
Budget for the Middle
– N K Tripathi
Nirmala Seetharaman, now referred in some social media as Maa Laxmi, has presented the budget 2025-26 at a time when the economic growth is decelerating, and BJP’s grip on the middle class is slackening. 24X7 coverage on TV and a spectrum of views in print media have already made clear that the budget favours the middle class.
The middle class is referred to the fortunate few people in India who are the taxpayers. The finance minister has given big relief in the income tax to the salaried class. In all, the salaried class will be better off by Rs one lakh crore more money in the hands. The threshold for the TDS has also been increased. The calculation of the Modi government is very simple. More money in the hands of taxpayers will lead to a higher consumption, which in turn will stimulate the demand in the market. More demand will nudge the manufacturing and service sectors. This would probably create more jobs, which again will further push the demand. We have to wait patiently for at least two years before we know the actual impact.
The political impact is calculated to be swifter. If the budget is able to draw some more votes to BJP in Delhi, the budget would have served its immediate objective. More hopefully, the middle class which was gradually becoming more indifferent to the BJP, may now be more comfortable with it.
It was predicted in advance that Trump’s shadow will loom over the budget. Predictably there’s no tinkering upward in the custom duties due to the threats of Modi’s dear friendTrump. Some calculated reduction in tariff is to please Trump and Musk, especially reduction in tariff on Tesla and Harley Davidson. However, Trump will not let India off.
Indian GDP is likely to grow by 6.5% to 6.7% in 2025–26. Chief Economic Advisor V Anantha Nageshwaran has concluded that the longer term average of GDP growth will be 6.5%. This falls short of making India Viksit by 2047. For more growth the finance minister has treaded optimistically by throwing bonanza to the middle class.
This budget has come when the global GDP is slowing. In India, as in the whole world, the currency is falling and stock markets are going bearish. Geopolitical situation is also complex. Unmindful of all the global situations, the Indian opposition will pounce on the government for any likely adverse impact on the economy.
The budget has announced some measures which may be helpful. 100% FDI may boost insurance sector. Hurdles in the development of nuclear energy have been removed. Declared manufacturing mission to accelerate development of a domestic cleantech ecosystem may end the Chinese dominance. If the budget adheres to 4.4% fiscal deficit, the bond market may flourish. Support to the start-ups may bring innovations. Support to less productive agricultural farmers may go a long way to improve the rural India.
In the past, Sitaraman had presented her budgets with economic prudence without any pomp and show. This time, however, there are big fireworks of spectacular reduction of direct tax. We can only hope for achche din.