India’s Finance Minister, Nirmala Sitharaman, announced a significant tax relief of 1 trillion rupees ($11.5 billion) for middle-class consumers in the latest budget. The move aims to boost household consumption and stimulate economic growth. Individuals earning up to 1.2 million rupees annually will now be exempt from income tax, up from the previous cap of 700,000 rupees.
This tax reform will benefit 10 million individuals, increasing the number of zero-tax payers to 60 million, or 74% of all taxpayers. The policy seeks to encourage savings and investment while addressing concerns over slowing economic growth, which is expected to range between 6.3% and 6.8% in the next fiscal year.
Despite the revenue loss from tax cuts, Sitharaman outlined a lower budget deficit of 4.4% of GDP, supported by higher bond sales and increased transfers from the central bank. Infrastructure spending is set to grow by 10%, reaching 11.2 trillion rupees.
Economists have mixed views on the budget. While some see it as a timely move to boost disposable income, others worry about ambitious revenue targets and insufficient infrastructure spending. The opposition, led by the Congress party, criticized the budget for not addressing unemployment concerns.
The budget signals a shift towards private investment-led growth. With global economic uncertainties and domestic challenges, the government’s fiscal prudence will be crucial in maintaining economic stability and achieving long-term development goals.
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