Stock markets remain sluggish, eyeing future RBI proposed rate cut action
File Photo: Shoppers walk inside a shopping mall in New Delhi. Image: REUTERS/Anushree Fadnavis
Finance Minister Nirmala Sitharaman saved the best of the policy measures for last, announcing a boost for the middle class in the form of zero income tax payment for up to an income of Rs12 lakh annually (under the new tax regime), signalling a move to consume and spend more now that they will have more income in their hands.
The assumption we are making here is that those earnings below Rs12 lakh annually were paying taxes. Also, the universe of taxpayers in India is still small.
The announcement of the tax relief drew cheers of “Modi, Modi” from parliamentarians from the Bharatiya Janata Party, but the finer print suggests that little else has been done: Whether it be employment generation, job creation and the ability for small businesses to grow rapidly.
Consumption demand in India remains weak and GDP growth for the third quarter ended December 2024 is forecast around 6.4 percent, its slowest in four years. Employment generation is an area where the Modi-led government has come in for criticism over the years and Sitharaman decided to tackle this issue by incentivising new hiring.
Also read: Why did stock markets get cold feet after the Budget?