As Union finance minister Nirmala Sitharaman goes through the final stages of preparation of the documents for Budget 2025, she is surrounded by a number of pressing problems. There are certain macro-economic realities that define the general climate the country is in and which she has to tackle in order to boost demand and consumption in the country, which is vital for revving up the GDP growth engine, which is showing distinct signs of deceleration in recent months.
Captains of Indian industry have urged the finance minister to put more money in the hands of the common man in order to revive demand. Significantly, demand is lagging in the urban sector for 5 quarters and the industry captains are worried. Experts have pointed out that job creation has slowed down and since inflation in high, it has hit consumption. Since demand of goods and services is sluggish, the salary hikes that India Inc is offering is not able to keep pace with inflation, resulting in erosion of pay at the hands of the consumer.
“Farmers should pay income tax”
While the finance minister is facing demands for income tax relief for the common man, she is also under pressure to raise more resources with very few options left. “Farmers, who are earning Rs 20 lakh or more a year, should pay income tax,” said Srinath Shridharan, policy researcher and corporate advisor. He was deliberating on how to increase the tax net even when offering income tax relief to the common man. He agreed that the middle class are suffering from high taxation and inflation eating into their low salaries.
Industry bodies seeking income tax relief
“This is probably the first time that industry bodies are asking for income tax relief for the middle class because it has come to hurt them now,” added Sridharan to illustrate how serious the situation has turned. He also pointed out how personal income tax exceeds personal income tax and wondered whether our tax policies are milking the middle class more than companies many of which are making record profits. Will the 80C limit increase in 2025, will the standard deduction increase, many are asking now.
Since the corporates are facing a high cost of capital and lukewarm demand, they are not enthusiastic to invest. Since businesses are not making new investments, new jobs are not being created. So this has almost become a Catch 22 situation.
Less than 2 weeks in the run-up to the Budget 2025, the pressure on Union finance minister Nirmala Sitharaman to put more money in the hands of the common people through income tax cuts is immense. But in order to do so, Sitharaman has to raise resources from new sources. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
