Budget: Who is the real gainer?
Feb 3, 2025
The budget is nothing more than a game of numbers, as it has never brought any major change to anyone's life. Yet, we read the news and do our analysis enthusiastically. I have seen people eagerly awaiting the budget and engaging in heated debates. Perhaps it is just a curiosity in our otherwise ordinary lives. If you ask someone, they will tell you that the budget has not significantly changed their lives. It is just another aspect of the economy. Newspapers carry flow charts bar charts and pie charts with other visuals. Social media gets budget reviews to share virally. Newspapers print a few more pages and send home elaborate reviews. A fraction of the economy is engaged in all these. Gradually, everything returns to normal. Everyone waits for the next budget to see new offers and changes.
Everyone was curious about what would come as the economic downturn began to knock on everyone's door. Not only ordinary people but every section of society was looking forward to this budget. Almost every media celebrated the news of tax exemptions for middle-class people, who were hitherto taxpayers, specifically the salaried section. Newspapers celebrated the personal income tax relief. However, it may not work in favour of the Indian economy, as this tax-paying section is considered a small percentage compared to the population size of India. They are considered a section with higher salary grades in India.
Therefore, their numbers will be average. The media has calculated that the loss of income from this action for the government is ₹1 trillion. But the government will be smarter. Its strategy is to exempt taxes for this higher salary grade category. But what will the tax-saving section do with more money in their hands? They will spend more money they may save from the tax exemption, which will stimulate demands. The demands will create new jobs and higher raw material consumption. These will make the GST bag bigger. A big chunk of this tax exemption will return to the government through the GST channel. If all the decision changes the demand pattern, I would describe this decision as a “right decision at the wrong time,” a kind of late decision, or another trick to catch the media's attention.
The picture of the so-called higher-salary individuals is slowly fading because middle-level companies cannot afford those salary grades, and technology is overpowering human workers, especially in this higher middle class. This category is becoming unwanted for companies. AI can fulfil their needs. In companies now, only the top category and the lower middle-class salaried section have space.
Instead of just skimming the surface, why doesn’t the government address the core issues directly? The proposal is unrealistic. I am not against exempting anyone. The government should shift this tax method to boost the economy and collect GST more effectively. If the government provides financial support to the poorer sections, they will reinvest it into the mainstream economy. This approach will stimulate growth from the ground up and benefit every section of the economy, ultimately benefiting the government.
The system must stimulate the economy. The economic planners and advisors must think and take steps accordingly. We can achieve this goal only by allowing freedom in commercial activity. Tighter control and regulation over the economy will only cripple the economy. The government should act as a facilitator rather than remaining a whipping watchdog.
In a way, unloading the tax burden of the middle class is a positive step. I hope the country can expect more reforms soon, primarily by cutting interest rates by the Reserve Bank of India, allowing the economy to move and swooping down on the murky online loans. The people are victims of this deceiving exercise. The time also has come to focus on environmental issues instead of solely concentrating on the economy, as the Economic Survey 2025 released a day before the budget warned.
SAJIKUMAR
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