FACT CHECK

Budget 2018: A Response to the Twin Narratives of “Anti-Middle Class” & “Poor Will Not Benefit”

Budget 2018

Since the announcement of Budget 2018, there are many negative narratives being built around it — some of these resorting to what can be termed as usual name-calling, such as populist or anti-middle class.

However, some media outlets have gone ahead and blamed the Budget on health policy too, as well as on its plans for industry and agriculture.

Now, this seems a bit exaggerated, considering the fact that addressing healthcare, rural infrastructure and MSMEs has been a key focus area of Budget 2018.

Let us, then analyse some of these narratives and see whether they stand up to facts.

NARRATIVE 1: THE BUDGET IS ANTI-MIDDLE CLASS

The FirstPost story ‘Budget 2018: Narendra Modi has taken middle class for granted, possibly antagonised most loyal vote bank’, published February 2, 2018, is just one example we have picked as illustrative of stories pushing the “Budget is anti-middle class” narrative.

The article talks about the government taking the middle class for granted. This narrative appears to have been built primarily due to two major decisions in the Budget: The health insurance coverage for the poor and the reduction in corporate tax from 30% to 25% for companies with an annual turnover of up to Rs 250 crore.

What some media houses seem to have playfully done is that — since this year there has been no tweaking of the tax slabs for personal income — they have spun the narrative of the Budget catering to the poor and the upper class, arguing that the middle class has somehow been left out of its ambit, at least where benefits are concerned.

THE FACTS

If we carefully look at the Budget document, we see that a standard deduction of Rs 40,000 for transport and medical reimbursements for salaried individuals has been proposed. This will cost the government revenue worth Rs 8,000 crore. This is more than the revenue cost that the government will incur from the corporate tax cut.

Further, no proof is required to claim the standard deduction unlike earlier. This saves the hassle of paperwork for both employees and the government. The move is aimed at benefitting 2.5 crore salaried employees and pensioners.

 

The move of reducing the corporate tax to 25% for companies with an annual turnover up to Rs 250 crore is a decision that will not benefit big industrialists, but will actually benefit the MSMEs – which, again, translates into benefitting mostly the so-called middle-class population.
The initiative of Ayushman Bharat will provide a critical health insurance cover of Rs 5 lakh which will also help the lower middle-class segment. Both the healthcare umbrella as well as the expenditure on rural and agricultural sectors that the Budget commits to would also ensure that in the long run the middle class too benefits.

The so-called middle-class population also comprises a sizeable number of senior citizens. Income from interest up to Rs 50,000 has been made tax-free for them. This can result in savings of Rs 2,000 to Rs 12,000 a year.

They will also be able to claim the benefit of a deduction of Rs 50,000 for medical insurance. That is, deductions for health insurance premium for senior citizens have been raised from Rs 30,000 to Rs 50,000. This can result in savings of Rs 1,000- Rs 6,000 a year. For critical illnesses and hospitalisation, the deduction has been increased from Rs 60,000 to Rs 1 lakh.

Further, the Finance Minister mentioned that many changes in the personal income tax rate applicable to individuals had been made in the last 3 years. Only last year, those with an income of less than Rs 5 lakh per annum got a tax reduction to 5%. As it happens, entry-level income tax in India is one of the lowest in the world.

Spinners of such negative narratives also tend to view only direct taxes. They ignore indirect taxes that too people keep paying. With GST, tax on a lot of items of consumption have been reduced from 28% to 12%-18%. Thus a 10% decrease on most items could translate to savings of Rs 1,200 per month on a spending of Rs 10,000. Does this not benefit the middle class?

Middle-class aspirations are not limited to tax breaks and discounts. The diverse needs of the middle class need to be addressed in a holistic manner. Does not the improvement in road, railway and airport infrastructure help the middle class? Do better education and improved urban infrastructure not legitimately count in this? There are new IITs and IIMs, medical colleges and schools of planning & architecture being set up across the country. The focus is not only on the quality of education but also on skilling programmes for the youth. Last but not least, mention must also be made of the large allocations for Smart Cities and AMRUT which is all designed to improve urban life and living.

Against the backdrop of the above facts, it appears to be an exaggeration, deliberate or otherwise, to claim that the Budget is not friendly to the middle class — or that it is victimising and/ or neglecting any particular class or classes — just because there is no change in income tax slabs. In fact, evidently it seems rather prudent on the part of the government to make changes that actually benefit the middle class rather than to go for only cosmetic changes.

NARRATIVE 2: THE POOR WILL NOT BE THE REAL BENEFICIARIES OF HEALTH SCHEME

The most surprising argument has perhaps come from The Wire. Its article ‘‘Why the Poor Will Not Be the True Beneficiaries of the ‘World’s Largest Health Programme’”, published February 1, 2018 and written by Dipa Sinha, alleges that the decision will not benefit the poor and that it will only improve the business of private insurance companies. This line has been taken up by other publications too, some of which have been republished this particular article. However, for our purposes, we will again treat it as a typical, albeit somewhat an extreme, example.

Will there be a spurt in the business activity of public and private health insurance companies? Possible, because that is how insurance works. Insurance is a business and not charity. It is precisely because of that ability to run itself as a profit concern that insurance firms can settle claims and pay out money to those in distress and need of the same.

But this does not translate into the poor not being the beneficiaries of the scheme. Also, if the health insurance sector gets an impetus by this scheme, how are the poor going to be harmed? The fundamental question to be asked is this: Will BPL families, hitherto not able to afford healthcare and/ or treatment, get money for the same or not?

If we check the details of the scheme, the eligibility for National Health Protection Scheme (NHPS) would be decided on the basis of the Socio-Economic Caste Census (SECC) data. It is aimed at benefitting 10 crore poor and vulnerable families and 50 crore individuals.

They will get Rs 5 lakh per family, per year for secondary and tertiary care hospitalisation. 1.5 lakh health centres, under Ayushman Bharat, will be set up to provide health facilities closer to home. Therefore, it would be apt to ask The Wire who they think these provisions are for. The poor or the rich?

To conclude, here’s our parting shot:

Only a few days ago, The Wire published a piece titled “Budget 2018: India’s Healthcare System Needs More Money and an Urgent Overhaul” on January 28, 2018, which talked about the need to demonstrate a commitment to India’s health sector. Surprisingly, the author is the self-same Dipa Sinha!

This how the two articles by the same author appear on the page displaying all pieces penned by her for the publication in question:

In the earlier article, the writer complains about a high out-of-pocket expenditure for healthcare and how the government was apparently not spending enough on the healthcare sector. Now that what is perhaps the biggest state-funded healthcare programme in the world has been announced in India, is it not amusing – to be generous – that the only consistency the writer and her publication have demonstrated in is continuing to complain?