What the middle class expects from this budget

The findings of a nationwide CVoter survey augur well for the Modi regime’s 2024 hopes. (Photo: Mint)
The findings of a nationwide CVoter survey augur well for the Modi regime’s 2024 hopes. (Photo: Mint)

Summary

  • The findings of a nationwide CVoter survey augur well for the Modi regime’s 2024 hopes.
  • A majority of Indians think that they have somehow tided over the severe economic crises that have hit them and their families since 2020, forgetting the hard days before the pandemic

NEW DELHI : Five things become very clear when one studies the responses of ordinary Indians to questions related to the Union Budget. The first is that the current National Democratic Alliance (NDA) regime is lucky, in the sense that expectations are not very high.

Second, ordinary Indians are split right down the middle when it comes to expectations related to ‘freebies’ or welfare schemes —‘revdis’ as prime minister Narendra Modi describes them. Third is that a majority of Indians find it difficult to manage household budgets because of stagnant or declining incomes and high inflation. The fourth is that a huge majority of Indians think that income tax exemption limits should be raised but are not very sure if finance minister Nirmala Sitharaman will deliver on that front.

The fifth trend could prove to be a blessing for the regime as it presents its 10th Union Budget on 1 February, the last full one before the Lok Sabha elections in 2024: despite persistent economic woes, ordinary Indians rate economic management under Sitharaman better than most finance ministers, followed by the late Arun Jaitley and Pranab Mukherjee. The much celebrated P. Chidambaram is rated the worst of the lot.

CVoter conducted a series of surveys across India with specially designed questions related to quality of life, standard of living, inflationary expectations, welfare schemes, personal income taxes, the global fears of an economic recession, and much more. Cumulatively, more than 20,000 respondents answered the questions posed by the CVoter team. These respondents are representative of the demographic, ethnic and socio-economic diversity of India.

Graphic: Mint
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Graphic: Mint

Some responses are also based on questions specifically designed for a quarterly report on consumer optimism. If you are an ivory tower economist with ideological blinkers, you could be tempted to question the wisdom of ordinary Indian citizens/voters because of their seemingly paradoxical approach to economic and political issues. If you are a grassroots political worker, you would understand and applaud the innate wisdom of the ordinary Indian.

I-T exemption hopes

Let’s first deal with income tax (I-T), which most engages the minds of middle class consumers of serious media platforms like this one. Collectively, three out of four Indians think that a monthly income of 30,000 to 1 lakh is necessary to sustain an average quality of life for a family of four. While 22.2% think a monthly income of 30,000-40,000 is good enough, 29.3% believe 40,000 -50,000 is necessary, and 21.9% think it will take 50,000 to 1 lakh per month to sustain a decent quality of life.

If you take a weighted average of the ‘verbatim’ responses, an annual income of 6.25 lakh is considered necessary to sustain a decent standard of living for a family of four.

A big majority of Indians want zero income taxes on annual incomes of up to 6.25 lakh. Currently, the income tax exemption limit is 2.5 lakh per annum, which was set by Jaitley in the 2014 Budget. The CVoter tracker in that year had reported 4 lakh per annum as the sum expected to be tax free. The gap between the provision of 2.5 lakh and expectation of 4 lakh wasn’t that huge 10 years back. But the gap between 2.5 lakh and 6.25 lakh is huge in comparison with what was expected almost a decade back. Many economists, tax experts and others want the limit raised to at least 5 lakh per year.

Now, here is what respondents have said about expectations. They were asked if they expect Sitharaman to raise exemption limits for personal income tax in the forthcoming Budget. While 36.9% of the respondents expected her to raise the limit, 35.2% had no expectations whatsoever. Besides, a fairly high proportion (27.9%) responded by stating they did not know or cannot share their opinions. So much for income tax exemption limits.

Almost two in three Indian middle class respondents have virtually given up hopes of getting any tax relief whatsoever. Even when it comes to the possibility of a drop in income tax rates, the expectation levels from ordinary Indians are not very high. Respondents were asked: Sitharaman has significantly cut corporate tax rates in recent times. Do you expect her to also cut income tax rates in this Budget? While 36.5% of the respondents were hopeful of a cut, 36.8% nurture no such expectations. A substantial 27% also did not have any response to this specific query.

Lowered expectations

Regimes are considered lucky when expectation levels are relatively low. One advantage of conducting the same kind of surveys over a long period of time is that they give you valuable insights into the minds of citizens and voters. On that front, there is no doubt that this regime is lucky, whatever be the reasons. In 2013, 75% of the respondents had stated that the performance of the central government on economic issues under Manmohan Singh and Chidambaram was worse than expected, while a meagre 5.8% thought it was better than expected. Everyone knows the electoral calamity that struck the United Progressive Alliance (UPA) regime in the year after the 2013 Union Budget.

What about 2023? Surprisingly, a third of the respondents state that the performance of the central government on economic issues is worse than expected, while about 44% rate their performance as better than expected. How many politicians can expect this after the economy, which was already in a slowdown, was battered by the covid pandemic and then bruised again while recovering because of global headwinds?

The folly of freebies

The second trend, related to freebies, does not really need a detailed analysis. The various promises made by the Aam Aadmi Party and the decision of Congress governments in various states to bring back the old pension scheme for government officials have triggered a fresh bout of debates on the fiscal (ir)responsibility of such freebies. Even noted economist Montek Singh Ahluwalia, who has seen the Indian economy transform since the historic reforms of 1991, thinks that such freebies are terrible for the long-term health of both the economy and state finances. An overwhelming majority of economists share the views and concerns expressed by Ahluwalia.

However, the ordinary Indian citizen-cum-voter seems split almost right down the middle on the issue. While 47% of respondents expect populist schemes in the forthcoming Budget in view of the series of assembly elections due in 2023 followed by the Lok Sabha elections in 2024, more than 20% have no such expectations and almost a third of the respondents did not have any opinion on the issue.

For better or for worse, the freebie culture has entered the political lexicon as the Congress has announced it will bring back the old pension scheme in Karnataka if it wins the assembly elections due later this year. Early indicators do point towards a Congress comeback in Karnataka.

Battered but optimistic

The third trend is the most significant and provides deep insights into the psychology of ordinary Indians, who also happen to be voters. A big majority feel bruised and battered by their current economic circumstances. Yet, they share a sense of optimism that could defy conventional logic.

The CVoter Daily Tracker asked a straightforward question related to managing family finances: How do you compare your current daily expenses to last year? One year into the second NDA regime in 2015, about 45% of the respondents stated categorically that they found higher expenses difficult to manage. By 2020 when the covid pandemic hit India and the world, 70% of Indians found it difficult to manage expenses. Things haven’t improved much since then as two thirds of the respondents still think it is very difficult to manage expenses.

There is more. Three out of every five Indians (60%) said in January 2023 that inflation under Modi’s regime has gone up, compared to 17.2% back in 2015. Similarly, four out of every five Indians think that inflation has had an adverse impact on the quality of their life. And three out of every five respondents said their household expenses have shot up, while family incomes have either stagnated or declined. And yet, the sense of positivity and optimism is astonishing.

Asked about the standard of living of the average Indian over the past year, a little more than a third said it has deteriorated, while an equal proportion thinks it has improved. When asked about expectations on the standard of living over the coming year, more than 45% are confident it will improve, while one in four respondents thinks it will deteriorate.

In the exclusive quarterly consumer optimism report prepared by CVoter, about 47% of the respondents were of the opinion in January 2023 that both they and the county were moving in the right direction, while just 25% felt that both were in poor shape.

A majority of Indians think that they have somehow tided over the severe economic crises since 2020. Economic and other shocks since early 2020 have prompted many Indians to forget that financial year 2019-20 was perhaps the worst of the decade, with GDP growth at an abysmal 4%. That was before the pandemic.

There is another telling data point. While 37% of the respondents blame poor economic policies for high inflation, more than 43% blame such policies for high unemployment. Such numbers would sound alarm bells for any finance minister in normal times. Yet, as highlighted earlier, Sitharaman has been rated as the best finance minister since 2004. For the Modi regime, that just augurs well for 2024.

(Yashwant Deshmukh is the founder of CVoter Foundation)

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