
This budget of the Central Government is a multimed multiplier. As stated in his budget speech, the Finance Minister has said that due to changes in tax rates, about one lakh crore rupees will go in the pockets of common people. In such a situation, consumption will increase and if consumption also increases by 10 percent, then the rate of GDP can reach 8 percent.
To understand the conjugation multiplier, assume that you have come to 10 thousand rupees more and if you buy a smartphone from these 10 thousand rupees, then I have now got 10 thousand rupees. Out of this 10 thousand rupees, I kept some amount in the form of deposited capital. Suppose you kept 20 percent i.e. 2000 rupees and spent 8 thousand rupees. When I bought a shirt of those 8 thousand rupees, the retailer reaches 8 thousand rupees. If he also keeps 20 percent of these deposits in the form of deposits and spends the remaining amount, then this amount reaches from one to the other and the third to the third. If you assess this, then it is five times a multiplyer on saving twenty percent, while it becomes ten times a multiplyer on saving ten percent. However, if people put 40 percent in savings, then the multiply is only two and a half percent.
If we look at the 2023 figure, the rate of savings in middle class is 18 percent. For the convenience of all, I have considered it 20 percent, so your multiplier comes five.
I believe that in this financial year, GDP consumption can be 10 percent. As the Finance Minister said that this step of the government will reduce the income of one lakh crore rupees i.e. one lakh crore will go to the middle class pocket. If people deposit 20 percent of this one lakh crore and spend the remaining amount, then the amount of five lakh crore rupees will increase in our consumption. 5 lakh crore is about 4.8 percent in the ratio of this year’s consumption. Even before this step, the consumption of 7 percent was going to increase, so if you add it, it becomes about 12 percent, but I am considering it as 10 percent. Finally, you should assess that 60 percent of GDP comes from consumption, then when your consumption increases by about 10 percent, then it will also have an impact on GDP. My guess is that this year the growth rate of GDP can be 8 percent.
However, we need to understand the difference that this increase will happen this year. When you create a infrastructure, then its benefit is not available in the same year but also in the coming years. However, we will get its benefit only this year.
Till now our industrialists used to say that we are not investing because we are not looking at the demand. This time as we are seeing that when the demand increases by 10 percent, it is a golden opportunity for our industrialists to invest so that they can fulfill this demand. If they do not increase their output, then it can affect inflation. In such a situation, I urge him that you must invest. It is necessary to invest you, so that its effect does not come on inflation.
At the same time, I hope that the Reserve Bank of India should also work on a monetary policy, because whenever the interest rates are low, it hopes that the government has taken a good result. There is a lot of investment.
I want to draw your attention to a very deep thing that you see that in the developed countries, people borrow for things like eating and going on vacation, but this does not happen in India. If a family in India wants to take a two wheeler or wants to buy a four wheeler or wants to buy a house, then he takes a loan for the same. So the effect of interest rate, only falls on a few items, that is, it does not affect the entire consumption due to the interest rate. Conversely, if you look at the investment, then the interest rate has an impact on all investment because when the investment is made, the company borrows to some extent. Therefore, it is very important that the Reserve Bank officials understand this difference and if investment is to be increased then it is necessary to make the montary policy easier. If the officials of the Reserve Bank do this, then the steps taken by the government will get further strength.
I will see this move of the government as a positive slope. I have told in my book India at 100 that India has to achieve an average growth rate of eight percent, so that India can become a developed country by 2047. When 100 years of our independence will be completed. I can see that the growth rate of eight percent can be achieved this year.
It is very important to solve our tax and GST system, because our bureaucracy confuses a lot instead of solving it. Due to tax, our small companies have a lot of trouble. Therefore, we have to pay attention to solving it and bureaucracy will play an important role in it.
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