Heard voice of middle class, tax reform to drive consumption and savings: Nirmala Sitharaman on Budget

FM Sitharaman says new tax proposal to put more money in people's hands, crucial for 8% growth; defends rupee stability against other currencies despite weakening against US dollar.
Union Finance Minister Nirmala Sitharaman during an interview with PTI, in New Delhi, Sunday, Feb. 2, 2025.
Union Finance Minister Nirmala Sitharaman during an interview with PTI, in New Delhi, Sunday, Feb. 2, 2025.Photo | PTI
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NEW DELHI: Paraphrasing Abraham Lincoln, Union Finance Minister Nirmala Sitharaman on Sunday described the Union Budget as "by the people, for the people, of the people" and said Prime Minister Narendra Modi was fully behind the idea to cut taxes but it took time to convince the bureaucrats.

"We have heard the voice of middle class" who had been complaining about their aspirations not being met despite being honest taxpayers, she told PTI in an interview.

When asked if the tax rebate in the Union Budget would boost GDP growth, Sitharaman said that putting more money in people's hands would drive better consumption and savings, which is key to achieving 8% growth.

"I wouldn't want to predict something, but certainly this tax proposal will make people have more money in their hands...So, I expect this would show both in terms of consumption spending and also in terms of savings, which can be through many different instruments," she said.

"But, I would not want to directly say this is the only way we are looking at growing up to 8%. These are steps which will have implications for the near-term and medium-term future," she added.

Opining that reducing taxes is the first step towards the new tax bill, the finance minister said, "the new regime has certainly always shown that rates will have to be brought down steadily, and this time we have made it smoother; the tax slabs are also flowing smoothly from one to another, and the rates are also very predictably in multiples of five."

On the narrow base of taxpayers in India, the finance minister said: "Those who have never been taxpayers or who have now reached that level of income, or even those who have avoided tax, will all have to be brought on. So, that is certainly a task before us. We will have to make sure that people are understanding the role of paying tax and bring them onboard."

Union Finance Minister Nirmala Sitharaman during an interview with PTI, in New Delhi, Sunday, Feb. 2, 2025.
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Responding to a query on what it took to convince the PM for the major announcement on tax relief, Sitharaman said it was about convincing the ministry and the boards and not so much the PM.

"I think the question should be how much did it take for me to convince the ministry, the boards... it is not so much the PM, the PM was very clear that he wants to do something. It is for ministry to have had the comfort level and then go with the proposal," she said.

When asked about the Opposition's crictism of the Budget being in favour of BJP's alliance partners, the finance minister said, "I think for want of criticism, they seem to be picking up, I am sorry to be so blunt. I said this even last time when they alleged me of announcing only for allied partners, I think this is a lame and lacy quick way to quick way to look at the budget."

When asked about political parties, including BJP, promising freebies in poll-bound states, Sitharaman said states should assess their capacity before announcing welfare measures. She claimed that BJP-ruled states do their homework, while criticising unnamed opposition states for making big promises without the budget to support them.

"I strongly feel that states and a state's capacity to take on such welfare measures will have to be studied before announcing any such measures, and I strongly believe such homework is done by BJP-ruled states, and only then do they announce it... unlike one or two states, I am not even naming them, they made very big promises and their budget today is not even able to fund those promises," Sitharaman said.

The finance minister also rejected criticism over the slide of the Indian rupee, saying it has depreciated only against a strengthening US dollar but remained stable against all other currencies because of the strong macroeconomic fundamentals.

She said a 3% depreciation in the rupee against the US dollar in past few months is a matter of concern as it makes imports costlier, but she rejected criticism that the local currency has seen all-round weakness.

"I am concerned but I will not accept the criticism that 'Oh Rupee is weakening!' Our macroeconomic fundamentals are strong. Rupee wouldn't be stable against all the currencies if the fundamentals were weak," the finance minister said.

The Indian rupee has been under pressure in the last few months but it continues to be the least volatile currency against the US dollar among its Asian and global peers.

Union Finance Minister Nirmala Sitharaman during an interview with PTI, in New Delhi, Sunday, Feb. 2, 2025.
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The reasons for the rupee hitting record lows almost on a daily basis against the US dollar range from widening trade deficit to a surge in the dollar index after the US Federal Reserve hinted at fewer rate cuts in 2025.

The Reserve Bank has reportedly spent USD 77 billion from its foreign exchange reserves to defend the rupee from falling sharply in the spot market, taking India's foreign exchange reserves down to USD 629.557 billion as on January 30, 2024, from USD 701.176 billion on October 4, 2024.

"Rupee's volatility is against the dollar. Rupee has behaved in a far more stable fashion than any other currency," Sitharaman said.

Rupee volatility is noticeable as the dollar is strengthening.

"RBI also has been looking at ways in which it will interfere in the market only to stabilise the need for avoiding huge volatility based reasons. So we are all closely watching the situation," she said.

The finance minister termed critics pointing to rupee volatility and depreciation as "a very quick argument."

"But in today's dollar strengthening environment and in the new US administration, the rupee will have to be understood in its relationship with the dollar (and) the fluctuations which come as a result of that. Criticisms can come, but those criticisms will also have to go with a response with a bit more study," she added.

Union Finance Minister Nirmala Sitharaman during an interview with PTI, in New Delhi, Sunday, Feb. 2, 2025.
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