Breaking News :
Kashmiri Shawl Seller Assaulted, Robbed in Punjab—Third Attack in 45 Days    Jamia Students Rally Against Crackdown on Campus Activism    AI Summit Divided: India Pushes for Inclusive Rules as US, UK Reject Paris Communique    Bangladesh Witnesses Wave of Violent Attacks Against Monuments of Liberation War    CPI Raises Alarm Over Chhattisgarh Encounters, Demands Inquiry    Govt’s 15-Point Plan Focuses on Education, Employment & Social Welfare for Minorities: Rijiju    Unchecked and Unregulated: How Illegal Constructions Soar in Kolkata Under TMC’s Watch    India’s Got Latent Row: Assam Police Book Ranveer Allahbadia, Samay Raina and Others    SC Reserves Verdict on WBSSC Job Scam Case, Questions Data Authenticity    Why Has Manipur Governor Not Convened Assembly Session? Congress Questions Delay    Far-Right Leaders Gather in Madrid to 'Make Europe Great Again'    Bipartisanism Wins in Ecuador: Noboa And González Head to Presidential Run-Off    Rajasthan: BJP Pulls Up Minister Kirodi Lal Meena Over Phone-Tapping Remark    Modi’s France Visit: Meets ‘Friend’ Macron & US VP JD Vance    Parrhesia as Political Resistance: The Bishop That Spoke Truth to Power    FIR Filed Over ‘Beef Biryani’ Notice at AMU, University Cites Typing Error    Modi Govt’s ‘U-Turn’ on CLND Act a Bid to Appease Foreign Nuclear Firms: Congress    Indian Rupee Plunges to All-Time Low of 87.95 Per Dollar in Early Trade    Delhi Elections: The End of a Myth And the Magnification of a Tragedy    Medical Aid to Jagjit Singh Dallewal Halted as Doctors Fail to Find Veins: Farmer Groups   
Economy

An Attempt to Pull Economy Forward with the Help of Tax Savings of Middle Class

The real intention of the Modi government is neither to create demand nor to generate employment. Its intention is only to win the Delhi elections by attracting the middle class.

An Attempt to Pull Economy Forward with the Help of Tax Savings of Middle Class

Finance Minister Nirmala Sitharaman and Prime Minister Narendra Modi (Bill Graphic)

Finally, the Modi government has accepted that our economy is stuck in recession. The growth rate of the economy which was estimated at 8.2% has fallen down drastically and has settled at 6.4%. Economists are also challenging this estimate because they believe that the GDP is being overestimated. Now to create a 5 trillion-dollar economy, which is the populist target of the Modi government, a growth rate of more than 10% is needed, which is impossible because the world economy is also stuck in a serious recession and foreign investment is fleeing. This global capital stays in a country only as long as it sees profit. If it sees profit somewhere else, then there is no question of it staying here. This time in the budget there has been total silence on the flying foreign capital, whereas before this the increasing foreign investment has been praised every time.

To revive the country's economy stuck in recession, the Modi government is now worried about expanding the market by creating domestic demand. Continuous budget incentives to corporates have not yielded any favourable results. Till now this government has believed, and even now it has not come out of this thinking that giving incentives to capitalists will create jobs. If this thinking was correct, then unemployment would have vanished from our country, because according to the 'World Inequality Report', about 23% of the gross income is going to the richest 1% people of this country and more than 40% of the total wealth has accumulated in their hands. This concentration of the country's resources and wealth has happened so fast in Modi Raj that before he came to power, there were 100-dollar billionaires in the country, today their number has increased to 200. But the wealth of these money-bags is not used to create jobs in this country.

Now, to come out of this recession, income up to Rs. 12 lakh has been exempted from income tax. Modi government thinks that this will save Rs. 1 lakh crore in the pockets of the middle class, which will come into the market and create domestic demand. This will give impetus to the economy and the creation of demand will lead to the creation of jobs.

But this strategy is not going to work very well, because the emphasis of this government is not on increasing the income of the common working class by increasing their wages/salaries and thus, creating demand by increasing their purchasing power, but on increasing the purchasing power of the common working class by increasing their savings from the income they are currently earning. Increasing income and increasing savings are two different things. Available data shows that in the first 6 years of Modi rule, between 2014-20, the gross income of industrial workers has declined by 3%, while the gross profits of capitalists have increased by more than 13% during the same period. So, anyone who thinks that employment can be created by giving tax breaks to capitalists, waiving their banking loans, implementing labour reforms in their favour and blocking the wages of working-class people is living in a fool’s paradise.

Recently released data on family consumer expenditure shows that on an average rural household spends only Rs 8079 and urban households spend only Rs 14528 per month. This is the average purchasing power of people living in our country, which includes those earning Rs 12 lakh and above. The government itself estimates that the number of people earning Rs 4 to 12 lakh is only 5.6 crore. This means that out of the country's 44 crore workforce (and this includes those engaged in agriculture and rural occupations dependent on the agricultural economy), the annual income of 38 crore people will be less than Rs 1.5 lakh. Without increasing the purchasing power of these 38-crore people, it is not possible to create any effective domestic demand and neither can any kind of employment be generated.

There is a possibility of some demand being generated from the tax savings of the middle class only when inflation is kept under control. The retail inflation rate in food grains is around 10%. But it is not possible for the government that protects the profiteers to control this inflation. The hue and cry being made about saving Rs 80,000 on an income of Rs 12 lakh and the increased demand being imagined with this is going to be dashed by the rising inflation.

If we examine the claims made by the Modi government through the budget a little more deeply, a more pathetic situation emerges. If we consider the number of families with an income of 12-24 lakh rupees to be around 2.5 to 3 crores, then the total number of middle-class families in India would be around 8-9 crores. One lakh crore rupees being given in income tax means an average saving of 12000 rupees annually or 1000 rupees monthly per family. The whole idea of creating demand through this saving is solved. It would be better to compare this relief being given to the middle class with the Pradhan Mantri Kisan Samman Nidhi and it can be named Pradhan Mantri Madhya Varg Samman Nidhi. 

In fact, the Modi government is not even serious about the strategy of creating demand with the help of savings. If it had been even a little serious about this strategy, it would have gone ahead and taken forward its savings strategy by withdrawing the arbitrary taxes it is imposing on petroleum products. This strategy would have been effective because the inflation caused by the increased prices of petroleum would have been brought under control and there would have been effective control on inflation. All sections of the common people including the middle class would have benefited from this saving and along with controlling inflation, demand could have been created through savings and employment could have been generated.

But the real intention of the Modi government is neither to create demand nor to generate employment. Its intention is only to win the Delhi elections by attracting the middle class. This hidden agenda of the BJP (which was never hidden) came out in the open during the Delhi election campaign, when the Modi-Shah duo tried to make this tax-saving issue an election campaign issue.

Had the Modi government been serious about solving the employment crisis and pulling the economy out of recession by creating demand in the domestic economy, it would have announced filling lakhs of vacant posts in the central government, substantially increasing the budget allocation for MNREGA, increasing wages and number of working days, announcing employment guarantee for the urban poor, announcing minimum wages for dignified livelihood for workers in the unorganised sector, announcing loan waivers and minimum support prices of 1.5 times the C-2 cost for farmers, withdrawal of labour codes that push workers into bonded slavery, etc. And to do all this, it would have imposed more taxes on the rich. These were steps that could have created demand by increasing the income of the common man, which would have ultimately led to job creation.

But the Modi government neither had to do this nor did it do so, because its economic philosophy does not allow it to hurt the profits of the corporates.


The author is an independent writer on politics, social and agrarian issues. The views are personal.

Comments (0)

Leave a Comment

   Can't Read ? Click    Refresh