Friends, listening to Raghav Chadha's speech, many thoughts came to my mind as an analyst. First of all, I must say that although this speech was given at a political level, its quality is very professional.
What Raghav Chadha did was that despite being an opposition MP, he tried to give a neutral economic analysis without taking a partisan view. This is very rare in Indian politics. Usually, what happens is that people from the ruling party call the budget something that came down from heaven and the opposition takes a completely negative stance. But Chadha took a balanced view using the structure of "The Good, The Bad, and The Way Forward".
What I found most impressive as an economic analyst was his data-based approach. He gave statistics on every issue, made international comparisons and gave historical context. For example, when he spoke on the Debt-to-GDP issue, he not only criticized but also explained how the government was hiding off-balance sheet items - FCI bonds, OMC bonds, fertilizer subsidies, etc.
Another impressive point is that he not only identified the problems but also suggested constructive solutions to each problem. Blockchain-based land registry, inflation-indexed wages, matching grants for state CapEx, and crypto regulation - all these are forward-thinking suggestions that are being discussed not only in India but also globally.
1. STT hike (Derivatives Trading Tax) Raghav Chadha raised this issue very boldly because market participants and retail investors had criticized this decision a lot. The stock market also fell after this announcement. But from the perspective of an economic analyst, this decision is right in the long run. In India, Futures & Options (F&O) trading has become like a gambling addiction. According to a SEBI study, 90% of retail investors suffer losses in F&O. These people invest their hard-earned money in F&O by taking loans, even selling gold and losing everything. Increasing STT will make speculative trading expensive and people will turn towards investment, not speculation. But the issue raised by Chadha is very important - what was the original purpose of STT? When P. Chidambaram introduced STT in 2004, his purpose was to replace Long-term Capital Gains Tax (LTCG). That is, a simple, upfront tax - it will be applicable when you trade, no need to look at profit and loss. But what happened now? The government has imposed both taxes! It imposed STT as well as LTCG. This is against the principle of double taxation. If you want to increase STT, then remove LTCG or if you want to keep LTCG, then reduce STT. It is not right to penalize investors by combining both. Their suggestion - to make LTCG zero - is ideologically correct. In many countries like Singapore, Switzerland, UAE, New Zealand, Hong Kong, there is no LTCG on equities. This results in people investing for the long term, not short-term speculation. There is wealth creation, not speculation. 2. Capital Expenditure (CapEx) increase This is the biggest strong point of the government. In FY 2018-19, CapEx was only ₹3 lakh crore, it has now become ₹12 lakh crore - a 4x increase! This is equivalent to 4.4% of GDP. CapEx means asset creation - roads, bridges, railways, ports, airports etc. Its multiplier effect is very big. According to economic theory, if the government spends ₹1 on CapEx, it creates demand of ₹2-3 in the economy. Because while building the road, cement, steel, labor are paid, those people buy goods in the shop, that shopkeeper gets income - this cycle continues. Mr. Chadha's suggestion is right - the government should give a 5-year CapEx roadmap. Because if the private sector knows in which sectors CapEx is going to happen in the next 5 years, then they can increase their capacity accordingly. For example, if there is going to be a big CapEx on highways, cement companies can already increase their plants. 3. Patience for election-bound states This is a subtle but important point. What usually happens in India is that states where elections are coming up soon get special announcements in the budget. This is against fiscal prudence. This is called "electoral budgeting", which is not good. 4. NRI Investment Limit Increase NRIs can now invest more in Indian equity markets - this limit has been increased from 5%. There are 32 million NRIs around the world, their purchasing power is huge. This is good for capital inflow. But the question Chadha raised is very serious - why are Foreign Portfolio Investors (FPIs) withdrawing money from India? In FY 2024-25, FPIs invested $23 billion (about ₹1.9 lakh crore). This is a huge number. What is the reason for this? India's valuation is very high (PE ratios at 20-22) US interest rates are high (4-5%) investments are safe there and returns are good India's economic growth is lower than expected (5.4% growth in Q2 FY25) Geopolitical tensions, regulatory uncertainties Ignoring these, opening the door only to NRIs is like pouring water into one hole and ignoring the water flowing out of another. 1. Debt-to-GDP crisis - the most serious issue This is the sharpest and technically strong issue in Raghav Chadha's entire speech. As an economic analyst, I have to say that the government is really using accounting gimmicks. First - the government has changed the rules of FRBM (Fiscal Responsibility and Budget Management). Old rule: The government can borrow up to 3% of GDP every year (fiscal deficit). New rule: The government's total debt can be up to 50% of GDP. This change seems subtle but is very dangerous. Because now the government can play on the "denominator effect". Example: If GDP grows by 12% (in nominal terms), the government will say, "Our total debt is within 50% of GDP, so we can borrow another ₹5-6 lakh crore!" That year the fiscal deficit can go up to 6-7%! This is very dangerous because: High fiscal deficit = high inflation Government borrows more = borrowing becomes expensive for the private sector (crowding out effect) Interest payments increase = less money for productive expenditure Second - Off-balance sheet items This is the biggest scandal that no one talks about. The government says our debt-to-GDP ratio is 56%. But this is false! The government does not show the following debts in its balance sheet: FCI (Food Corporation of India) bonds - ₹3-4 lakh crore Oil Marketing Companies (OMC) bonds - bonds given for subsidy Fertilizer bonds - to provide subsidy to farmers NHAI (National Highways Authority) bonds NSSF (National Small Savings Fund) diversion If we consider all these, India's real debt-to-GDP ratio is around 80-85%, not 56%! Using this technique means a company hides its debts in offshore subsidiaries. This is accounting fraud. And international rating agencies (Moody's, S&P, Fitch) know this, which is why India is still kept at the lowest rung of investment-grade rating. 2. No change in Income Tax Slabs - Middle class disappointment This is an issue that every salaried person feels. From an economic perspective: Consider the figures: Personal Income Tax collection: ₹11 lakh crore Corporate Income Tax collection: ₹9.8 lakh crore For the first time in history, individual taxpayers have paid more tax than companies! The reason for this is: Corporate tax rate was 34% in 2007-08, now 25% (for large companies) and 15% (for new manufacturing companies) There is no exemption in personal tax - highest slab is still 30% (+ surcharge + cess = effective 42-43%) That means the entire tax burden is on the shoulders of the middle class. And the same middle class has no relief. Impact of Inflation: Since 2018, inflation has averaged 5-6% But salaries have increased by only 3-4% That is, real wages have decreased Expenditure has increased: Education: 8% increase (in a year) Healthcare: 9% increase Rent: 7% increase Food: 6% increase Transport: 5% increase And there is no salary increase, no tax relief! Chadha's suggestion - increase Standard Deduction from ₹75,000 to ₹1.5 lakh - is very appropriate. This will give a person in the ₹30% tax bracket a benefit of ₹22,500 per year. It seems small but it is meaningful for the middle class. 3. No exemption for the middle class The middle class is becoming a sandwich: On the top - exemptions on capital gains for the rich, on business income. On the bottom - subsidies, free schemes (food, free electricity, water) for the poor. In the middle - the middle class pays all the taxes, no benefits This is economically and politically dangerous. The middle class is the backbone of the country - it saves, invests, pays honest taxes. If it is put in trouble, how will the economy grow? 4. Low allocation for healthcare - very serious The data given by Raghav Chadha is frightening: India: Only 1.5% of GDP spent on healthcare National Health Policy 2017 target: 2.5% of GDP We are in 2026, still stuck at 1.5%! Comparison USA: 18% of GDP UK: 12% Germany: 13% Japan, Spain, Netherlands: 10-11% Us: 1.5% 😔 What happens: Government hospitals lack beds, No modern equipment, Doctors are overworked (10,000+ patients for 1 doctor), 6-12 month wait for an operation, No basic medicines in the hospital. Result: People go to private hospitals, it is so expensive there that people: Have to take loans, Have to sell household gold, Have to sell property, Every year lakhs of people go below the poverty line due to healthcare expenses. Chaddha said it rightly - "Jaan hai to jahaan hai". If your citizens do not have health, how will your economy grow? COVID-19 taught us a big lesson. Everyone saw how weak our healthcare infrastructure is. But even after 4 years, we have not learned anything from it. As an analyst, I am of the opinion that Raghav Chadha's speech is a high-quality professional economic analysis.Section 1: Four Good Things
Second Section: Four Bad Things
