Speaking on the unprecedented income tax cuts announced by the Finance Minister in the recent budget, Rathin Roy, a former member of the Prime Minister’s Economic Advisory Council has said that of the 3.1 crore (31 million) beneficiaries, “no economist would call them middle class”.
In a 25-minute interview with Karan Thapar for The Wire, Roy said they are, in fact, the top 10% of the country and if they are to be deemed middle class it would suggest that the remaining 90% are poor, which would be a sorry indictment of India.
Roy also spoke about the impact of the income tax cuts on GDP growth and said it would be “nothing dramatic”.
He pointed out that the 10.1% nominal growth projection of the budget suggests that if inflation is even 4.5%, the growth next year could be around 5.5% – a percent lower than what is expected this year. He said it is likely that the income tax cuts would help ensure that growth next year, i.e. for 2025-26, remains at the same level as this year.
That, he adds, would rule out a dramatic improvement in growth.
Raising other important questions about the income tax cuts announced in the budget.
Not only did he question how the beneficiaries should be classified and the impact on GDP growth but he also raised questions about the cost of these income tax cuts and their justification.
