The Indian government is reportedly mulling over tax cuts for the lower-income group, as a part of a ₹50,000 crore ($6 billion) consumer boost initiative in the upcoming budget.
What Happened: The Ministry of Finance is currently in discussions over proposals to slash taxes for consumers who are most likely to spend, reported Bloomberg. This could potentially benefit individuals earning between ₹5 lakh and ₹15 lakh annually, who are presently taxed at rates ranging from 5% to 20%. The introduction of a new tax slab is also under consideration.
The specifics of the plan are yet to be finalized, with a decision anticipated closer to the budget announcement in July. Despite the possible revenue loss due to the tax alterations, the government is determined to stick to its fiscal deficit target of 5.1% of GDP for the current fiscal year.
Approximately half of the ₹50,000 crore measures will be derived from tax cuts, while the rest will be sourced from other programmes. The government is also considering increasing the annual cash payment to small farmers from ₹6,000 to ₹8,000 and extending financial support to women farmers.
The budget for the new Modi government is expected to be announced on July 22, as per local media reports.
Despite recording an 8.2% growth in GDP in FY24, private consumption in India expanded only by 4% in the time period. The sources told Bloomberg that the government is looking to infuse funds into the economy in a way that shows quicker results. The higher spending from the government will be covered by the higher revenues and the $25 billion (around ₹2.1 lakh crore) dividend from the central bank.