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



'Draconian' Kerala health law follows WHO diktat: Govt readies to take harsh measures

By Dr Maya Valecha*  The Governor of Kerala has signed the Kerala Public Health Bill, which essentially reverses the people’s campaign in healthcare services in Kerala for decentralisation. The campaign had led to relinquishing of state powers in 1996, resulting in improvement of health parameters in Kerala. Instead, now, enforcement of law through the exercise of power, fines, etc., and the implementation of protocol during the pandemic, are considered of prime importance.

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. 

Bihar rural women entrepreneurs witness 50% surge in awareness about renewal energy

By Mignonne Dsouza*  An endline survey conducted under the Bolega Bihar initiative revealed a significant increase in awareness of renewable energy among women, rising from 25% to 76% in Nalanda and Gaya. Renu Kumari, a 34-year-old entrepreneur from Nalanda, Bihar, operates a village eatery that serves as the primary source of income for her family, including her husband and five children. However, a significant portion of her profits was being directed toward covering monthly electricity expenses that usually reach Rs 2,000. 

Work with Rajasthan's camel herders: German scientist wins World Cookbook Award 2023

By Rosamma Thomas*  Gourmand World Cookbook Awards are the only awards for international food culture. This year, German scientist  Ilse Kohler Rollefson , founder of Camel Charisma, the first of India’s camel dairies, in Pali district of Rajasthan, won the award for her work with camel herders in Rajasthan, and for preparing for the UN International Year of Camelids, 2024. 

Reject WHO's 'draconian' amendments on pandemic: Citizens to Union Health Minister

By Our Representative  Several concerned Indian citizens have written to the Union Health Minister to reject amendments to the International Health Regulations (IHR) of the World Health Organization (WHO) adopted during the 75th World Health Assembly (WHA75) in May 2022, apprehending this will make the signatories surrender their autonomy to the “unelected, unaccountable and the whimsical WHO in case of any future ‘pandemics’.”

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.

Golwalkar's views on tricolour, martyrs, minorities, caste as per RSS archives

By Shamsul Islam*  First time in the history of independent India, the in-charge minister of the Cultural Ministry in the current Modi government, Prahlad Singh Patel, has glorified MS Golwalkar, second supremo of the RSS and the most prominent ideologue of the RSS till date, on his birth anniversary, February 19. In a tweet he wrote : “Remembering a great thinker, scholar, and remarkable leader #MSGolwalkar on his birth anniversary. His thoughts will remain a source of inspiration & continue to guide generations.”

Why is electricity tariff going up in India? Who is the beneficiary? A random reflection

By Thomas Franco*  Union Ministry of Power has used its power under Section 11 of the Electricity Act, 2003 to force States to import coal which has led to an increase in the cost of electricity production and every consumer is paying a higher tariff. In India, almost everybody from farmers to MSMEs are consumers of electricity.

Deplorable, influential sections 'still believe' burning coal is essential indefinitely

By Shankar Sharma*  Some of the recent developments in the power sector, as some  recent news items show, should be of massive relevance/ interest to our policy makers in India. Assuming that our authorities are officially mandated/ committed to maintain a holistic approach to the overall welfare of all sections of our society, including the flora, fauna and general environment, these developments/ experiences from different parts of the globe should be clear pointers to the sustainable energy pathways for our people.

Environmental cost of Green Revolution: India world’s second-highest fertilizer importer

By Glenn Davis Stone*  Feeding a growing world population has been a serious concern for decades, but today there are new causes for alarm. Floods, heat waves and other weather extremes are making agriculture increasingly precarious, especially in the Global South .