Government maybe planning to play with the budget to increase income tax slabs
if Narendra Modi wants to safeguard his political future, then he must attend to the economy
(Dr Pentapati Pullarao)
The national budget will be announced on February 1, 2025. There are expectations that there will be miracles to revive the economy, bring down prices and revive image of Narendra Modi. The biggest opponent of Narendra Modi is not any politician, but the economy. If Modi cannot revive the economy, then it will bring people against the government.
Any budget will have a limited impact. When Dr Manmohan Singh started the economic revival of India in 1991, it was not only the budget, but a series of other actions. So, Government maybe planning to play with the budget to increase income tax slabs and then saying it is helping the middle classes. if Narendra Modi wants to safeguard his political future, then he must attend to the economy.
Narendra Modi is a popular prime minister. There is no doubt that Modi has done extremely well in foreign affairs, internal security, heath and sanitation, Kashmir, sports and raised profile of India. Roads, railways, infrastructure and food distribution has been great.
But there is a big gaping hole and that is the economy. When there is inflation, people suffer, savings and employment go down. When oil prices have been down 50% since 2014, why is there inflation? Obviously, because the economy has been mismanaged. While Indians could face the worst external conquerors, they cannot face a government which will mismanage the economy.
One cannot understand why Narendra Modi has not recognized that the economy will erode his politics. Modi should have grasped that his economic team has failed and needs another team. The problem is that Modi has not changed his Ministers or core advisers since 2014. Old faces stop new faces from coming in.
Problems for Modi:
- The first problem which Modi faced was on November 8, 2016, when he himself shot a self-goal and suddenly introduced ‘Note Bandi “on the country. The damage done to the Indian economy by “Note Bandi “is long-lasting. But sadly, Modi did not admit the damage and never countered the ill-effects of Note Bandi. That is why un-employment continues in India.
- Only roads and rail infrastructure: There was dis- proportionate investment only in roads and railways. There is a method in this madness. The idea is to help the top companies, who make cement, steel, engineering firms, earth-moving equipment, heavy machinery and trucks, etc. Now all these companies are making huge profits, as government ensure they get big orders. But this focus has left a huge gap in other areas. There should have been investment in employment-generating agriculture, fisheries, etc. Modi faces a big problem since he cannot reduce orders for the big companies. Yet, there is un-employment.
- High petrol and diesel prices: Since 2014, oil prices went down. But Modi did not reduce petrol and diesel prices in India.. Government had said that when international oil prices go up, petrol prices in India will rise. But when international oil prices came down, government did not reduce –petrol prices. This is a major problem for Indians. This is a huge tax on farmers and middle classes.
- India like China is suffering from over-investment in certain infrastructure. China’ economy is suffering due to excessive investment in un-needed infrastructure. Some favored states like Maharashtra and Gujarat get disproportionate investment in infrastructure.
- Highest taxation: Through high GST, income taxes, high petrol prices, high highway tolls, costly air travel, government has sucked away income of middle classes. Taxes have made the middle classes and poor people lose all their savings.
Government failing the middle classes: Government maybe planning to play with the budget to increase income tax slabs and then saying it is helping the middle classes. But when there is inflation, all such tax concessions are useless. Government is playing the game of “giving with one hand and taking away with the other hand “Similarly, poorer classes get food and some Direct cash transfers. But due to rising prices, they lose all their incomes and are without savings.
Country demands lower GST and taxes: The country demands lower GST and taxes. There is a huge gap between the richest people and all others. Yet, thus far, the government has been stubborn in not reducing taxes and levies. Government is only interested in finding money for the top companies.
Can Modi repair the economy
The poor parliament election results have shaken up the Modi government. The BJP realizes that the middle class is getting angry. Along with farmers, these sections feel that in the last 10 years, there has been prosperity in which they have no share. The combination of middle classes and farmers is an un-stoppable force.
Modi needs new Ministers and new advisers: It is up to Narendra Modi to do course-correction, and he is capable of it. Modi has the same Ministers and advisers since 2014. They cannot give new advice to tackle the problems. But will Modi change his set-up? Show me on Dr. Manmohan Singh in the government!
The damage to the economy started on November 8, 2016, when Note Bandi was introduced. It still continues to impact the economy. Modi can repair the economy if he abandons the policy of high taxes, high tolls and no relief to the middle classes and farmers. But it is not enough to simply give some income-tax concessions, when inflation has continued for years.
A great craftsman like Manmohan Singh is needed to repair the damage. Narendra Modi should enrich his cabinet by getting the best brains in India. Even if Modi achieves great success in foreign affairs and Defense and India’s prestige is high internationally, Modi will face increasing problems, if he cannot take care of the middle classes and farmers. Some budgetary concessions will not be enough. Government should recognize it has failed the economy and start repairs. Just keeping Bombay business happy is not enough
(Author is a Political and Economic analyst based in New Delhi)
