Tax relief may have “very limited” impact on demand and growth: Former Chief Statistician
New Delhi, Feb 4 (FN Bureau) The Union Budget, presented last week, has given most awaited tax relief to the middle class as zero tax payable on an income of up to Rs 12 lakh and has been well appreciated by the industry across sectors saying it will boost consumption and resulting in economic development, but the former Chief Statistician Pronab Sen thinks otherwise and said it could actually have “very limited” impact. The budget’s unprecedented income tax relief, which the government seems very proud of and which most commentators believe will boost demand and growth, could actually have “very limited” impact on both and GDP growth next year is likely to be in the range of 6 to 6.5% and not higher.
This is the considered opinion of India’s former Chief Statistician, Pronab Sen, who is presently the Country Director of the International Growth Centre. In an interview with The Wire, Sen believes that the 31 million income tax payers who would benefit from the tax relief are “elite” and cannot really be considered middle class. He believes the income tax relief will increase inequalities whilst also suppressing, to some extent, the upward mobility of those at the lower end of the social scale because social expenditure has been suppressed or cut. Sen adds that it’s possible that the very rich could use their tax relief to buy imports, either directly or by increasing their patronage of restaurants and other services with large import components.
Indian industry had hailed the Union Budget 2025-26 saying the Government has made a strong effort to address the immediate challenges being faced by the economy, particularly on the consumption front by presenting a “Bold” budget giving significant relief to individual tax payers while maintaining the fiscal deficit at 4.4 per cent GDP. Commenting on the Budget the apex industry body FICCI said “Through the Budget the government has made a strong effort to address the immediate challenges being faced by the economy, particularly on the consumption front, while keeping an eye on the long-term target of pursuing the vision of ‘Viksit Bharat’.”