The budget’s much touted income tax relief could actually have “very limited” impact on both demand and GDP, while growth next year is likely to be in the range of 6 to 6.5%, according to India’s former chief statistician Pronab Sen. Sen is currently the Country Director of the International Growth Centre.
Sen believes that the 31 million income tax payers who would benefit from the tax relief are “elite” and cannot really be considered middle class. He believes the income tax relief will increase inequalities whilst also suppressing, to some extent, the upward mobility of those at the lower end of the social scale because social expenditure has been suppressed.
Sen adds that it’s possible that the very rich could use their tax relief to buy imports, either directly or by increasing their patronage of restaurants and other services with large import components.
