Given that consumers do so much of the heavy lifting, most Budgets try to put more money in their hands through a tax break or two.
But not this one. The tax giveaways in this Budget have been minimal and there’s a clear intent to tax the super-rich to fund outlays on agriculture and infrastructure. There are three broad sets of proposals in the Budget which dent consumption.
Two, the Seventh Pay Commission recommendations are likely to give a leg up to public sector pay and OROP is being implemented too. This represents the only budget measure that could provide a leg-up to urban consumption. In fact, the higher service tax (0.5 per cent Krishi Kalyan cess) and the lack of tax breaks can prompt some belt tightening by urban consumers.
Taxing the super rich Three, the Budget clearly intends to tax the creamy layer to fund giveaways to the masses. The surcharge of 15 per cent on incomes above ₹1 crore, excise duty hikes on jewellery purchases, TDS on high value cash transactions and the tax on HNIs who receive dividends above ₹10 lakh a year, are proposals that may hit at discretionary spending in the economy. Don’t expect an immediate uptick in consumption.
`With the FM admitting that the tax giveaways have cost him a mere ₹1,060 crore, while the tax hikes rake in ₹20,670 crore for the fisc, it is clear that he’s taking away more than he gives. Its another matter if, with government spending cutting a wide swathe across sectors, animal spirits in the economy revive and nudge consumers to loosen their purse strings.