The middle class, which has been the backbone of the BJP for decades, hoped that it would be offered more in the Budget. File
| Photo Credit: Reuters

The middle class seems upset with the Union Budget, presented on July 23. Many said that the government did not provide them any relief. The middle class constitutes nearly 31% of India’s population. Not many Budgets paid a great deal of attention to the demands and needs of the middle class either. But given the shift of the middle class away from the Bharatiya Janata Party (BJP) in the 2024 Lok Sabha elections, this section, which has been the backbone of the BJP for decades, perhaps hoped that it would be offered more in the Budget.

The Finance Minister acknowledged the challenges of the middle class and emphasised the government’s efforts to provide relief through tax adjustments despite limitations. Tax is a major concern for the middle class; most taxpayers belong to the middle class.

Also read | Budget 2024-25: A look at the sector-wise allocations in ten charts

Budgetary provisions

The proposed increase in Long Term Capital Gains (LTCG) tax from 10% to 12.5% and Short Term Capital Gains (STCG) tax from 15% to 20% affects those who invest in mutual funds and shares. This means that a large number of people belonging to the middle class, who invest in these financial instruments, may see a higher tax burden on their returns. This makes investments less attractive and reduces their potential gains.

The removal of indexation benefits, which adjust for inflation, for individuals selling properties is also going to hurt the middle class to a great extent. This change will result in higher taxable gains on the sale of properties, thereby increasing the tax liability for middle-class individuals. This could significantly impact those who rely on property sales for financial gains or retirement planning.

The deduction limit under Section 80D in the Income Tax Act has remained static for nearly a decade. Middle-class families, who often rely on tax deductions to manage their finances, face higher out-of-pocket healthcare expenses as the benefits of this deduction have not kept pace with rising medical costs. This stagnation reduces the real value of the deduction over time, placing a greater financial burden on the middle class. Collectively, these budgetary provisions are likely to contribute to a sense of dissatisfaction and impose a financial strain on the middle class, who feel that their significant contributions have not been acknowledged and challenges not adequately addressed.

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The BJP’s losses and gains

The BJP has suffered losses in the 2024 Lok Sabha elections compared to the 2019 elections. The unhappiness of the middle class was one of the many reasons for its losses. Data from the post-poll survey by Lokniti-Centre for the Study of Developing Societies (CSDS) confirm that there was a shift among middle and upper middle classes voters away from the BJP.

Table 1 shows that there was a 3% point shift among middle class voters away from the BJP — from 38% in 2019 to 35% in 2024.

Table 1 | The shift among middle class voters in Lok Sabha elections (2014-2024)

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Though the Congress did not gain from middle class voters, the INDIA bloc, of which it is a part, secured a 3-point increase in vote share from middle class voters in 2024 compared to 2019.

The BJP also lost votes from upper middle class voters. During 2019, 44% of the upper middle class voters chose the BJP; this declined to 41% in 2024. This reduced share also affected the vote share of the National Democratic Alliance (NDA), of which the BJP is a part, in 2024.

On the other hand, there was a 2-point gain in vote share for the Congress from upper middle class voters in 2024. The party’s allies gained much more from upper middle class voters. Among the upper middle class voters, 27% voted for the United Progressive Alliance (UPA)/INDIA bloc in 2019 and 32% voted in 2024 (Table 2).

Table 2 | The upper middle class vote in Lok Sabha elections (2014-2024)

The BJP held on to its support from the lower income groups. In 2019, 35% of the voters from lower income groups chose the BJP. This was the case in 2024 too.

The INDIA bloc managed to secure a 7-point increase from voters belonging to lower income groups compared to 2019. While in 2019, 28% of the lower income voters chose the UPA; this increased to 35% for the INDIA bloc in 2024 (Table 3).

Table 3| The lower income group vote: Lok Sabha elections (2014-2024)

Voters belonging to the lowest income groups voted for the Congress and INDIA bloc in a substantial way (21% for the Congress and 34% for the INDIA bloc) in 2024. It is important to note that the BJP’s support base increased marginally among the voters from the lowest income groups. During 2019, 36% of the voters from the lowest income groups voted for the BJP. This increased to 37% in 2024. (Table 4)

Table 4| The table shows the lowest income group vote in Lok Sabha elections (2014-2024)

The pattern seems to be clear. The higher the income category, the higher the losses for the BJP in 2024 compared to 2019. The BJP lost popularity among the middle and upper middle classes, maintained its support base among the lower income class, and marginally got more support from among the poorer classes.

The BJP’s increased popularity among the lowest category of voters can be attributed to the free rations that the government distributes to a large section of voters who mostly belong to these income categories; and various other welfare schemes. But the decline in the BJP’s support base among the middle and the upper middle classes is clear. It is time for the BJP to re-think how it is going to appease both the poor and the middle cases at the same time. Can it afford to ignore the middle class at the cost of appeasing the poor?

Sanjay Kumar is Professor and Co-director Lokniti-CSDS

Source: National Election Study 2014-2024 conducted by Lokniti-CSDS

Also read: CSDS-Lokniti post-poll survey: Personal financial conditions played key role in voting choice 

Telangana’s Health, Medical, and Family Welfare Department’s budget outlay for the fiscal year 2024-25 saw a cutback compared to the previous year. The current budget stands at ₹ 11,500 crore, marking a decrease of ₹661 crore from the 2023-24 budget of ₹12,161 crore.

While presenting the Budget, Finance Minister Bhatti Vikramarka Mallu acknowledged the success of the Rajiv Arogyasree scheme, where the Congress government has doubled the threshold for medical treatment from ₹5 lakh to ₹10 lakhs, aiming to alleviate the financial burden on families facing higher medical costs.

Addressing infrastructure concerns, the minister assured that the government would prioritise the completion of super-specialty hospitals, medical and nursing colleges which are currently in various stages of construction. “The Nizam’s Institute of Medical Sciences (NIMS) is slated for expansion, with the government committing to providing necessary assistance to enhance the institute’s services. Additionally, plans include the construction of a new building for the Osmania General Hospital (OGH),” he said.

– Siddharth Kumar Singh

Chief Economic Advisor to the Government of India, Dr. V Anantha Nageswara.
| Photo Credit: SRINATH M

With the economy regaining momentum, it is time for fiscal policy to step back, Chief Economic Adviser V. Anantha Nageswaran told The Hindu, explaining the interim Budget for 2024-25. Identifying some of the next generation reforms needed in the coming years, he said recent changes, including the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC), and direct taxes also need a periodic review. Edited excerpts:

New Delhi: Union Finance Minister Nirmala Sitharaman speaks in Rajya Sabha during the Budget session of Parliament, in New Delhi, Friday, Feb. 2, 2024.
| Photo Credit: PTI

With an allocation of ₹22,137.95 crores in the interim budget 2024, the Micro, Small and Medium-Scale Enterprises (MSMEs) sector will see establishment of more clusters and new technology centres.

Union Finance Minister Nirmala Sitharaman said in her budget speech, “It is an important policy priority for our Government to ensure timely and adequate finances, relevant technologies and appropriate training for the Micro, Small and Medium Enterprises (MSME) to grow and also compete globally.”

While the allocation for the Emergency Credit Line Guarantee Scheme, which was launched in 2020 during the COVID pandemic, has reduced to ₹ 10,162.92 crores from ₹14,000 crores last financial year, establishment of new technology centres has allocation of ₹450 crores, Micro and Small Cluster Development Programme has ₹400 crores and the PM Vishwakarma scheme has got ₹4,824 crores. Allocation for the coir sector is also up marginally to ₹103.10 crores.

According to the Federation of Indian Micro and Small & Medium Enterprises (FISME), the Budget “lays a strategic direction to address a few critical needs” of the MSME sector. The current financial architecture needs a revamp to serve green field manufacturing projects and fast growing MSMEs. In technology, the focus on resource efficient technologies and green technologies is another direction the government is alluding to.

Union Finance Minister Nirmala Sitharaman presents the Interim Union Budget 2024 at the Lok Sabha of the Parliament House in New Delhi.
| Photo Credit: ANI

Union Finance Minister Nirmala Sitharaman on February 2 presented the interim budget for 2024, ahead of the upcoming general elections.

With no dramatic pre-poll sops the Ms. Sitharaman stuck to fiscal deficit targets; announced new urban housing scheme, more rural homes, rooftop solar solutions; and turned the focus to eastern States.

Here are a series of videos by The Hindu detailing the same.

International Monetary Fund (IMF) Managing Director Kristalina Georgieva
| Photo Credit: REUTERS

The economic success of India is grounded in the pursuit of reforms over the last years, Managing Director of International Monetary Fund (IMF) Kristalina Georgieva said on February 1 exuding confidence that it would achieve its goal of being a developed nation by 2047 by staying the course.

“India has been a bright spot in the world economy, and it continues to be so. We are upgrading projections for Indian growth to 6.5% in 2024. This comes on the back of fairly strong performance in 2023. The success of India is grounded in the pursuit of reforms over the last years,” Ms. Georgieva told a group of reporters here.

Editorial | Poll posture: On the 2024 Interim Budget

Ms. Georgieva said that one very significant advantages of India is the bold actions on the digital front with the digital public infrastructure, digital ID and making digital a strong comparative strength of India allowing small entrepreneurs to tap into markets in the way they were not able to do before.

“We also see in India recognition that female participation in the labour markets is insufficient. I think Prime Minister (Narendra) Modi is right to bet on Indian women and open up more space for their participation in the economy,” she said.

“Last but not least, India recognizes that innovation is what is going to drive a future competitiveness, very effective and efficient investment in R&D as we saw with the moon landing. This creates a very fertile ground for future growth,” the IMF head said.

Also Read | India to emerge as third largest global economy by 2027: Finance Minister

“Where India needs to be watchful like all other countries, it has to be watchful how the strength of public finances and the use of public money support this medium long term objective of strong growth,” she said.

To a question on Prime Minister Modi’s call to make India a developed nation by 2047, when the country celebrates the 100 years of its independence, she said this is very much achievable.

“I see no reason why this will be unachievable. Stay the course,” Ms. Georgieva said hours after the Union Finance Minister in her interim budget said that the Modi’s government is working to make India a ‘Viksit (Developed) Bharat’ by 2047, and that this development would be “all round, all inclusive, and all pervasive”.

Also Read | Finance Ministry says economy likely to grow closer to 7% in 2024-25

The IMF managing director said staying the course also means eliminating obstacles for private entrepreneurship.

“I see in India as actually everywhere space for more to be done,” she said.

“This has been a very visible strength for India: confidence. And confidence not just in the leadership, (but also) confidence of the people. When I was last in India, I talked to people from all walks of life and there is that sense of confidence in the economy; confidence in the country,” Ms. Georgieva said.

Harsh Goenka, Chairman, RPG Group

The Finance Minister’s speech during the Vote on Account exudes confidence that our economy is on track to achieve the Hon’ble Prime Minister’s vision of becoming a ‘developed nation’ (Viksit Bharat) by 2047. The budget last year had significantly increased infrastructure spending alongside multiple welfare schemes. The results of the reforms and investments are now clearly visible with significant strides in various sectors that bolster the nation’s trajectory towards inclusive growth and sustainable development.

Continued focus on infrastructure, with substantial investments in railways, airports, and highways underscores the government’s commitment to strengthen these sectors which are the backbone for economic growth, job creation, and enhanced quality of life. The budget also continues several social welfare measures, crucial for India’s long-term growth, ensuring that development is inclusive and benefits the most vulnerable sections of society. The healthcare initiatives are particularly noteworthy, reflecting the lessons learned during the pandemic and doubling down on the commitment to building a robust public health system. The decision to extend healthcare coverage under Ayushman Bharat to all ASHA and Anganwadi workers will motivate those working at the grassroots and strengthen the primary healthcare ecosystem. The decision to encourage cervical cancer vaccination for young girls will reduce the risks of developing cervical cancer for the 511.4 million women aged 15 and older.

The foresight shown towards technology is commendable. The 1 lakh crore support for technology investments aligns with the nation’s rapidly growing digital economy, unlocking new growth avenues and fostering innovation to cement India’s position as a global leader in the digital space. Strengthening of deep-tech technology for the defence sector will ensure our defence forces are always equipped with the most advanced technologies to meet any future threat.

The agricultural sector, the backbone of the Indian economy, has been getting due attention with 11.8 cr. farmers having received direct financial assistance from PM-Kisan Samman Nidhi so far. The initiatives to enhance agricultural productivity, improve post-harvest marketing and storage infrastructure and better market access will not only boost the sector but also empower millions of farmers. This will go a long way in elevating the rural economy and ensuring food security for India.

The budget makes a strong case for environmental sustainability, aligning with our Net Zero commitment. Viability gap funding for investments in renewable energy, green initiatives, and sustainable urban planning demonstrate our proactive stance on climate change. The proposed rooftop solar investment of 1 crore households will promote grassroot level energy self-sufficiency and also create multiple economic opportunities.

The budget showed continued commitment to simplifying tax structure and removing irritants eg. withdrawal of old outstanding direct tax demands which will bring relief to around one crore small taxpayers. The government’s approach to fiscal management also deserves an applause. Measures to consistently bring down fiscal deficit, aiming at a below 4.5% number by FY26 will ensure economic stability.

Overall, balancing growth with social welfare, modernisation with sustainability, and fiscal prudence with ambitious development goals, the Interim Budget 2024 has ensured that India’s economic juggernaut continues to roll on as we build a prosperous, resilient, and future-ready nation.

CPI (M) leader Sitaram Yechury and CPI leader D. Raja. File photo
| Photo Credit: SHIV KUMAR PUSHPAKAR

In a bid to reduce the fiscal deficit, the Union government has cut down on expenditure that has led to welfare schemes and capital expenditure being curtailed and this would negatively impact future growth and economic fundamentals, the CPI(M) said critiquing the 2024 Interim Budget.

The Union Budget, the CPI(M) Polit Bureau said in a statement here, reveals the grim economic situation confronting India’s working class. As per the Budget tabled in Parliament on Thursday, the revenue receipts in 2023-24 exceeded the budget estimates and grew by 13.3 per cent compared to the previous year.

Citing these figures, the Polit Bureau said that Central government expenditures have been squeezed below budget estimates in order to reduce the fiscal deficit. These expenditures have grown by only 7 per cent, less than even the nominal growth of GDP, which is officially expected to be 8.9 per cent. This shortfall in expenditure has taken place despite the establishment expenditure of the government being higher than budgeted. “The axe has, therefore, fallen on expenditures on welfare schemes as well as on capital expenditure. This will negatively impact future growth and economic fundamentals,” the party said.

Expenditures on several sectors like agriculture and allied activities, education, health, social welfare, and schemes like the PM Krishi Sinchayee Yojana and umbrella schemes for SCs, STs and other groups have been kept below budgeted levels, the CPI(M) noted.

The revised expenditures on PM Awas Yojana, PM Gram Sadak Yojana, and PM Poshan are not only lower than budgeted, they are even less than the expenditures in 2022-23. “Schemes specifically for women and children have also seen a reduction on both counts,” the Polit Bureau observed.

The CPI(M) said that the estimated ‘real’ growth of 7.3 per cent in 2023-24 is pure fiction and is based on the “absurd proposition that the inflation rate has come down to barely 1.6 per cent in 2023-24”. This figure, the party said, is completely at odds with the inflation rates based on the Consumer Price Index (CPI), which is around 6 per cent with food inflation of around 10 per cent. “This Budget carries forward the vicious ‘development model’ of the Modi government which squeezes the livelihood of the vast majority of India’s working people to favour the maximisation of profits for the few,” the CPI(M) Polit Bureau stated.

CPI General Secretary D. Raja, called the Budget as disappointing. “FM’s Interim Budget speech was disconnected with micro reality and was focused on presenting a rosy picture of the economy before elections. BJP has shown loyalty to corporates continuously by slashing corporate tax. Borrowings are at record high and common people are suffering with high inflation,” he said in a post on X.