Govt to 'gift' more money to middle class

In order to pump-prime the slowing economy, the agenda for the first 100 days of the NDA government will include putting ample money in the hands of the middle class and rural India to give a push to consumption.

The upcoming Union Budget in July is expected to give a tax exemption to people earning up to Rs 5 lakh. Concessions are also being worked out for the corporate sector to kick-start investment.

Besides, the government expenditure on building of roads, expanding rail network and ‘housing for all’ is to be increased to give a fillip to steel, cement, electricity and coal sectors, sources in the government told DH. Merger of banks and their recapitalisation too top the priority list in the first 100 days, they said.

Unlike in 2014, Prime Minister Narendra Modi’s current tenure begins at a time when the economy has logged its slowest growth in five quarters in (October-December) 2018-19. The official numbers for January-March quarter will be released on May 30, a little before the prime minister takes oath for his second term. Estimates suggest the growth rate is likely to fall further.

Sources said the government would take up bigger reforms such as direct tax simplification, land and labour reforms one at a time but the first three to four months will be devoted to propel demand in economy, which has fallen across sectors from consumer goods to automobile and passenger traffic at airports.

On the direct taxes front, the Union Budget may see a change in income tax slab and exemption from paying any income tax to people earning up to Rs 5 lakh. Under the changed slab, people earning between Rs 5 lakh and Rs 10 lakh are expected to get some more exemption. At present, the rate of tax for those earning between Rs 5 lakh and Rs 10 lakh is 20%.

The interim Budget had not given any exemption but had allowed refunds to people after paying income tax at the rate of 5% on income exceeding Rs 2.5 lakh but not more than Rs 5 lakh. The government may also bring down the corporate tax rate to 25% from 30% at present. This would spur investment, which has been on a continuous decline as shown in the household savings rate that has fallen from 23.6% in FY12 to a little above 17% in FY18.

The election manifesto has promised Rs 100 lakh crore on infrastructure in the next five years, most of which would be spent before 2022, an official said.