Has Budget taken middle-class for granted because Modi assumes they will anyway vote for BJP?

Illustration by Soham Sen | ThePrint Team

Finance Minister Nirmala Sitharaman Friday presented the maiden Budget of the second Narendra Modi government. The Budget announced an increase in cess on petrol and diesel and raised customs duty on gold, offering no relief to the middle-class.  

ThePrint asks: Has Budget taken middle-class for granted since Modi assumes they will anyway vote for BJP?

If India becomes a $5 trillion economy, it will benefit all, including the middle-class

Narendra Taneja
National Spokesperson, BJP

The Budget has put a master plan in place to meet the goal of making India a $5 trillion economy by FY 2024-25. All will benefit from this, including the middle-class. In fact, the middle-classes are always the frontline beneficiaries of all such growth in open economies like India.

The Budget talks about heavy incentives for electric vehicles and tax concessions, now extended for 99 per cent companies. The middle classes will gain from many of the new tax incentives launched to boost manufacturing, including that of solar power and IT equipment.

The budget also talks about water management and taking tap water to every single Indian household by 2024. This will increase demand for steel, cement and manpower. Many such schemes are executed by entities run and managed by the middle class.

As far as the increment in the special additional excise duty and road cess on petrol and diesel by Re 1 per litre is concerned, these taxes will contribute to the infrastructural development of the country; the middle-classes will stand to benefit from that too. The engineers, service providers, chartered accountants are all from the middle-class.

Government’s policies have ensured the middle-classes’ bahi khata turns red

Jaiveer Shergil
National Spokesperson, Congress Party

Indian voters, especially the middle-class, were expecting a bouquet of roses but were instead handed out a bed of thorns. The BJP government used the budget as a tool to continue its policy of revenue extortion by increasing the duty on petrol and diesel.

Despite nearly Rs 11 lakh crore revenue windfall in the past five years through a 411 per cent hike in excise duty on diesel and a 233 per cent increase in excise duty on petrol, the government has failed to pass on the benefits to the consumers.

The budget should have been reform and relief-oriented, but sadly it isn’t.

Finance Minister Nirmala Sitharaman made a transition from briefcase to bahi khata for the sake of optics. But in reality, the government’s policies have ensured that the middle-classes’ bahi khata turns red.

The budget lacks balance. While corporate houses continue to get benefits in terms of reduction in corporate taxes, the middle-class taxpayers have been left high and dry.
India is one unique country, which continues to hike fuel prices despite a downward trend in the crude oil barrel prices.

The Finance Minister failed to understand and dissect the cracks in the Indian economy, especially the rising unemployment among the middle-class. She just focused on catchphrases, metaphors and empty slogans.

Budget a setback for lower-middle income groups, who were the target group in interim Budget

Deepanshu Mohan
Associate Professor and director, Centre for New Economic Studies, O.P. Jindal Global University

The Budget comes across as a major disappointment for lower-middle-income groups and citizens (especially farmers), who were the main target group of attention during the interim Budget presented earlier this year. Such is the mastery of the Modi government’s that it feeds a continuous loop of trailers of what’s to come ahead, but when the time comes, nothing is actualised. Schemes like PM-Kisan or PM Shram Yogi Mandhan found little mention in today’s Budget speech.

The only recognisable silver lining was the operational and regulatory ease provided in setting up a new business or in completing basic involuntary obligations for citizens (paying taxes, filing returns etc.). Exemptions provided in income tax on home-loans is aligned with the government’s push for affordable housing, which will benefit new (lower-middle income) home owners. It is left to be seen how banks go about with their home-loan pricing mechanism to support the government’s plan. Also, a dodgy push for increasing the government’s foreign borrowing capacity or its external debt management reflects the government’s quest for easy money – this will add significant stress on the (already) volatile position of the Rupee and the current account Deficit.

Welfare, education and healthcare got little fiscal focus. More importantly, beyond fleeting references, the critical missing aspects included women, agriculture, textiles, exports and renewable energy development (or W.A.T.E.R.) – this would have been the building blocks of ‘New India’.

Not much space for giving benefits to middle-class given current financial constraints

Suyash Rai
Fellow, Carnegie India

The Budget was made at a time of significant fiscal constraints. Revenue collections in 2018-19 were much lower than what they were budgeted to be. Actual collection of personal income tax was about 13 per cent lower than budgeted. In such circumstances, there was not much space for giving benefits to the middle-class, especially in terms of higher tax exemption threshold, lower tax rates or more deductions.

The benefits have been largely restricted to lower-middle-class. The interim budget had said that no tax would be levied for those with taxable income of less than Rs 5 lakh. This Budget has given increased tax benefits for affordable housing. Further, there are some benefits, such as deductions on loans for electric vehicles, pensions for shopkeepers and traders, and reduction in GST rates on many items, which could benefit those in the middle-class.

I think there is a case for reducing the tax rate for the Rs 5 lakh to Rs 10 lakh bracket. There is also a case for raising the threshold for GST every few years. Such steps could benefit the middle-class, but they require a better fiscal situation.

This Budget’s guiding principle is prudence, not populism

Mandar Kagade
Policy Consultant

The Budget presented by the Narendra Modi government is a mixed bag for the middle-class. I say this because of its big push to affordable housing – an additional Rs 1.5 lakh deduction for interest on loans for purchasing houses worth Rs 45 lakh.

Additionally, the Budget provides a much-needed push to reforms in rental laws, which could result in state governments adopting a similar model as the Centre’s.

However, the increase in both excise duty and cess on petrol and diesel by Re 1 per litre will make fuel more expensive for the common man. There’s also an increase in customs duty on gold from the existing 10 per cent to 12.5 per cent. Further, there’s no change in the Income Tax slab.

Despite taking all these points into consideration, I don’t think the Budget in any way indicates that the Prime Minister is taking the middle-class for granted. The Budget has been presented after a general election and at a time when India is facing an economic slowdown.

Therefore, prudence and not populism should be the guiding norm, which one sees in this budget.

By Fatima Khan and Revathi Krishnan