After a series of statements and policy decisions that have sparked widespread debate, finance minister Nirmala Sitharaman has found herself amid intense public outrage. While much of the focus, especially on social media, has been on the controversial “popcorn tax,” her broader approach to the economic policy can be described as “fear-mongering” – a deliberate strategy to distract the public from the actual challenges and evolving concerns surrounding the country’s economy. These developments reflect the government’s failure to address more critical issues and resorting to populist measures that harm the common man instead while shielding the government from much-needed scrutiny.
The popcorn-tax controversy
The “popcorn tax” refers to the decision made by the Goods and Services Tax (GST) Council in December 2024, which introduced differentiated tax rates for various types of popcorn sold in India. According to the new tax regime, non-branded, salted popcorn was taxed at 5%, pre-packaged and branded popcorn at 12% and caramelised popcorn at 18%, which fell under the category of confectionery. While this move may seem trivial to some, it has ignited widespread public backlash. The decision can be considered as an example of the government’s inability to connect with the everyday struggles of the common man.
For a country grappling with high inflation and rising costs of essential goods, taxing a simple snack like popcorn at different rates appeared senseless. Consumers voiced their frustration over what they saw as a display of government incompetence, with social media flooded with memes and sarcastic posts. The uproar was not just limited to online forums but also echoed across traditional media, with critics accusing the government of focusing on inconsequential matters while ignoring the real problems plaguing the economy.
The popcorn tax controversy highlights the government’s tendency to adopt policies that appear tone-deaf to ordinary people’s lived experiences. Instead of addressing the pressing needs of the population, such as tackling unemployment, inflation or income disparity, the government is fixated on trivialities. The public’s reaction to this move reflected their growing disillusionment with a government that seemed more interested in maintaining control over minor details rather than solving pressing national issues. These announcements erode consumers and not only affect consumer spending – a vital driver of economic growth – but also create a perception of an out-of-touch government.
A pattern of disconnected tax policies
The popcorn tax is not an isolated incident. Over the past few years, the central government has introduced several tax measures that have raised eyebrows, often for their seeming detachment from reality. For instance, the imposition of an 18% GST on pre-packaged and labelled food items, including staples like pulses and cereals. This policy disproportionately impacts low-income households, further squeezing an already beleaguered population. Similarly, the decision to tax sanitary napkins at 12% was widely condemned, prompting a reversal after considerable public outcry. These instances show a worrying trend in the government’s economic policy, where decisions are made with little regard for the social and economic consequences they may have on the common man.
The government’s handling of the GST system, particularly its application to everyday goods, has been criticised for creating unnecessary complexities. While the goal of simplifying taxation was a laudable one, the current system has only added to the confusion. The categorisation of popcorn – of all things – into different tax slabs is a perfect example of how the government has turned tax policy into a bureaucratic quagmire that only serves to inconvenience consumers and businesses alike. Instead of streamlining the system to benefit the public, these moves seem to be a way of further entrenching the government’s control over economic matters, while ignoring the voices of those who are most affected. The complexity of the current GST system disproportionately affects small and medium-sized enterprises (SMEs), which form the backbone of the economy. SMEs often lack the resources to navigate the intricate tax structures, resulting in compliance difficulties, delayed refunds and increased operational costs, which further exacerbate economic disparities.
Fear-mongering: A distraction from real issues
What is perhaps most concerning about Sitharaman’s statements and policies is the tone of fear-mongering that has accompanied them. Her government’s rhetoric often frames economic challenges in terms of imminent doom, painting a picture of a nation teetering on the edge of financial chaos if drastic measures are not taken. Recall the statements like “the rupee has not weakened but it is the dollar that has strengthened” while speaking to reporters after attending the annual meetings of the IMF and the World Bank. Such narratives are not only misleading but also counterproductive. Further, by focusing on rhetoric and peripheral issues like the popcorn tax, the government diverts attention away from the real and pressing economic concerns that require immediate action.
One such issue is the ongoing slowdown of the economy. In the July-September quarter of 2024, India’s GDP grew at a mere 5.4% year-on-year, a marked slowdown from previous years. Sitharaman was quick to downplay this, calling it a “temporary blip,” but the signs of a deeper crisis are becoming increasingly evident. From a robust GDP growth of 8.2% in 2023-24, the economy has plunged by nearly two percentage points to a forecasted growth of 6.4% for 2024-25, marking the slowest pace in four years. Even the National Statistical Office’s first advance estimate of GDP is lower than the RBI’s projection of 6.6%.
Also read: Three Tax Slabs for Popcorn: Congress Points to GST’s ‘Absurdity’, Internet Has a Field Day
The net Foreign Direct Investment is declining, foreign investors are pulling out and forex reserves are shrinking. The manufacturing sector is struggling, investment remains sluggish and consumer demand is weak. Despite these challenges, the government has failed to implement substantial fiscal measures to rejuvenate the economy, relying instead on superficial policies that barely address the underlying issues.
Sitharaman’s attempt to minimise the severity of the economic slowdown is emblematic of a broader issue – the government’s refusal to engage with the reality of India’s economic challenges. Rather than confronting these challenges head-on, the government has resorted to a strategy of deflection, focusing on trivial matters like popcorn tax that are a supposed improvement in the economy but is not reflected in the lives of most Indians.
A deteriorating economic landscape
In the face of these challenges, the Narendra Modi government’s economic policies have been criticised for their inability to stimulate growth. The manufacturing sector is yet to fully recover from the pandemic-induced slump and investment in infrastructure has been slow. While the government continues to focus on cosmetic reforms, the economy is grappling with systemic issues that require more significant intervention. The rupee makes historic falls and unemployment remains high, with millions of youth unable to find work. The recent trend of mass lay-offs in the tech sector has only added to this sense of uncertainty.
The government’s response has been largely to adopt piecemeal solutions that do not address the core issues. For instance, the GST system continues to be a source of contention, with businesses complaining about the complexity of compliance and the slow pace of refunds. Small and medium enterprises have been particularly hard-hit by these issues. Instead of tackling these structural problems, the government continues to introduce measures that, at best, offer temporary relief or, at worst, create new burdens for businesses and consumers alike. With the rise of the digital economy, the government’s taxation policies need to evolve. The current system does not adequately address the unique challenges and opportunities posed by digital transactions and e-commerce, potentially stifling growth in this vital sector.
The need for constructive economic policy
India needs a comprehensive, long-term economic strategy that prioritises growth, job creation, stabilisation of the rupee and poverty alleviation. The government must focus on fiscal policies that stimulate demand and create jobs, invest in infrastructure development and reduce the regulatory burden on businesses. The focus must shift away from minor distractions and toward tackling the structural issues that have prevented the country from achieving its full potential.
India also needs a tax system that is fair, transparent and easy to navigate. The current GST system, with its complicated tax slabs and frequent changes, is doing more harm than good. A simplification of the tax code, with a focus on reducing the burden on the lower and middle classes, would go a long way toward rebuilding trust in the government’s ability to manage the economy. Economic policy-making should involve strengthening democratic institutions, enabling broader participation in the decision-making process. Engaging civil society, industry experts and the general public can lead to more inclusive and effective economic policies.
Sitharaman’s recent statements and the popcorn tax controversy serve as a metaphor for the broader failure of the Union government’s economic policies. By focusing on trivial matters and using fear-mongering tactics to distract the public from the real challenges facing the economy, the government has lost touch with the concerns of the people it is supposed to serve. For India to progress, the government must adopt a more constructive approach to policy-making – one that prioritises the welfare of its citizens and addresses the deep-rooted economic issues that continue to stymie growth. As we approach another annual budget session, the time has come for the government to look beyond the popcorn tax and focus on creating trust, confidence, and a robust and sustainable economic future for all.
Amal Chandra is the author of The Essential, a policy analyst, political commentator and columnist. He tweets at @ens_socialis.
