election campaign. Oh, not to forget, there’s a shiny, new rail project for Bengaluru, capital of pollbound Karnataka, where BJP hopes to oust Congress.

via Budget 2018: How Budget 2018 takes from the wealthy and urban consumers and gives to the poor Indians – The Economic Times

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