The Finance Ministry is reportedly considering proposals for the benefit of the middle class. Experts are of the view that the government should raise the basic exemption limit as well as the standard deduction limit for the salaried middle class. These measures are necessary to help the middle class cope with the elevated inflation levels.The Finance Ministry has indicated that India is on track towards meeting the targeted fiscal deficit of 6.4% of GDP for FY 2022-23, given higher tax revenue buoyancy.
While this is good news, there remains much to be done in terms of strengthening tax revenues. India’s tax-to-GDP ratio stands at 10-11%, which is significantly lower than the average of other emerging economies where it is 21% of GDP, while the corresponding ratio for OECD nations is 33%. Against this background, one may expect the upcoming Budget to continue its focus on fiscal consolidation through increased tax revenues. Fiscal consolidation, coupled with simplification and rationalisation may be the overarching themes of this Budget. On February 1, Finance Minister Nirmala Sitharaman will present the Union Budget for the next financial year (2023-24). Given that the next general elections will be in early 2024, this Budget is likely to be the last full-fledged Budget for the current government.