Print Friendly, PDF & Email

Insights into Editorial: Shopping for votes: on the Interim Budget 2019-20

Insights into Editorial: Shopping for votes: on the Interim Budget 2019-20

Introduction: How does the interim budget differ from a regular budget?

In an interim Budget, the vote-on-account seeks parliament’s nod for incurring expenditure for part of a fiscal year.

However, the estimates are presented for the entire year, as is the case with the regular Budget. However, the incoming government has full freedom to change the estimates completely when the final Budget is presented.

The budget for the year approved by Parliament gives the government spending rights only till the end of the financial year ending March 31.

If for any reason the government is not able to present a full budget before the financial year ends, it will need parliamentary authority for incurring expenditure in the new fiscal year until a full Budget is presented.

Through the interim Budget, Parliament passes a vote-on-account that allows the government to meet the expenses of the administration until the new Parliament considers and passes the Budget for the whole year.


Interim Budget 2019: an exercise aimed at pleasing farmers, informal workers, salaried taxpayers:

The interim Budget 2019-20 contained elements that are aimed at benefiting three major segments of the population:

  • Farmers: announcements of an income support scheme
  • Informal sector workers: an insurance scheme
  • Salaried taxpayers: tax exemptions.

Interim Budget 2019-20 must rank as one of the most politically expedient ones this country has seen.

The shadow of the general election falls squarely on the budget proposals, which are aimed at seeking votes in the name of various schemes that rain cash on beneficiaries.

The issue of binding the next government, post the election, it is necessary that sharing of growth benefits is done in ways that sustain growth, reduce distortions, and improve capabilities to participate in growth.


Pradhan Mantri Kisan Samman Nidhi :

To provide an assured income support to the small and marginal farmers.

Vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs. 6,000 per year.

This income support will be transferred directly into the bank accounts of beneficiary farmers, in three equal instalments of Rs. 2,000 each.

Around 12 crore small and marginal farmer families are expected to benefit from this, which is almost half of the total number of households.

There is an income support scheme for farmers who are reeling under the impact of falling realisations for their crops, and


Informal sector workers: an insurance scheme: Pradhan Mantri Shram Yogi Mandhan (PMSYM) scheme:

There are around 42 crore unorganised sector workers, which contribute toward the growth of national economy.

Launch of Pradhan Mantri Shram Yogi Mandhan (PMSYM) scheme to provide unorganised workers an assured monthly pension of Rs 3,000 after 60 years of age.

The scheme will attract matching contribution of Rs 100 per month from government as well as from workers.

The scheme will benefit 10 crore workers in unorganised sector, may become the world’s biggest pension scheme for unorganised sector in five years”.

The scheme will cover all those unorganised sector workers like autorikshaw driver, whose income is up to Rs 15,000 per month.


Tax Exemptions for Salaried Tax Payers:

The increase in standard deduction from ₹40,000 to ₹50,000 may be small but it will cover three crore taxpayers, which is again almost half of the 6.8 crore taxpayers.

The income tax rebate on those with taxable annual income of up to ₹5 lakh a year will benefit three crore middle class voters that includes traders, small businesses, those who have just joined the formal workforce and pensioners.

The standard deduction limit for salaried taxpayers would be raised to ₹50,000 from the ₹40,000 announced in last year Budget.

This will provide additional tax benefit of ₹4,700 crore to more than three crore salary earners and pensioners.

However, the critics argued and pleaded for a completely new direct taxes code which will completely redesign the architecture of income tax. So, the outlook is a far more reformist outlook.



While these sops will benefit sections of the population, the question is whether it is correct for a government that will be in power for less than two months in the next financial year to write into the statute books proposals that are permanent.

Ministry announced that the fiscal deficit would be 3.4% of the GDP for both 2018-19 and 2019-20, compared with a target of 3.3% and 3.1% respectively.

The Centre will miss the glide-path for reducing the fiscal deficit, yet again. The estimated slippage of 0.10 percentage point is not significant if we assume that the concessions will spur spending by the beneficiaries.

This is, of course, assuming that the gross tax revenue projection (governement has to spend on these schemes and measures) of ₹25.52 lakh crore, which is a 13.5% growth over the revised estimates of 2018-19, is achieved.

The actual deficit numbers will depend on the realised GST collections over the next two months and the government’s ability to meet the disinvestment target over a timeline of one month left for actions before the election code kicks in.