Union Finance Minister Nirmala Sitharaman has aimed to boost consumption by putting money directly into the hands of the people. The government is set to forgo ₹1 lakh crore in direct tax revenue this year, with the belief that this infusion of cash will circulate throughout the economy.In addition to providing a tax relief package for the middle class, the budget also emphasised fiscal consolidation and a steady commitment to capital expenditure.To shed light on the nuances of the budget, CNBC-TV18 spoke with several key political figures: Syed Zafar Islam, National Spokesperson of the BJP; Sasmit Patra, Rajya Sabha MP from the BJD; Milind Deora, Rajya Sabha MP from Shiv Sena; and Shashi Tharoor, Lok Sabha MP from the Congress.
Below are the excerpts of the discussion.Q: How do you see this budget? The focus was on continuity, improving the livelihoods of the middle class, and putting more consumption power in their hands. How do you see the budget overall?Patra: This is a case of a missed opportunity. Why I say it is a case of missed opportunity is primarily because of two reasons- one, when you say that for the middle class you are able to provide some kind of a benefit through such rebates, the middle class those who are getting up to the threshold of ₹12 lakh effectively be benefiting of about ₹60,000 per annum. Let’s say that’s the amount, which averages out to about ₹5,000 per month. If we were to look at the consumer inflation that is happening right now, the food inflation that is happening right now, there are no specific indications in this budget that specify that inflation is going to be curtailed. So, what you are essentially doing is the money that you are saying is going to stay in the hands of people, which will lead to a consumption demand that is actually going to be, in a way, diluted within the framework of inflation itself. That’s the first piece.Second, many times, we believe that income tax, being provided a rebate is actually going to help create and boost consumption and demand, it’s not going to happen that way. If you really want to do that, you have to actually increase capacity and increase outlay for MNREGA. MNREGA is the country’s flagship program in terms of livelihood support, at the bottom of the pyramid. If you were to look at the outlay for MNREGA, it is absolutely status quo. On one hand, you have got high inflation, second, there is no scope or any support for the reduction of fuel prices, and there is no intervention being made for LPG prices, what essentially you are saying is going to go towards the consumption demand will essentially end up just being traded off against the inflation.
Q: The complaint that is coming in today from the opposition is that what happened regarding stagnant real wages? The government has been speaking about how the private sector needs to pay higher wages, there has been a demand from the industry to simplify the GST structure, and there could have been a statement of intent in the budget that they are committed to rate rationalisation. What about increasing private capex, or giving certain boosts in the budget which increase the flow of private capex? What about long-term growth? How do you think the budget really figures on these fronts?Deora: Firstly, everyone has some expectation or the other from the union budget, and everyone expects the finance minister of the day to address each and every issue. I think, keeping in mind the global challenges that exist today, please try to understand that globally, if you look at the situation, one is there is a move towards greater robotics, and artificial intelligence. There is a potential threat to jobs. Globally, you are seeing governments that want to impose tariffs and potentially initiate trade wars with many countries. In the United States, for instance, they’ve already imposed hefty tariffs on Mexico and Canada. China is probably next. Who knows what will happen in the months and years ahead, with India? In that scenario, keeping in mind that there’s global uncertainty, keeping in mind that there are severe political and technological disruptions underway, I think it’s important that the government of India protects Indian industry, protects Indian job seekers from these disruptive challenges, and not just protects them, but makes Indian industry, and especially MSMEs export ready and globally competitive, and in that sense, I give full marks to the finance minister and to the government for undertaking, in my opinion, a series of measures that in the last year in Parliament I have raised several times and that in my opinion are strategic endeavors that the government must aspire towards.For instance, increasing credit to MSMEs. They are the backbone of our economy. Today, between one-third to 50% of manufacturing jobs are created by the MSME sector, and between one-third and 50% of our exports come from the MSME sector, bringing them technology, bringing them access to affordable credit, is absolutely critical and essential to make them export ready and be able to compete in a world where globalisation is under threat and where tariffs are likely to be imposed and there’s likely to be some degree of trade disputes between India and many other countries that we export to or that we import from.Q: What’s your first reaction on the budget? You’re clearly focused on consumption and power and putting money in the hands of the middle class. Do you think that the budget on that front, when it comes to consumption, does it check all the boxes?Tharoor: In the ordinary course it would have, but the fact is that if you look at the core problems facing this budget, I must admit, they’ve not been addressed.If you’ve got a job and a salary, you’ll be happy that you can keep a little more of your salary, even though, in real terms, I don’t know how much of a difference it’s going to make, because inflation has eroded the nominal value of your salary anyway. So, giving you a bit of a tax break is actually a more modest gain than it might appear on the surface. But having said that, the biggest problem is what happens if you don’t have a job. Large numbers of our young people are unemployed. We have record levels of unemployment and record levels of youth unemployment, there’s nothing in the budget for them. There’s no reference to unemployment in the finance minister’s speech. That’s problem number one.Problem number two is that, in fact, last year, the government had actually announced employment leaked incentive schemes in the budget of 2024-25 but they couldn’t really make any progress with that. They cut the budget a bit from ₹10,000 crores down to ₹6000 crore and change, and they haven’t delivered the job opportunities. So, unemployment remains a very big question mark.On the income tax itself, she mentioned, there’s going to be an income tax bill coming next week, so we better wait for the fine print. We don’t know whether it’s going to suddenly change all the deductions and so on so forth available to taxpayers. So, the savings may not be that good, after all, we have to wait to see.The other problem is the larger question of the investment climate. Viksit Bharat’s goal, which is a wonderful aspiration, requires growth. Growth estimates have come down this year from what they were projecting last year. On top of that, we are not seeing any source of additional investment. FDI is leaving the country in droves, domestic investors are skittish about investing in the economy. 23,000 Indian-dollar millionaires have migrated out of India and become NRIs. The concern about the government’s weaponisation of the income tax, the revenue intelligence, the ED and so on is reaching heights that no one wants to comfortably do business in our country, these are very worrying trends and those are the matters that really need to be addressed.
