Skip to main content

Middle class bonanza? No benefit to anyone who earns less than Rs 25,000 a month

By Gautam Mody* 

At a time when working people are faced with job losses and rising unemployment, inflation and the erosion of real wages and rapidly widening income and asset inequalities, Prime Minister Narendra Modi and the BJP government think it is just the right time to lower income tax for the middle class, the rich and the superrich whilst cutting the government’s expenditure on food rations, MNREGA, ICDS, healthcare and education in the Budget Statement 2023-34 (BS).
They want us to believe that all this is possible because the ‘Amrit Kaal’ (golden age) has arrived. What has certainly arrived is the institutionalised capacity of government, under the BJP, to fudge and fabricate numbers hoping to create an illusion that all is well.
The economic crisis today is deep and there are no easy solutions out of it. The truth also is that, for India, the economic crisis began with the introduction of demonetisation in 2016. It has persisted and gotten aggravated by covid, the supply chain crisis that followed and then the commodity price shock caused by the Ukraine War.
We are today such a heavily indebted economy that the single largest expenditure of the government is interest payments on borrowings. Twenty out of every hundred rupees of government expenditure today will go to interest payment on the loans taken by the government. In a year from now, government debt will be more than 50% of our GDP making our economy even more unstable than it already is.
The government debt also comes at the cost of reduction in income taxes which will in 2023-24 alone result in a loss of revenue to government of Rs 35,000 crore. The reduced income taxes will most of all benefit the superrich (people with annual incomes of above Rs 5 crore) most of all who will pay about three percentage points of their income less in taxes. With this, there is also an increased tax shelter on profits from the sale of high-value property.
The reduction in income tax brings no benefit to anyone who earns less than Rs 25,000 a month which means this keeps out the vast majority of the working class – contract workers, the crores of workers who are on the minimum wage and of course honorarium, domestic and agriculture and other rural workers who don’t even earn the minimum wage.
With the Goods and Service Tax on medicines and food products, the poorest worker in the country contributes a greater share of their wages in taxes to the government than the superrich pay in all forms of taxes. The BS will only contribute to the ever-growing inequality between the rich and the poor in the country.
To add to this gains for the rich and decline in benefits for the working people: the BS has reduced expenditure by nearly one-third on food rations (by Rs 100,000 crore) and on NREGA (by Rs. 28000 crores) as compared to the last year (2022-23). This means there will be less food available through the PDS and even less employment under the NREGA.
Even funds for the Pradhan Mantri Kisan Samman Nidhi have been reduced. So much for the promise of doubling farmers income by 2022! The expenditure on healthcare, ICDS and education has barely been touched. This means in reality the expenditure will be lower for all these services when adjusted for inflation.
Reduced expenditure on social security and social protection will mean lower earnings for working rural households (reduced NREGA), increased expenditure on food (reduced rations) and additional expenditure in the private sector because of reduction in healthcare, ICDS (both healthcare and nutrition for children under 6) and education expenditure by the government.
The possibility of any of this reduced Union government expenditure being compensated by increased expenditure by State governments also does not exist with central transfers to state governments being increased only by a fraction and at any rate lower than the rate of inflation. The rich and the superrich will in contrast have more money to spend on luxury goods as a result of their reduced tax payments. More demand for luxury goods does not grow the economy because there is already an excess supply of them and a lot of them are imported.
With GST on medicines and food products, the poorest contribute greater share of their wages in taxes than the superrich
In 2019, just before the pandemic, the BJP government had dramatically reduced taxes on private companies lowering them by one-third. The BJP said it will increase private investment creating more jobs and higher wages. That did not happen. Private companies distributed their reduced profits as dividends to their owners and shareholders.
It is widely accepted that reduced taxes on the rich and on companies do not contribute to investment and growth but the BJP continues to spread this myth.
Despite all the bombast about government investment being high and being increased dramatically to a level higher than in 2015, it is still lower than before the BJP came to government. The rate of savings and investment by the private sector have at all times been lower than they were in 2014.
Despite the BJP’s clearly pro big business policies, the capitalist class has as a whole expressed little, if any confidence, in the BJP. There is no evidence that government investment is helping to raise private sector investment. Added to that, government investment figures are in name only – less than half the roads, water lines and houses that were promised in the last budget have been built.
Low levels of investment result in fewer new jobs, lower wages, lower demand for basic goods and therefore lower economic growth which then leads the cycle to repeat. When it comes accompanied by high inflation especially in basic goods and food products it wipes our working class incomes and lives as the last several years have done.
As if this was not bad enough today we received data for the month of January 2023 which tell us that manufacturing exports have declined while our import expenditure keeps rising. If this situation persists, as the BJP government’s Economic Survey 2022-23 admits is a likelihood, then our foreign exchange balances (current account deficit) will come under threat.
With no goods worthy of sale in international markets, despite all the sloganeering, of Make In India and Atmanirbhar Bharat, this situation will lower the value of the rupee in relation to the US dollar and other strong foreign currencies resulting in an even sharper rise in prices and greater economic instability.
With the Indian capitalist class having subordinated themselves to foreign and imperialist interests, for their capital investment needs, ably assisted by the BJP government for nearly 9 years now, our economy stands at a precarious place that will only cost the working class dear.
This situation calls upon the trade union to be vigilant and build resistance against the reduction in expenditure on social security and social protection and a stop to all income tax breaks. Our resistance must be lead us to a struggle for an economic policy that delivers a job for every worker, a just minimum wage for every job, universal access to health, free education for all and a roof over every head to reverse the growing inequality and to create an equitable and just society.
*General secretary, New Trade Union Initiative



Vaccine nationalism? Covaxin isn't safe either, perhaps it's worse: Experts

By Rajiv Shah  I was a little awestruck: The news had already spread that Astrazeneca – whose Indian variant Covishield was delivered to nearly 80% of Indian vaccine recipients during the Covid-19 era – has been withdrawn by the manufacturers following the admission by its UK pharma giant that its Covid-19 vector-based vaccine in “rare” instances cause TTS, or “thrombocytopenia thrombosis syndrome”, which lead to the blood to clump and form clots. The vaccine reportedly led to at least 81 deaths in the UK.

'Scientifically flawed': 22 examples of the failure of vaccine passports

By Vratesh Srivastava*   Vaccine passports were introduced in late 2021 in a number of places across the world, with the primary objective of curtailing community spread and inducing "vaccine hesitant" people to get vaccinated, ostensibly to ensure herd immunity. The case for vaccine passports was scientifically flawed and ethically questionable.

'Misleading' ads: Are our celebrities and public figures acting responsibly?

By Deepika* It is imperative for celebrities and public figures to act responsibly while endorsing a consumer product, the Supreme Court said as it recently clamped down on misleading advertisements.

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah*   The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

US 'frustrated' with India’s discomfort: Maritime exercise in South China Sea

By Vijay Prashad*  In early April 2024, the navies of four countries -- Australia, Japan, the Philippines, and the United States -- held a maritime exercise in the South China Sea. Australia’s Warramunga, Japan’s Akebono, the Philippines’ Antonio Luna, and the United States’ Mobile worked together in these waters to strengthen their joint abilities and -- as they said in a joint statement  -- to “uphold the right to freedom of navigation and overflight and respect for maritime rights under international law.” 

Dadi, poti discuss 'injustice' under 10 yr Modi rule: Video campaign goes viral

By Our Representative  Watan Ki Raah Mein, a civil society campaign of the Samvidhan Bachao Nagrik Abhiyan, has released a short video conversation on social media of an exchange of letters between a dadi and her poti discussing poverty, unemployment, corruption and women’s safety. The letters also raise the question of  suppression of our fundamental rights of speech, expression and justice. 

Magnetic, stunning, Protima Bedi 'exposed' malice of sexual repression in society

By Harsh Thakor*  Protima Bedi was born to a baniya businessman and a Bengali mother as Protima Gupta in Delhi in 1949. Her father was a small-time trader, who was thrown out of his family for marrying a dark Bengali women. The theme of her early life was to rebel against traditional bondage. It was extraordinary how Protima underwent a metamorphosis from a conventional convent-educated girl into a freak. On October 12th was her 75th birthday; earlier this year, on August 18th it was her 25th death anniversary.

India 'not keen' on legally binding global treaty to reduce plastic production

By Rajiv Shah  Even as offering lip-service to the United Nations Environment Agency (UNEA) for the need to curb plastic production, the Government of India appears reluctant in reducing the production of plastic. A senior participant at the UNEP’s fourth session of the Intergovernmental Negotiating Committee (INC-4), which took place in Ottawa in April last week, told a plastics pollution seminar that India, along with China and Russia, did not want any legally binding agreement for curbing plastic pollution.

No compensation to family, reluctance to file FIR: Manual scavengers' death

By Arun Khote, Sanjeev Kumar*  Recently, there have been four instances of horrifying deaths of sewer/septic tank workers in Uttar Pradesh. On 2 May, 2024, Shobran Yadav, 56, and his son Sushil Yadav, 28, died from suffocation while cleaning a sewer line in Lucknow’s Wazirganj area. In another incident on 3 May 2024, two workers Nooni Mandal, 36 and Kokan Mandal aka Tapan Mandal, 40 were killed while cleaning the septic tank in a house in Noida, Sector 26. The two workers were residents of Malda district of West Bengal and lived in the slum area of Noida Sector 9.