Finance Minister Nirmala Sitharaman has delivered a budget which has stunned everyone, even her most vicious critics. Those earning up to Rs 12 lakh will not have to pay any Income Tax now. Additionally, salaried classes including pensioners will get Rs 75, 000 extra benefit as standard deduction.
So why did the FM give this windfall to the middle class? The reason is that finally the FM has realised that the middle class is the back bone of the economy. It is very simple logic and it is surprising why the FM did not realise it earlier.
The fact is that the top 10% rich population contributes less than 4% of the GDP. The middle class, lower middle class and the poor contribute more than 95% to the GDP by way of consumption. And consumption boosts the economy.
With this budget the FMs has put more money in the hands of middle class, who will now spend much more. More consumption means more production. More production means more GDP and more GST which will add huge revenue to the govt coffers.
