The increase in the tax exemption threshold under the New Tax Regime from Rs 7 lakh to Rs12 lakh, along with revised tax rates, has put Rs 1 lakh crore back into taxpayers’ pockets. Speaking at the India Today-Business Today Budget Round Table 2025, moderated by Rajdeep Sardesai, Rajya Sabha MP and former Finance Minister P. Chidambaram welcomed the move but argued that broader relief measures were needed. Â
“I welcome it, but I think the masses deserve money in their hands. That means GST should have been cut, or taxes on petrol and diesel should have beenÂ
reduced,” said Chidambaram.
While the tax cuts will cost the exchequer Rs1 lakh crore, many experts believe it will boost consumption and savings, driving economic growth. However, Chidambaram remained skeptical.
“The Finance Minister has put Rs1 lakh crore in the hands of taxpayers, but not all of it will go into consumption. Some will go into bank deposits, some will be used to repay loans, and some will be spent on foreign travel. The key question is: how much of it will actually drive domestic consumption?” he said.
Highlighting income disparities, he pointed to recent data on per capita monthly expenditure. “In December 2024, the average monthly per capita expenditure was Rs4,122 in rural areas and Rs6,996 in urban areas. For the bottom half of the population, it’s much lower. To stimulate demand, you need to put money in their hands. If the masses consume more, it will drive demand,” he explained.
Chidambaram also noted a reduction in capital expenditure, stating, “Centre and state capex have declined by Rs1.84 lakh crore. The Rural Development Ministry alone has seen a Rs72,000 crore cut.”
On global risks, he pointed to uncertainties in the U.S., saying, “Headwinds will be there. This time it comes with an unpredictable U.S. President. The government should hold closed-door discussions with opposition leaders. The Prime Minister should invite half a dozen opposition leaders for a serious dialogue before he leaves for the US.”