With massive outlays for rural voters in his third budget, Union Finance Minister Arun Jaitley on Monday consciously attempted to arrest the public perception that the National Democratic Alliance government is only friendly to industry.
With an eye on key assembly elections in the coming months, Jaitley’s speech focused on agriculture and rural infrastructure. This was a departure from his previous two budgets, which had cut back on social sector spending and concentrated on hiking investment in infrastructure sectors such as roads and railways.
However, the government was forced to change tack after the ruling Bharatiya Janata Party’s humiliating defeat in the Bihar assembly elections last November, apart from a string of losses in local body polls in various states, including Gujarat – indicators that its hold on the rural voter was slipping. In addition, there were alarming reports about acute rural distress and a slump in rural demand after two successive droughts.
Another factor that prompted the Modi government to opt for an image makeover was the success of the Opposition, and Congress vice-president Rahul Gandhi in particular, in dubbing the ruling dispensation a “suit-boot ki sarkar”.
Focused approach
The Union government had unveiled an ambitious crop insurance scheme for farmers even before the budgetary proposals were unveiled on Monday. The prime minister has also decided to take a break from his frequent trips abroad and has been addressing farmers’ rallies across different states to spread the word about his government’s pro-poor programmes.
The change in strategy became even more imperative given that assembly elections will take place in states such as Assam, Kerala, West Bengal, Tamil Nadu, Punjab and Uttar Pradesh over the next year. Most of these states have a rural large population, whose main occupation is agriculture.
It was in line with the government’s changed approach that Jaitley listed agriculture, social sector and rural development as top priority areas in the nine pillars of his budget.
He allocated Rs 35,984 crore for agriculture and promised to double the income of farmers over the next five years. The outlay for the Mahatma Gandhi National Rural Employment Guarantee Scheme, previously described by Modi as a monument to the Congress government’s failures, was raised to Rs 38,500 crore. Similarly the outlay for agriculture credit was enhanced and a provision of Rs 19,000 crore was provided for rural roads development programme.
“We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden,” Jaitley said in the Lok Sabha. “These enhanced allocations are capable of transforming villages and towns.”
Middle-class woes
The prime minister later described the Budget “as pro-village, pro-poor and farmers with special attention to agriculture, village infrastructure, healthcare, employment generation and Dalit entrepreneurship.” The main focus is to bring about a qualitative change in the country, Modi added.
However, wooing the farmer and the rural voters appears to have come at the cost of leaving out the salaried middle class. Not only has the Budget provided no relief in the tax slabs, but the common man has been further burdened with a series of indirect taxes.
For instance, service tax has been further increased while an additional infrastructure and agriculture cess will now be imposed, along with an increased surcharge on small cars and a cess on metro travel, coal and lignite which will impact the common man. All this is in addition to the educational and sanitation cess (for the Swachh Bharat programme) already being levied.
Poking holes
The Opposition was unimpressed with the Budget, but it did claim credit for the government’s move to shift its focus to the agriculture sector and rural economy. Congress spokesperson Randeep Surjewala pointed out that the NDA government was forced to change course because of Rahul Gandhi’s sustained campaign, which had succeeded in convincing people that the Modi government only cared for the corporate sector.
Former Prime Minister Manmohan Singh and former Finance Minister P Chidambaram said the increased allocations for agriculture would not benefit the farmer as two key issues had not been addressed. “The Budget speech makes no mention of a fair and remunerative Minimum Support Price [for crops],” said Chidambaram. “Nor is there any major initiative to increase productivity in crucial crops.”
Trinamool Congress MP Derek O’Brien said the allocations made for the rural roads programme were misleading, as a quick read of the fine print showed that the funding pattern for this scheme had been restructured. He explained that the programme was earlier fully funded by the Centre, but according to the new rules, the states will have to contribute 40% of the cost of a project. “This will end up putting an additional strain on the state’s finances,” O’Brien said.
Congress’ Chidambaram said the NDA government had missed an ideal chance to make bold structural reforms. “To that extent, I would say this is a wasted opportunity,” he said.
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