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

Comments

TRENDING

Importance of Bangladesh for India amidst 'growing might' of China in South Asia

By Samara Ashrat*  The basic key factor behind the geopolitical importance of Bangladesh is its geographical location. The country shares land borders with Myanmar and India. Due to its geographical position, Bangladesh is a natural link between South Asia and Southeast Asia.  The country is also a vital geopolitical ally to India, in that it has the potential to facilitate greater integration between Northeast India and Mainland India. Not only that, due to its open access to the Bay of Bengal, Bangladesh has become significant to both China and the US.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

'BBC film shows only tip of iceberg': Sanjiv Bhatt's daughter speaks at top US press club

By Our Representative   The United States' premier journalists' organisation, the National Press Club (NPC), has come down heavily on Prime Minister Narendra Modi for recent "attacks on journalists in India." Speaking at the screening of an episode of the BBC documentary “India: The Modi Question,” banned in India, in the club premises, NPC President Eileen O’Reilly said, “Since Modi came to power we have watched with frustration and disappointment as his regime has suppressed the rights of its citizens to a free and independent news media."

Chinese pressure? Left stateless, Rohingya crisis result of Myanmar citizenship law

By Dr Shakuntala Bhabani*  A 22-member team of Myanmar immigration officials visited Rohingya refugee camps in Cox's Bazar to verify more than 400 Rohingya refugees as part of a pilot repatriation project. Does it hold out any hope for the forcibly displaced people to return to their ancestral homes in the Rakhine state of Myanmar? Only time will tell.

Unlike other revolutionaries, Hindutva icon wrote 5 mercy petitions to British masters

By Shamsul Islam*  The Hindutva icon VD Savarkar of the RSS-BJP rulers of India submitted not one, two,or three but five mercy petitions to the British masters! Savarkarites argue: “There are no evidences to prove that Savarkar collaborated with the British for his release from jail. In fact, his appeal for release was a ruse. He was well aware of the political developments outside and wanted to be part of it. So he kept requesting for his release. But the British authorities did not trust him a bit” (YD Phadke, ‘A complex Hero’, "The Indian Expres"s, August 31, 2004)

China ties up with India, Bangladesh to repatriate Rohingyas; Myanmar unwilling

By Harunur Rasid*  We now have a new hope, thanks to news reports that were published in the Bangladeshi dailies recently. Myanmar has suddenly taken initiatives to repatriate Rohingyas. As part of this initiative, diplomats from eight countries posted in Yangon were flown to Rakhine last week. Among them were diplomats from Bangladesh, India and China.

40,000 Odisha adolescent girls ask CM: Why is scheme to fight malnutrition on paper?

By Our Representative  In unique a postcard campaign to combat malnutrition, aimed at providing dietary diversity, considered crucial during adolescence, especially among girls, signed by about 40,000 adolescent girls from over 10,000 villages, have reminded Odisha chief minister Naveen Patnaik that his government's Scheme for Adolescent Girls (SAG), which converged with Pradhan Mantri Poshan Shakti Nirman  ( POSHAN ) 2.0 in 2021, is not being implemented in the State.

Natural farming: Hamirpur leads the way to 'huge improvement' in nutrition, livelihood

By Bharat Dogra*  Santosh is a dedicated farmer who along with his wife Chunni Devi worked very hard in recent months to convert a small patch of unproductive land into a lush green, multi-layer vegetable garden. This has ensured year-round supply of organically grown vegetables to his family as well as fetched several thousand rupees in cash sales.

Over-stressed? As Naveen Patnaik turns frail, Odisha 'moves closer' to leadership crisis

By Sudhansu R Das  Not a single leader in Odisha is visible in the horizon who can replace Chief Minister Naveen Patnaik. He has ruled Odisha for nearly two and half decades. His father, Biju Patnaik, had built Odisha; he was a daring pilot who saved the life of Indonesia’s Prime Minister Sjahrir and President Sukarno when the Dutch army blocked their exit.