Discussions on what should be in the next Union Budget are now taking place between policymakers, finance ministry officials, economists, experts and several interest groups, ranging from industry bodies to those in specific domains. Over the next few weeks, politicians of all parties would also pitch their recommendations and demands, trying to speak for specific regional and social demographic groupings.
The annual Budget is a high-profile event in India’s political calendar, with the “suited-booted” India Inc conventionally showcased as its most important stakeholder. Big business and corporations are not only in focus before the Budget, but also on the Budget day itself, and the stock market response and industry reactions get the lion’s share of attention after the finance minister’s Budget’s presentation.
The middle classes are not seen as too crucial and are all but forgotten except when it comes to two aspects — changes in income-tax slabs and changes in the prices of some items deemed as important to this segment such as housing loans, cooking gas, air tickets, and so on.
Any bread-crumbing in income-tax slabs is projected as a big benefit, a de facto stimulus, while the real focus continues to be elsewhere.
In the larger political-economic worldview of Prime Minister Narendra Modi, the emphasis in this Budget, too, is likely to be on the usual items on the agenda — the overall increase in the size of the Indian economy, with the goal of achieving a $5 trillion GDP, and our ranking as a global economy, with the ultimate prize being becoming number three, right after the United States and China. One expects massive spending on infrastructure as a stimulus to growth as well as development — roads, ports, power, airports, railways, etc. — besides investment in rural and welfare economics that will entail expenditure on agriculture, primary healthcare and education, insurance coverage for the most vulnerable and subsidies for the poor, not to forget poverty alleviation schemes.
And even as GST collection targets have nearly doubled from what was once envisaged as possible, the objective will continue to be moderate growth and control of inflation. Privatisation and the sale of PSUs will become slow, and growing indirect taxes would be expected to lift the bulk of expenditure, which will rise, even as tax deficit has to be kept in check.
In short, a lot for industry, policymakers, welfare politics, poor and rural India, and almost too little for the urban middle class.
The coming Budget must change this pattern — transform its view of the middle classes as just a chattering and taxpaying segment and instead view it — through the lens of enhanced expenditure and demand creation — as a powerful economic growth engine. This can happen through the rise in incomes, which will be fiscal-rebated, or through major income tax slab cuts.
This route of the middle classes spending an additional, say Rs 3 lakh crores or so, saved from I-T cuts, will also result in rapid secondary job creation — which is unlikely to be matched by government-funded infra projects.
In short, leave much more money in the hands of the 30-odd million middle class Indians, let them spend more and quickly generate jobs and growth. All of India will stand to benefit.