After listening to the Finance Minister segue from green growth, financial aid and poor prisoners to artificial intelligence and lab-grown diamonds in her Budget speech, many of us were wondering what message the government was trying to send to the taxpayer ahead of the election year. But a calmer reading of the Budget documents suggests that there are four messages to the taxpayer, hidden in this hotchpotch of proposals.

Achievable targets

Traditionally, Budgets were not taken too seriously by those in the know, because they were statements of intent and nothing else. Analysts who’ve tracked the yawning variations between Budget Estimates, Revised Estimates and Actuals each year, tell you that there’s many a slip between the cup and the lip.

But the last couple of Budgets have done their bit to infuse more credibility to the exercise, by setting more achievable targets. By using conservative assumptions on nominal GDP growth, tax buoyancy and non-tax receipts, the Centre has achieved its fiscal deficit target of 6.4 per cent of GDP for FY23. For FY24, deficit projections again appear quite attainable.

The 10.5 per cent expansion in nominal GDP appears quite conservative with the Economic Survey forecasting 6.5 per cent real growth for FY24 and the RBI expecting CPI inflation at 5.2 per cent. With growth in corporate and personal income tax collections expected at 10.4 per cent too, there’s no need for coercive measures to meet revenue targets. The 11.8 per cent growth target for GST is slightly ambitious, but may be a bet on continued formalisation. Much of the growth in non-tax receipts is expected as dividends and profits from PSUs which can be nudged up.

The Centre may however need to brace for surprises on the expenditure side. To accommodate higher capex, the Centre has leaned heavily on a ₹1.6-lakh crore cut in food and fertiliser subsidies. But FY23 showed that should a global escalation in prices force up costs, the Centre may have little choice but to foot the bill on these items.

Less doles, more assets

After all the rhetoric on the ill-effects of revdi (freebies) by the States, it would have been odd for the Union Budget not to slash subsidies and giveaways. But the approach to such cuts has been selective. While outlays to some vintage schemes have been duly cut, new schemes seem to have cropped up to take their place.

For instance, while MGNREGA, fertiliser and food subsidies have seen a sharp cut and ‘green revolution’ has received no allocations, new schemes such as PM Kisan (₹60,000 crore), PM Poshan Shakti (₹11,600 crore), Blue Revolution (₹2,025 crore), National Livelihood Mission (₹14,129 crore), Ayushman Bharat (₹7,200 crore) seem to have taken their place. Budget documents list out no fewer than 185 Centrally sponsored welfare schemes competing for outlays.

But there does seem to be a shift in the Budget outlays from one-time payouts, to payouts that deliver more long-term benefits to target groups. The Jal Jeevan Mission (₹70,000 crore), PM Awas Yojana (₹79,590 crore), Gram Sadak Yojana (₹19,000 crore) are examples.

The capex push is clearly evident from large allocations to roads, defence and railway infrastructure. But the ₹1.7-lakh crore fertiliser subsidy allocation and the ₹1.9-lakh crore food subsidy still hog a disproportionate share of outlays and moving these to direct cash transfers will signal real intent on ending revdi in the Union Budget.

Farmer focus

Expectations had built up ahead of the Budget that the NDA regime would shift its focus to the long-ignored middle-class from the farming community — the blue-eyed boy of every government. Hopes were even fuelled for a possible tax on rich farmers. These hopes have been comprehensively dashed. Despite evidence of agricultural credit reaching saturation, the target has been set at a record ₹20-lakh crore, a fivefold increase in five years.

PM KISAN, which entails cash payouts to farmers, has received ₹60,000 crore in fresh allocations. It will continue to co-exist along with the many safety nets already available to farmers — the MSP regime (₹1.9-lakh crore), fertiliser subsidies (₹1.7-lakh crore), crop insurance (₹13,625 crore), Modified Interest Subvention (₹23,000 crore), Krishi Sinchayi Yojana (₹10,787 crore) et al.

A new roadmap with outlays, to develop farmer’s co-operatives and promote natural farming has also been unveiled. In contrast, the signal to middle-class taxpayers is that they cannot expect any further reductions in tax rates from here, unless they are willing to give up on exemptions.

Give it up

A ripple of anticipation went around taxpayers when the Finance Minister began to read out changes such as a higher ₹7 lakh slab for tax rebate, widening of tax slabs, reduction in peak tax rate, and so on. But it turned out that all these concessions were only applicable to those who opt for the Centre’s new tax regime.

This regime requires the taxpayer to give up on the entire clutch of tax breaks — Section 80C investments, NPS contributions and home loan interest — around which she has planned her finances for long. So this is asking for a big pound of flesh. The fine print in the memorandum has further unkind cuts too. Investors who used vehicles such as insurance-cum-investment plans, listed NCDs or market-linked debentures to shelter their incomes from TDS or tax have these loopholes plugged.

That’s actually two messages from the government to the individual taxpayer rolled into one: “If you want tax cuts, give up your exemptions. Don’t be too clever about exploiting loopholes in the old tax regime, we are waiting to plug them.”