Union Budget 2023: Finance Minister Nirmala Sitharaman will soon present the general budget for 2023-24. This will be the fifth consecutive budget to be presented by him, as well as the last budget of the second term of the Modi government. Before presenting the budget, the Finance Minister said that he is fully aware of the pressure being felt by the middle class of the country. However, he said that the current central government has not put the burden of any new tax on the middle class. But the question arises that how much power is there in this claim of the Finance Minister?
No relief to middle class on reduced tax for corporates!
Even though the Modi government has not increased the direct tax. But the indirect tax collected in the form of GST and excise duty has increased the burden of inflation on every household. During the second term of the Modi government in 2019, only two months after presenting the budget, on 20 September 2019, the central government announced a cut in corporate tax. The government has reduced the corporate tax from 30 per cent to 22 per cent, while the corporate tax for new domestic companies has been reduced to 15 per cent. Due to this step of the government, according to the Parliament Committee on Estimates, the central government had a loss of Rs 86,835 crore in 2019-20 and Rs 96,400 crore in 2022-21. That is, the government had suffered a loss of Rs 1.84 lakh crore in two years. The government reduced the corporate tax but did not provide any relief to the middle class who pay income tax.
Expensive GST hit the middle class!
In 2022, the common man was already troubled by inflation. In the meeting of the GST Council on 28 – 29 June 2022, the GST rate was increased on many things used by the common man, and the GST exemption available on many goods was abolished. Five per cent GST has been imposed on canned or packaged and labeled fish (except frozen), curd, paneer, lassi, honey, dry makhana, dry soybean, peas, wheat and other cereals and puffed rice. Earlier these items were exempted from GST. Maps and charts including atlases were taxed at 12 per cent, along with tetra packs and cheque-issuance services at 18 per cent. Going out for a walk will also become expensive. Earlier GST was not applicable on rooms with rent below Rs 1,000. But from July 18, 2022, 12 per cent GST was imposed on hotel rooms with rent less than Rs 1,000 per day. Five per cent GST was imposed on rooms with rent above Rs 5,000 for hospitalized patients, except for ICU. In 2022 itself, things related to education and writing of children have become expensive. The GST Council also increased the GST rate on printing-drawing ink, pencil sharpener, LED lamp, drawing and marking products. 18% GST is being levied on these items.
Inflation killed in 2022
A few days after the Finance Minister presented the budget on February 1, 2022, Russia attacked Ukraine. After that, a huge increase was seen in the prices of all commodities including crude oil, gas. Petrol diesel became expensive due to the rise in the prices of crude oil, while CNG PNG became costlier due to the rise in the prices of gas. From the price of edible oil to the price of wheat started touching the sky. The rise in commodity prices increased the cost of the companies. Whose burden the companies put on the customers. From FMCG to consumer durables and auto companies increased the prices of their products. This inflation spoiled the budget of the middle class.
EMI also costlier due to inflation!
There was a sharp jump in inflation after Russia’s military action on Ukraine. From May 2022, the RBI started increasing its policy rates, ending the era of cheap loans to crack down on inflation. In April 2022, the retail inflation rate was 7.79 percent and after that, the retail inflation rate remained above 7 percent for a long time. After which RBI increased the repo rate every time in five monetary policy meetings. The repo rate which used to be 4 per cent till April 2022 has now become 6.25 per cent i.e. 2.25 per cent costlier. After this decision of RBI, loans from banks to housing finance companies have become costlier. For those who had already taken a home loan, their EMI became very expensive and for those who were thinking of taking a loan, it became expensive to take a loan.
Expensive cooking gas, fuel spoiled the budget!
When the lockdown was imposed during the first wave of Corona, after a huge reduction in the prices of crude oil in the international market, the government increased the excise duty on petrol by Rs 13 and on diesel by Rs 16 per litre. At that time the government was charging Rs 32.9 excise duty on petrol and Rs 31.8 on diesel. On November 4, 2021, after a huge jump in crude oil prices, the government reduced the excise duty on petrol by Rs. 5 and on diesel by Rs. 10. After this, after Russia’s attack on Ukraine, when petrol diesel became expensive after increasing the prices of government oil companies, then in May 2022, the government had cut excise duty by Rs 8 on petrol and Rs 6 on diesel. However, oil companies are not giving relief to the common people even after the price of crude oil has come down from $120 to $82 per barrel in the international market. On top of that, cooking gas has also become costlier. In 2022, the price of LPG per cylinder has increased by Rs 150 and now an LPG cylinder is available in Delhi for Rs 1053. There has also been a huge jump in the prices of CNG and PNG.
Fear of recession increased concern!
Due to the demand-supply gap due to the Russia-Ukraine war, there has been a tremendous increase in inflation. To crack down on inflation, the Central Banks of America and Europe have made loans costlier. Due to this, the possibility of partial recession in these countries has deepened. Companies are engaged in making tremendous layoffs to reduce expenses, including global IT companies. India is a big exporter of services. The economic crisis coming in these developed countries can also affect India. In such a situation, to deal with any possibility of a global recession, the Modi government will have to make the same preparations as it was done in 2008 to deal with the recession of the Global Financial Crisis.
What relief will the middle class get
When the Finance Minister is saying that she is aware of the sufferings of the middle class, the question arises whether the Modi government gives relief to the middle class in its last full budget? Will the tax burden be reduced? Will there be relief from inflation? However, how much the Finance Minister is aware of the pain of the middle class, it will be known only on February 1, 2023.
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