Nirmala-nomics

On the 5th of June 2024, the Bharatiya Janata Party (BJP) faced a heavy blow as it failed to establish a majority government in the 2024 Lok Sabha elections. Yet, it secured a third consecutive term with the support of its coalition partners. After dominating Indian politics for over a decade, it seemed that the BJP’s charm might not have rubbed off that well on the masses, marking the reinvigoration of the Congress-led INDIA coalition. Even the idea of continuity, experienced governance, rise in India’s global involvement and power, several welfare programmes, and a strong Hindu nationalist leading the front could not allure Narendra Modi’s people from scratching their heads. The reason? Big corporations, India’s middle class, and taxes. 

As India’s first full-time finance minister, Nirmala Sitharaman has faced backlash from the unforgiving Indian population due to inequitable taxation in every Union Budget she has presented. The Indian middle class is different, yet it is enormously burdened by a tax system that favours rich industrialists and businessmen. 

From every micro-transaction at a local vendor that adds up to a large consumer spending to bringing innovation and stability in society, the Indian middle class forms the backbone of the country’s economy. Accordingly, this general election saw them double down on change and rigidity, influencing India’s political landscape through their voting power. In hindsight, this could have been expected because a growing middle class is seen as a sign of improved living standards for the true ‘common man’, and such a significant stakeholder being riddled with the finance ministry was never a good indicator for Modi’s ‘Mission 400’. Consequently, they had to settle for a mere 240 seats, an exceptional disappointment for a party that would have never anticipated this collapse after its prompt measures during the pandemic, among several other rather successful actions in their second term. 

In a broader context, Nirmala Sitharaman’s economic policies act as prerequisites to the BJP’s economic and social agendas, focusing on economic nationalism and bringing about the entrepreneurial wave. The new Budget is a very careful blend of welfare schemes to cater to the vulnerable minorities and corporate incentives to catalyse and support the expansion of the ‘Make in India’ campaign. The implementation of expansionist economic policies like privatisation, increased capital investment and the propagation of the ‘Atmanirbhar Bharat’ vision all very strongly reinforce the BJP’s economic ideologies. Under the BJP government, India has become the fastest-growing major economy in the world, with projections showing that it will become the third-largest economy in the world by the end of this year, considering its 6-7% annual GDP growth. There has been an influx of almost 85 billion dollars of Foreign Direct Investment (FDI) into the Indian economy, reinforcing the faith that foreign institutions have in India. On a very fundamental level, government schemes like the Pradhan Mantri Jan Dhan Yojana have become the bedrock of financial inclusion in India, with over 500 million new bank accounts being opened. But despite India’s economic expansion, unemployment remains a pressing issue, with over 16-18% urban youth unemployment. And even after the tax concessions to the middle class,  the ravages of inflation have hit their pockets the hardest as their purchasing power keeps falling, making the economy rather volatile.

There were several other gaping holes in past Union Budgets. For one, last year's income taxes generated a larger government revenue share than corporate taxes for only the third time in more than three decades. Simultaneously, India has a vast indirect tax base and an inadequate direct tax base. Thus, minimal tax revenue is gathered, with the lower and middle classes bearing an inordinate amount of the tax burden. What’s more? There is a high level of litigation, which harms tax certainty, something fundamentally important for any tax system. It all adds up to suggest that big corporates — yes, the ones who built the ‘India Story’ — are chaining the middle class and hurting the nation’s economy today by pocketing profits and freezing the real wages of employees.

With all the looming fear in the finance ministry to face the ruthless media, the exploited middle class, the farmer who might not see tomorrow, and most importantly a general election that may appear sooner than it seems, it all called for one simple yet groundbreaking reform in the 2025 Union Budget: a major change in the income tax slabs and rates. And Sitharaman delivered. 

For this common man, the 2025 Union Budget is all about payback. The government has made sure the headline is heard right and clear by increasing the amount of rebate available for individuals with taxable income up to twelve lakh rupees under the new tax regime. The finance minister’s speech also emphasised that the budget centres around encouraging economic growth, easing compliance burdens and reducing taxes. Reforms in indirect taxation increase exports, lower healthcare costs, and promote the local economy, while trade facilitation policies make conducting business easier. Important GST changes reduce fraudulent claims and streamline dispute resolution. 

In sum, the revamped tax regime is certainly beneficial for middle-class taxpayers and small business owners. One thing is clear from these recent developments: to have doubts in your mind, questions in your throat, along with strength in your voice, is true patriotism. It is because of this mindset that the Indian middle class can have a good night’s sleep. It is because of this mindset that Indians make the government work for them, not the other way around.

Truly, it is as if the 2024 general elections have shaped India’s recent Union Budget, and this is just the beginning of ‘Nirmala-nomics,’ a masterclass on upholding the heartbeat of India — the middle class — and the BJP’s undisputed status in India.