Budget 2024: Modi govt may fire 3 key ‘populist’ shots before Lok Sabha polls

The Modi government's 'Interim Budget 2024-25' on February 1, 2024, is expected to have a touch of populism, especially keeping rural heartland in mind and some relief to middle-class income taxpayers. Despite this time's budget being an "interim budget", it holds “special relevance” considering General Elections due in April or May 2024.

Any announcement made in this year's interim budget could have an impact on the elections, and the government could likely announce populist schemes to woo farmers, the middle class and the aspiration class aiming to buy housing properties. Notably, in the budget before the 2019 General Elections, the government made two big announcements -- ‘PM KISAN’, which was made effective retrospectively from December 2018, and ‘PM Shram-Yogi Maandhan’, a pension scheme for the unorganised sector workers, with monthly income up to Rs 15,000.

The agricultural sector has weakened in the past few quarters, and the Centre will likely announce schemes to boost the morale. "Any populist measures directed to the farm economy will be keenly watched. It may include the expansion of the PM KISAN scheme by as much as 50% to INR9,000 per annum or increased benefits in the form of an insurance scheme or higher MGNREGA allocation (which is a demand-driven program)," says the 'budget review' report by research analysts Nikhil Gupta and Tanisha Ladha at brokerage Motilal Oswal.

On the personal income tax front, there has been a strong demand to cut the personal income tax rate since the Centre had slashed the corporate income tax rate. "The new tax regime can be made more attractive by either increasing the exemption income limit, raising the income tax rebate under Section 87A or by reducing the highest surcharge rate."

Additionally, the government may look at uplifting consumer sentiment to soften the impact of inflation. "To increase the income in the hands of salaried people, the government might provide some interim tax relief by increasing the standard deduction limit from the current Rs 50,000 (not changed for last five years)," shows a privately circulated report by PNB Paribas-led brokerage Sharekhan.

The Centre may also announce some concrete measures to boost the residential or commercial property market. Since the residential property market has been performing well for the past three years, it is expected the government may provide more incentives to keep the momentum going.

The dampened demand in rural India due to higher inflation and lower agri production has proven to be a challenge for the government. Rural spending has declined 3% YoY in Apr-Nov’23. Keep this in mind, the Centre could take steps to increase the allocation under various rural schemes, which could boost rural consumption.

Notably, the government has already extended the Pradhan Mantri Garib Kalyan Anna Yojna (PMGKAY) for another five years until December 2028. On similar lines, observers think, the Centre could this time increase the allocation under MNREGA, Pradhan Mantri Kaushal Vikas Yojna 2.0, among others.