A Budget That Ticks All Boxes

The generous tax relief package for the middle class should boost consumption and act as a stimulus for the economy. The budget's vision is big on nurturing an enabling environment for business and infrastructure spending

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The Narendra Modi-led government unveiled the most middle-class-friendly budget it has ever presented on Saturday, announcing a rebate that will mean people who earn up to ₹12 lakh a year (₹12.75 lakh for those with only salary income) pay no tax under the New Tax Regime, responding to a demand from a very vocal and substantially electorally relevant middle class.

The tax relief—at the upper end of the relevant income segment—translates into around ₹10,000 in incremental discretionary income every month—instantly led to a surge in sentiment (evident in the way members of the middle class responded to the budget), and may well help the Bharatiya Janata Party (BJP) in the coming Delhi elections since the Capital accounted for 10% of individual income tax payments in 2023-2024. And it could well be the demand stimulus experts had called for ahead of the Union Budget to tackle what appeared to be a cyclical slowdown in economic growth.

The Indian economy is expected to grow by 6.4% in 2024-25, a four-year low, and growth in the second quarter of the year slipped to 5.4%, a seven-quarter-low.