Modi Government’s Impact on the Middle Class: A 4-Year Review
Over the past four years, the Modi government has made significant strides in empowering the middle class through a series of tax reforms and policy changes aimed at improving their financial well-being. This article aims to provide a comprehensive review of the positive changes that have been brought about for the middle class under the Modi administration.
Income Tax Reforms for the Middle Class
The single greatest boon to the middle class has been the increased income tax exemption slab, which now stands at Rs. 5 Lakhs. Chartered accountants have highlighted that if all exemptions are properly utilized, one can avoid paying income tax on an annual income up to Rs. 9.5 Lakhs (as of 2019). Furthermore, the standard deduction has been increased from Rs. 40,000 to Rs. 50,000, which significantly reduces the tax burden for salaried individuals.
Economic Challenges Post-Demonetization and GST Introduction
A recent survey by the AIMO revealed that the economy has yet to fully recover from the impacts of demonetization and the introduction of GST. According to the AIMO, the number of jobs in Micro, Small, and Medium Enterprises (MSME) decreased by 33 percent since 2014. The survey, based on data from 34,700 of their 300,000 member units, also showed that MSE job losses were 25 percent, while traders experienced a staggering 40 percent decline in job numbers. Data from the Centre for Monitoring Indian Economy (CMIE), a business-intelligence firm, further illustrates the loss of 11 million jobs in the largely unorganized rural economy last year.
Other Key Reforms Benefiting the Middle Class
While certain economic indicators show challenges, the Modi government has achieved numerous other milestones that benefit the middle class:
Control of Inflation: In the past four years, inflation rates have been effectively managed, making urban living more affordable. The lower middle class has particularly benefited from the increased income tax limit of Rs. 5 Lakhs, which eases financial pressures.
Improved Financial Transparency: The government has worked tirelessly to make the financial system more transparent, targeting domestic black money and increasing the income tax base to generate new revenue without an increase in tax rates.
Enhanced Agricultural Sector: The government has eradicated the black market for fertilizers and improved connectivity with gas and over 100 million toilets. Mudra loans, supported by the government, have led to unprecedented employment opportunities, contributing to economic growth.
Modern Infrastructure: The rollout of Digital India has penalized many corrupt officials and facilitated smarter governance. Significant improvements have been made in tourism, making it more accessible to government employees. Railway reservation systems have also seen accelerated development, enhancing the travel experience for millions.
Lowered Costs: The cost of essential services has significantly decreased over the past four years. For instance, the interest rate on home loans dropped from 10.3% to 8.3%, while the price of 1GB of 3G data reduced from Rs. 250 to 1GB of 4G data priced at Rs. 5. Additionally, call rates have plummeted to near-zero levels, and insurance costs have been slashed from Rs 250 per lakh to Rs 12.
Medicine and Stent Prices: The prices of pulses, vegetables, and medicine have fallen substantially, with prices such as Arhar Dal now available at Rs 70 per kg, significantly lower than during the UPA regime.
Resolution of NPAs: Through reforms, loan repayments have been reinitiated, and non-performing assets (NPAs) are now being resolved, leading to a more efficient financial system.
Anti-Corruption Measures: The government has addressed issues like the diversion of urea and fake families receiving subsidies by introducing direct cash transfers via verified accounts, curtailing corruption.
Unified Tax System: The implementation of GST has simplified the tax system, while stringent benami laws have been enforced to resolve NPAs.
Conclusion and Future Outlook
Considering these significant reforms and improvements, it is clear that the middle class stands to benefit greatly from the continued efforts of the Modi government. As the economy continues to evolve, it is crucial for the middle class to remain informed about the policies that have positively impacted their lives and to voice their support for further progress. With a strong track record of improvement over the past four years, the Modi government remains a strong candidate for re-election in 2018-2019.