Budget: Enjoy the ride, it’s your reality no matter whom you vote

Who cares about economics, when survival is at risk?That the Modi government will play to the gallery using its last opportunity to win votes was a foregone conclusion. Interim Budget done, the jury is still out on whether Finance Minister Piyush Goyal just about went the whole hog or ended up overdoing it.Meanwhile, the cheers of the salaried class are yet to cease, and they have surely taken the focus away from the faint smiles on the faces of marginal farmers, who received a dole of Rs 500 a month in an economy, where more money in pockets is bound to make that kind of monthly income meaningless.The hike in base income-tax slab to Rs 5 lakh from Rs 2.5 lakh was the biggest in recent memory. If the Rs 1.5 lakh Section 80C benefit is fully utilised, an annual income of Rs 6.5 lakh would be tax free now. There was a hint of it at the Rs 8 lakh annual income-tax limit for upper class quota which you didn’t see.Such a liberal tax regime will create a profligate nation: sparking off a spending frenzy in online shopping and at malls, setting off demand for more cars and bikes and white goods and branded stuff. Nilesh Shah of Envision Capital says this Budget will create demand in the economy and that should be a good cue for the stock market to get out of its current sluggish phase.The Sensex was up nearly 500 points post Budget.But it is the real estate sector people who have gone home smiling all the way: GST for new home buyers is likely to come down, there are benefits for home buyers, there is a push to buy second homes, and there is a tax holiday on new projects registered by 2020.The finance minister promised once-in-a-lifetime benefit of capital tax gains rollover from investment in one residential house to two residential houses for a taxpayer with capital gains of up to Rs 2 crore. The message: Have spare money? Park it in real estate.The most remarkable part of the Budget surely was the focus on social security, however minuscule it may be for a nation with such a large population still at the bottom of the pyramid.So, what all has been given? Vulnerable farmers with land holdings below 2 hectares will get Rs 6,000 per year. A new scheme has been launched to provide assured monthly pension of Rs 3,000 a month on a contribution of Rs 100 per month for workers in the unorganised sector after 60 years of age. This will benefit some 100 million workers. Goyal said it would become the world’s biggest pension scheme for the unorganised sector in five years. The allocation towards rural employment scheme MNREGA has gone up to Rs 60,000 crore. Raamdeo Agrawal of Motilal Oswal gives the FM full credit for carrying out a smart balancing act and meeting aspirations of all sections of people.Some analysts and economists surely do not like these numbers because they do not add up. The government seems to be either making too bullish projections on the receipts side, or is simply leaving that headache to whoever comes to power, even if it is the incumbent itself.Yet, there is something less shocking. Fiscal deficit for 2018-19 has been retained at 3.4 per cent of GDP, slightly higher from the earlier target of 3.3 per cent. We will have to wait and see if this convinces the rating agencies. The government did promise to keep fiscal deficit for 2019-20 at 3.4 per cent of GDP and bring it down to 3 per cent in 2020-21.Lakshmi Iyer of Kotak Mutual Fund says the 3.4 per cent fiscal deficit target for FY20 is neutral for bond markets.Meanwhile, current account deficit for 2018-19 is seen at 2.5 per cent of GDP. The FM also promised to bring down the debt-to-GDP ratio to 40 per cent by 2024-25. Net borrowing target for FY20 has been pegged at Rs 7.1 lakh crore and gilt repayment at Rs 2.36 lakh crore.Again, who cares? You have heard the projections, right? A $5 trillion economy in 5 years and $10 trillion in eight years. The elephant has started taking long strides. Feel lucky to be part of a generation getting to ride this wave. This is your reality; you get to enjoy it no matter who you vote for! 67789409 67789608 67789054 67788731

from Economic Times http://bit.ly/2Sl8S6z
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