India’s tax burden is alarmingly high, and the middle class is paying the price. With individual tax collections soaring by 114 per cent in just three years, economists suggest the government continues to extract more from those who are already struggling. While India's Tax-to-GDP ratio stands at 19 per cent, East Asia, which has grown significantly faster, maintains a lower rate of 14.5 per cent.
Why are India’s taxes concerning?
This excessive taxation is crippling consumption, the backbone of India's economy. Experts suggest that this is a short-sighted approach that risks long-term stagnation.
Household savings are at an all-time low. Incomes have stagnated after years of controlling for inflation. Rising debt burdens imply families' spending power is under pressure leading to lower economic activities across the board. This pivots away from India's growth-centered strategies. India's present tax model will only further hinder its middle class while funding subsidies.
The Budget 2025 has to tackle these oversights. India must change its strategy from overtaxing the salaried class towards promoting exports and manufacturing for sustainable revenue generation. India inc suggests policies that encourage investment, job creation, and economic dynamism instead of encouraging a freebie culture. Other Asian nations have achieved rapid growth by keeping taxes moderate and business-friendly. India could learn from them.
If the government fails to recalibrate its taxation policies, it risks stifling economic momentum by suffocating its biggest economic driver—the middle class. It is time for a fair and balanced tax regime that fuels growth... But will the government deliver?
Budget 2025: Comparing India's tax structure to other Asian economies
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STORY HIGHLIGHTS
The Budget 2025 has to tackle these oversights. India must change its strategy from overtaxing the salaried class towards promoting exports and manufacturing for sustainable revenue generation.
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