The so-called tax bonanza given to the middle class seems to have taken the wind out of other crucial issues in visual-media discussions. India’s middle class is in the top 10-20% of the population, which comes to around 145-290 million. Remember that the total number of persons who filed income-tax returns in 2024 was 81 million, or 28-56% of this segment. That is just 5.6% of the total population. Of this, those paying nil or no income tax is 49 million, or 60%.
The remaining 32 million taxpayers are beneficiaries. They constituted just 2.2% of the population in 2024. Is this transfer of income – estimated at one lakh crore rupees – from the government to private pockets going to boost consumption in such a way as to raise the aggregate growth of the economy? It more likely portends political dividend in the coming assembly elections.
As in the past, a slew of schemes has been announced for agriculture and rural development, manufacturing, and urban-centred projects. The urban bias is not well hidden, but somewhat underplayed by highlighting some rural development programmes.
The reality, however, is an increasing rural and urban divide on almost all development indicators. But, overall income inequality stands out. As per the 2023 estimates of the World Inequality Lab, 1% of Indians account for 22% of national income, while the top 10% (including this 1%) accounts for 57%. The next 40% accounts for 30% and the bottom 50% accounts for 13%. India’s GDP in US dollars was $3,567 billion in 2023.
That means a per capita income of $57,280 for the top 1%, of close to 14 million individuals. This also works out to a per capita income of $14840 for the top 10%, $1,835 for the next 40%, and a mere US$677 for the bottom half.
The per capita income of the top 1% is equal or marginally higher than that of Germany, while that of those in the bottom half is less than half of the per capita income of countries in sub-Saharan Africa.
Just consider where the benefits of growth -- maximisation of which is the number one priority of the government -- are going to? A more dismal picture will emerge if one talks of employment, especially that which gives one a wage equal to the subsistence wage.
And this will certainly give an important clue to the plight of the bottom half. Is there any space for debate on the budget from the perspective of the bottom half of India?