India's Modi crafts populist measures ahead of elections

NEW DELHI – 25 January 2019: India is weighing measures to woo farmers, small business owners and those who are less well-off, after setbacks in state elections for Prime Minister Narendra Modi's ruling party, now readying for a general election due by May.

Two opinion polls on Thursday suggested that a coalition led by Modi's Hindu nationalist Bharatiya Janata Party (BJP) could emerge as the largest group in the election, while falling short of a majority.

That could push Modi to adopt more populist measures likely to be a drain on the economy, although his government is already at risk of breaching its fiscal deficit goals.

Here are some of the steps taken or being considered, some of which may feature in the Feb. 1 interim budget, government sources said, with their costs likely to fall on the next government.

HELP FOR SMALL BUSINESSES

On Jan. 10, India announced a change in national sales tax rules to exempt an additional two million small businesses.

From April, businesses with annual sales of up to 4 million rupees ($56,700) will be exempt from the Goods and Services Tax (GST), a concession now limited to firms with turnover of up to 2 million rupees a year.

The government is also considering offering cheap loans and free accident insurance coverage to small businesses, Reuters reported this week.

HELP FOR FARMERS

Direct fund transfers and interest-free loans for farmers are among the relief measures being considered. Such loans, from state-owned banks that will be compensated by the government, could cost 120 billion rupees a year, government sources said.

An option in place of the interest-free loans could be to give farmers sums ranging from 2,000 rupees to 4,000 rupees for every hectare of land owned, at an estimated cost of more than a trillion rupees.

The government's least favored option is farm loan waivers, such as those rolled out by the main opposition Congress party after it defeated the BJP in key farmland states in last year's state elections.

JOB RESERVATION

India aims to spend millions of dollars to boost educational places to meet a 10 percent quota recently promised to the less well-off among upper-caste Hindus and people from other religions. It already sets aside job and education quotas for its lowest social classes.

ONIONS

In December, India doubled to 10 percent its export incentives for onion farmers, after prices of the key staple plunged. The programme offers credit to be used to pay taxes.

E-COMMERCE RULES

India wants to ban from Feb. 1 sales by e-commerce companies, such as Amazon.com and the Walmart -owned Flipkart Group, of products from firms in which they hold equity.

The move followed complaints by retailers and traders that big firms exploit control of inventory from affiliates and pacts on exclusive sales, thus promoting undercutting.

TAX CUTS

On Dec. 22, India slashed its sales tax for more than 20 items, from televisions to movie tickets.

The government is also considering raising the ceiling for payment of personal tax, the BJP said.