Post demonetization big-bang, Arun Jaitley opts for aam-aadmi Budget

The air of expectancy was there. Finance Minister Arun Jaitley in his fourth Budget had the chance of really making a solid push in infrastructure and pushing for bold reforms to follow up on the decision to demonetize high value currency notes on November 8. This was the last time for the government to really put a reform oriented Budget before 2019, as the next one in 2018 will inevitably be a populist one. But in the end, the Budget ended up as more of a cautious nip and tuck,opting for incremental reforms, looking to consolidate some of the gains of the past and most importantly, with a firm eye on BJP's poor and middle class votebank. 

There was widespread speculation about how the Budget will look to soften the demonetization woes. It lived up to that expectation to an extent, with a huge tax cut for people earning in the payslab of Rs 2.5 lakh to Rs 5 lakh and some concession thereafter till Rs 50 lakh income per annum. Clearly the Budget is hedging bet on significant increase of tax net post scrutiny of bank deposits after demonetization. Jaitley indicated to the positive trend by saying, advance tax collection is up 34%. With a low tax rate for the entry level salaried class, Jaitley is optimistic of greater compliance. For the first time, FM contrasted the obscenity of people evading tax with the number of cars bought and foreign travels by Indians. But greater tax compliance is clearly a process half done and needs more than an appeal to the good sense of people. 

While the Budget didn't refer to any state specific sops especially with the EC breathing down the government's neck, it had enough political messaging that can be leveraged by the BJP leaders ahead of the elections. The step to bring down political cash donation to Rs 2,000 will be spun as a war on ambiguous funding for elections. There has been massive investment promised for the rural sector. While the devil is in the details, and execution of the schemes will mark their effectiveness, grandiose schemes like record level of agricultural credit, allocation of Rs 48,000 crores for MGNREGA, making 50,000 gram panchayats poverty free in two years, 1 crore houses to be made by 2019 and complete rural electrification by next year make for pretty claims. The government is eager to rub off the Opposition's claim of being essentially run by corporate purpose and this Budget is a major course correction in that effect. 

For senior citizens above 60 years, there will be no tax upto Rs 3 lakh, while the exemption will be upto Rs 5 lakh for those above Rs 80 lakhs. Centralised defence travel system and web-based portal for defence forces will also go down well with the security forces. 

For a very long time, small traders have been the backbone of BJP's urban votebank and Jaitley had some good news for them. Corporate tax for SME with turnover upto Rs 50 crore to 25%, and 96% of the companies will be covered under it. While there was no special tax sops for the top industries, the wealthy can breathe easy as no wealth or inheritance tax was imposed as it was widely speculated. 

For the youth, the Budget promises new platforms like SWAYAM for online education, SANKALP and STRIVE for skill development. Jaitley announced 35% hike in allocation for SC, STs and minorities. Another hat-tip to the election was announcement of lending priority for the SC, ST and minorities under Pradhan Mantri Mudra Yojana. The Budget proposed new laws for confiscating property of tax defaulters, something the Mallyas of the world will be wary of. 

While the CEA was diminutive about the success of demonetization, Jaitley sang paeans of it. He also claimed that demonetization's temporary negative impact will not spill over to the next fiscal. The government showed its intention for promoting cashless transaction by banning cash trasactions above Rs 3 lakh. For any POS equipment, the government has abolished import duty. Service tax on tickets booked by IRCTC have been waived. 

Where Jaitley showed great reserve was in pushing for financial reforms. He proposed high-profile merger of state oil companies, announced listing of railway stocks and abolished arcane regulatory body FIPB. He has fixed an ambitious target of Rs 72,500 crore for the next fiscal. 

Jaitley has pledged Rs 2.41 lakh crore for infrastructure development. Will it kickstart the investment cycle at a time India's core sector economy is going through a lull? The answer lies in the future, but for now Jaitley's Budget is made firmly with an eye on BJP's immediate political goals.