Abu Dhabi: The interim Indian budget, to be presented on Friday, will have priority for the rural sector as well as support small and medium enterprises to boost growth ahead of the general elections in May.
“Persistent food price deflation and its impact on rural incomes, combined with the recent BJP (election) losses in key states clearly indicate a weakening rural voter support,” said Hanna Luchnikava-Schorsch, principal economist, Asia-Pacific at IHS Markit Economics. This the “government would be keen do address ahead of the upcoming elections, particularly as rural distress is likely to also affect the overall economic momentum.”
Among the expected budget measures are additional waivers on farm loans, measures to broaden beneficiaries of the minimum support price hike announced last year, subsidised new loans for farmers, and possible changes to the rural employment scheme.
The government may also offer measures to appease urban voters and support micro, small, and medium-sized enterprises (MSMEs), which are the key source of employment for many. India’s unemployment rates have reportedly rose to a 45-year high during 2017-18 cent as the economy slowed and rural distress increased due to neglect of the agriculture sector.
Some of the decisions taken by the government in the last two years slowed down the Indian economy, through the demonetisation scheme and roll out of a goods and services tax (GST), which has proved unpopular due to complexities involved in the tax system.
“It remains an occasion to showcase what the government has achieved over the last five years,” Sanjeev S Ahluwalia, an adviser in the New Delhi based Observer Research Foundation. “The government will highlight the rolling out of GST, which combines over 19 central and provincial taxes. This had been debated over the last two decades but not implemented because the states had to agree to the change.”
Opening of 600 million new bank accounts to boost financial inclusion as well as access to electricity for all households by the end of the fiscal year is also expected to be highlighted during the budget speech.