Budget 2018-19: Middle Class Centric?

Amid mixed reactions to the Union Budget for 2018-19 by experts, the one question that has remained unanswered is what led the Modi Government to keep the middle class on tenterhook while presenting its last budget before the 2019 Lok Sabha elections? Has the perpetual abortive attempts by the Government to develop its pro-poor image rendered the role of middle class infructuous? Or, in view of the Lok Sabha elections in 2019, does the ruling BJP aim to make its presence felt in poverty-ridden rural areas -- that have never been its base -- with the support of sharing out the economic benefits enjoyed by affluents to the destitute? Ironically, with its ploy to woo the lower stratum of the society, the Government may lose confidence of both the Upper and Middle classes.

Incidentally, whether it is concerned for economic growth or political gains, the middle class is unlikely to pay dividends to the Government. The target pegged to cope with escalating inflation and increase the economic growth rate might not be achieved if the budget was aimed to address the plight of the middle class by providing it further respite in the Income Tax slab and lower cost of luxury commodities.

Although the Government has enough reasons to cite economic implications behind the demeaning aspirations of the middle class in the light of the fact that they have already been given respite of 5 per cent in the Income Tax slab in the budget for 2017-18, the crackdown is believed to have been prompted by ulterior political motives too. In fact, the BJP has tried to make a dent in the rural bastion of its adversaries with the overtures towards the destitute in the garb of proposing a mega healthcare scheme for 10 crore unprivileged families along with the minimum support price (MSP) to farmers.

In recent elections in the country, the BJP failed to fare well in the rural segments presumably for ignoring farmers in particular while it suffered a setback in urban areas for want of support from salaried middle class. Even in its strongholds like Gujarat, the party had to struggle a lot to hold on to the power. The party does not have enough of a rural vote bank and the middle class urban voters were divided in their observation about the Government’s performance. If the party’s strategists are to be believed, the party could hardly derive benefit from granting relief to the middle class in the Income Tax slab, in particular, while cashing-in on the situation to turn the ‘sop’ into votes.

None other than Finance Minister Arun Jaitley has made statements in the Parliament and during a TV show as well, that the middle class had had enough in previous budgets and the provision for enhancement in standard deduction sufficed their need to cope with the present inflation rate. He claimed that India had been the only country in the world that had 5 per cent entry point Income Tax slab and supplementary provision for standard deduction of Rs. 40,000/-.

The ruling BJP is, in fact, trying to make its last-ditch effort to woo the rural masses to compete with its political adversaries that include its own stalwarts too, besides opposition parties. To allay the pro-farmers nation-wide outcry, the party preferred to stress upon the need of farmers. Jaitley said that the government would ensure minimum support price to farmers even if prices fell, for which the Niti Aayog would discuss with state governments on how to put in place an institutional mechanism to ensure that farmers got better prices for their produce.

Jaitley claimed that the government had decided to fix the minimum support price (MSP) of the coming Kharif (summer sown) crops, which include maize, soyabean and pulses, at least one-and-half times the cost of production.

Interestingly, the Government has presumably no roadmap to mop up resources to deal with the proposed expenditure on the healthcare system and the much-acclaimed MSP. The Finance Minister, however, claimed to meet the expenditure through realising 10 per cent tax to be levied on long-term capital gains on equity share. In a TV show, Jaitley claimed that the long-term capital gains on equity share to the tune of Rs. 3,67000 crore ( Three lakh sixty seven thousand crore) remained tax-free under the scheme of making investments for a period over one year. He contended that the levied 10 per cent tax on such a huge gain to big investors -- including financial institutions and honchos from corporate world as well -- would help realise a substantial amount to meet the proposed healthcare and MSP schemes. But the Government feigned ignorance towards the sinister implications of the proposed tax on the stock market. Incidentally, the move is to deal a major blow to the affluent section of society, in particular, in order to achieve a virtual unrealistic goal to woo rural masses.

The much-acclaimed healthcare scheme would incur an estimated cost of Rs. 1200 crore. Jaitley has proposed that of the total 25 crore unprivileged families in the country, 40 per cent (10 crore) would be covered initially under the healthcare system with the support of a budgetary allocation of Rs. 1200 crore. Under this world’s largest National Health Protection Scheme, 10 crore vulnerable and under-privileged families with a health coverage of upto Rs 5 lakh per family being offered for secondary and tertiary care hospitalisation. But the Government has hardly any full-proof mechanism to identify beneficiaries of the scheme and it is likely to encourage possible malpractices in the society. Jaitley has, however, claimed that the Government would use Aadhar datas in order to identify beneficiaries.

To top it all, the Government can neither afford to ignore the middle class nor can it uplift poor at the cost of the growth of the affluent. As per the details available at different websites, NCAER revealed that India's middle class population was 267 million in 2016. By 2025-26, the number of middle class households in India is likely to more than double from the 2015-16 levels to 113.8 million households or 547 million individuals. Another estimate put the Indian middle class as numbering 475 million people by 2030. It is estimated that average real wages will quadruple between 2013 and 2030.

 On the other hand, the world has 872.3 million people below the new poverty line, of which 179.6 million people live in India. India accounts for one in three of the poor population worldwide, the world Bank said in its inaugural edition of the report 'Poverty and Shared Prosperity', according to which extreme poverty worldwide continued to fall despite the global economy's “under-performance".

"India is by far the country with the largest number of people living under the international USD 1.90-a-day poverty line, more than 2.5 times as many as the 86 million in Nigeria, which has the second-largest population of the poor worldwide," the report said.

About 31% of the world’s “multidimensionally poor” children live in India, according to a new report by the Oxford Poverty and Human Development Initiative (OPHI).