Does the budget signal a change in the Centre's growth strategy?

There's a shift in emphasis from infrastructure to consumption but it doesn't solve our core problems

- VIVEK KAUL is the author of 'Bad Money'.

In the stock market circles of Central and South Mumbai, the phrase 'kya lagta hai' (KLH, what do you feel)? can be a conversation starter. During the course of any such conversation in the last few months, the KLH crowd would eventually get around to cribbing about how high taxes are holding the stock market and economy back.

Nonetheless, throughout this fiscal year following the July 2024 budget, tax rates have largely remained unchanged. So, why has the KLH crowd been so vociferous about high taxes lately? And why was there so little noise earlier? Stock prices peaked in late September and have fallen since. This could potentially reduce the annual bonuses for the KLH crowd, which may explain their recent outpourings on the government needing to lower tax rates to increase disposable income, stimulate spending and boost companies, the stock market and the economy.

Now, those who shout the loudest are likely to be heard the most. The annual budget for 2025-26 shows that the KLH crowd has been heard. Thanks to a rebate, no income tax needs to be paid for income of up to ₹12 lakh. Tax slabs have also been widened, leading to the government forgoing tax revenue of ₹1 trillion. This raises several points.

First, the tax forgone will end up as income in the hands of people. And this income is likely to be spent, lifting consumption to some extent and helping companies operating in that space.