India Creates History
India created history and a world record with an estimated 66.30 crore devotees taking a dip at the Prayagraj Maha Kumbh within 45 days. The scale and grandeur of the Maha Kumbh Mela was unprecedented. I have personally witnessed the superb arrangements, cleanliness in the Mela and unflinching faith of devotees. Truly, it is surprising that so many people taking a dip in one place did not trigger any pandemic or unrest. Salute and Pranam to the devotion and faith of crores of devotees and Kudos to the government for the success of the Maha Kumbh, an event which happened in 144 years and could be witnessed only once in the lifetime of an individual.
Economically, too, this Kumbh Mela has been a great success. The Maha Kumbh festival in Prayagraj has generated over ₹3 lakh crore in business, making it one of India’s largest economic events. Various sectors such as hospitality, transport, and retail have seen significant economic activity, benefiting not only Prayagraj but surrounding regions1.
Along with Prayagraj, Varanasi and Ayodhya witnessed a surge of pilgrims. Thus, we find that religious tourism can be tapped to boost the regional economies and help generate employment.
Let’s turn to other important events that happened during the last 45 days or so.
The change of regime in the USA has begun to change the geo-political scenario the world over. We have already started experiencing the same, with the USA changing its stance on the Ukraine War, taking Europe and the world by surprise. The USA has launched a new Golden Card for immigrants, requiring an investment of USD 5 million. A new tariff war to protect American industries has begun in tune with campaigns during the recently concluded election like “Making America Great Again (MAGA).”
Economic Survey 2024-2025 echoes these global developments and remarks that “lowering the cost of business through deregulation will make a significant contribution to accelerating economic growth and employment amidst unprecedented global challenges.”
The Economic Survey exhorts governments around the country to get out of the way and allow businesses to focus on their core mission to foster innovation and enhance competitiveness. It suggests rolling back of regulations significantly and embracing risk-based regulations. It emphasises changing the operating principle of regulations from ‘guilty until proven innocent’ to ‘innocent until proven guilty’. It is indeed a treat to read the well-researched and pragmatic Economic Survey2. Economic Survey gives the real picture of the economy, the global perspectives/trends and benchmarking; sector and region-specific developments, challenges of the economy and possible solutions, etc. Therefore, it should be published at least one month prior to the Union Budget such that it doesn’t miss the limelight amidst the glare/hype of the Budget Proposals.
1. https://economictimes.indiatimes.com
2. https://www.indiabudget.gov.in/economicsurvey/
THE FINANCE BILL 2025
The editorial of January 2023 titled “The Middle Class Deserves More!” laid a case for much-needed relief to this vital class of the economy post-pandemic. Another editorial of January 2025 titled “Don’t Kill the Golden Goose” also urged the government for a friendly and reasonable tax regime and giving much-needed relief to the middle-class population.
On several occasions, the BCAS has represented and pitched for tax relief to the middle class, especially salaried people, the latest before the Consultative Group on Tax Policy at NITI Aayog, which visited the BCAS office on 10th December, 2024. Well, the BCAS efforts bore fruits, and we have had a historic Budget 2025-2026. The Finance Bill 2025 came with a much-awaited relief to the Middle Class, granting a tax-free income of up to R12 lakhs (R12.75 lakhs to the Salaried Class). It is indeed a bold move to grant tax-free income to about 87 per cent of the taxpayers. Kudos to the Government for this unprecedented decision. There are some other relief measures to the Charitable Trusts, increase in thresholds of TDS and TCS; an increase in the investment and turnover limits for the classification of all MSMEs, etc. The estimated fiscal deficit at 4.4 per cent of GDP is in line with the government’s efforts to reduce it on year on year basis. Economic survey predicts growth of the Indian economy between 6.3 to 6.8 per cent for the FY 2025- 2026, which is quite optimistic when we look at the world average of 3.2 per cent.
THE INCOME TAX BILL 2025
Another significant development is the release of “ The Income Tax Bill 2025”, which is considered an honest attempt to simplify the Income-tax Act, 1961. The critics say, “It is old wine in a new bottle.” For a teetotaler like me, the age of wine may not matter, but for the connoisseur of wine, the age does matter – the older, the better. Technically also, it is good that the Bill only aims at simplifying the language without any substantial changes in the provisions, such that the jurisprudence of over six decades will be helpful in the interpretation of the new Act also. One significant change is the replacement of “Previous Year” and “Assessment Year” with “Tax Year”. This will help Aam Adami to understand tax law better.
Even though some of the provisions of the Income-tax Act, 1961 are simplified, as well as some inconsistencies are removed, by and large, many old complex provisions requiring the fulfilment of several conditions and those exposed to ambiguous interpretations still remain. It is believed that the government missed a golden opportunity to make these changes at the bill stage. However, the government, with an open mind, may consider doing so at the time of enactment of the Bill, taking into account suggestions from various stakeholders.
EXCESSIVE FINANCIALISATION
One of the concerned areas of the present economy is potential excessive financialisation. The Economic Survey reports that “When the economy reaches a state of ‘over-finance’, the financial sector would compete with the real sector for resources.” It further adds that “the financial markets must grow in line with, but not faster than, the economy’s capital needs and overall economic growth. As the country undergoes this significant transformation, it is crucial to be aware of the potential vulnerabilities that may arise. Excessive financialisation can hurt the economy. The costs may be particularly high for a low-middle-income country like India.” Uday Kotak, founder and director of Kotak Mahindra Bank, expressed similar concerns about over-financialisation. He said, “Over-financialisation can hurt the Indian economy as investors move their savings into equities without understanding valuations.”
People are investing huge sums in Mutual Funds in various schemes/financial products and through SIPs, which are pumped into the equity market, besides direct investments by retail investors. Thus, we find that large amounts of savings of lower and middle-class people are invested in the stock market and the real sector is deprived of cheap finances. This view is supported by the Economic Survey, which states that “Greater levels of financial engineering can create complex products whose risks are not apparent to the regular consumer. At the same time, these products are designed so that the lenders have little ‘skin in the game’. Ultimately, the proliferation of such products can lead to an event such as the financial crisis of 2008.” It is here that Regulators should be vigilant and introduce checks and balances in the system.
The recent failure of the New India Cooperative Bank Ltd. has again brought auditors to the spotlight. We need to be vigilant and careful in certifying the quality of assets (including loans) and hidden liabilities / exposures clients (especially banks) have in their balance sheets.
To conclude, India is poised to grow at over 6 per cent for the fourth consecutive year, which can be faster if the recommendations of the Economic Survey about deregulation and free hand to Indian entrepreneurs are granted. The Income Tax Bill 2025 has raised hope of simplification and reduced litigation. Let’s hope that the tax administration and regulators abide by and follow the same standards of service and trust as they expect from the taxpayers and regulatees!
Greetings for the holy month of Ramadan and the festival of colours — Holi, Ugadi and Gudi Padwa.
