Do I Tax relief to MIDDLE CLASS will boost economy?

It is not possible to simultaneously reduce taxes, debt and the deficit, and also invest in growth boosting sectors and infrastructure. However, Finance Minister has tried to achieve all this in the Union Budget for 2025-26.

The budget cleverly explains that growth does not need this constant juicing of capital expenditures, and can instead come through the revival of demand from the “middle class”.

The Prime Minister, modi while addressing India Mobility summit recently, said that he had opened up a market of about 25 curare – what he has long called the “new-middle class”. That is perhaps a reasonable estimate of India’s real middle class. The old middle class who could afford one vehicle three decades ago – are perhaps viewed now as being the rich. So, is it that everyone in India is in the MIDDLE CLASS now? Absolutely not.

It is a hard fact that more than 80 crore people – or about 60 per cent of India – receives free foodgrain under the PM Garib Kalyan Anna Yojana. It’s unbelievable to see this 60 per cent as being middle class; and so we can assume an upper limit for the middle class at 40 per cent of the country: 60 crore people, less than 12 crore families.

There were 7.5 crore returns filed last year by the due date, of which almost 4.7 crore paid nothing. About 2.7 crore are thus affected by the tax relief. Is the middle class this 3 crore people who are directly taxpayers?

Or the 12 crore families who are not dependent upon the government for food? Can a group of 3 crore be considered “middle class” if they are the richest segment of a country of 140 crore? That seems to stretch the definition of “middle” a bit too far.

Anyway, let us celebrate a Budget that gestures towards deregulation, increases economic openness, and promises reform of direct taxes.

We must have to find out the right answer to this question, before depending on an imaginary MIDDLE CLASS to get out of the recession.

There’s a lot here to be pleased about. But we should not get carried away and assume that “middle class” tax cuts or that whatever we have got will necessarily restore growth momentum to the economy.

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