Fiscal Profligacy

The spending involved in implementing Budget proposals will throw the fiscal position off track.

- Dipak Mondal

When the government was drafting this year's Budget, it seems the only thing it had in mind was elections later this year. No wonder then that when the interim Finance Minister, Piyush Goyal, unpacked his customary Budget suitcase, it had many goodies for the common man, farmers and workers in unorganised sectors.

In what some of the critics called the cash-for-vote Budget, the government seems to have thrown fiscal prudence to the winds. In announcing a direct benefit transfer scheme for farmers — under which it plans to give 6,000 every year to 120 million farmers with landholding of less than 2 hectares — the government took an additional financial burden of 75,000 crore in the next financial year. Since the scheme has been made effective retrospectively, from January 1, 2019, a provision of 21,100 crore has been made in the current financial year as well.

In yet another ‘popular’ announcement, the government plans to exempt individuals with up to 5 lakh taxable income from income tax. This would benefit 30 million taxpayers, and by the finance minister’s own admission, cost the exchequer around 18,500 crore.

Then there’s another big announcement — the Pradhan Mantri Shram-Yogi Maandhan pension scheme for unorganised sector workers with monthly income up to 15,000. It aims to provide an assured monthly pension of 3,000 on monthly contribution of a small amount while they are working. While the full cost of the scheme is yet to be known, the government has allocated 500 crore, promising to contribute more as and when needed.

These three alone could account for an additional 1 lakh crore spending in the next financial year, not to forget that some of the promises the government made last year (like the Ayushman Bharat health insurance scheme) had not been fully provided for in the last Budget. Some costs of existing schemes are likely to be carried forward to next year.