{"id":222826,"date":"2025-01-24T06:35:12","date_gmt":"2025-01-24T06:35:12","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/01\/24\/ex-rbi-chief-raghuram-rajan-doesnt-want-fm-sitharaman-to-cut-income-tax-rate-in-budget-explains-why-its-a-bad-idea\/"},"modified":"2025-01-24T06:35:12","modified_gmt":"2025-01-24T06:35:12","slug":"ex-rbi-chief-raghuram-rajan-doesnt-want-fm-sitharaman-to-cut-income-tax-rate-in-budget-explains-why-its-a-bad-idea","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2025\/01\/24\/ex-rbi-chief-raghuram-rajan-doesnt-want-fm-sitharaman-to-cut-income-tax-rate-in-budget-explains-why-its-a-bad-idea\/","title":{"rendered":"Ex-RBI chief Raghuram Rajan doesn’t want FM Sitharaman to cut income tax rate in Budget, explains why it’s a bad idea"},"content":{"rendered":"
\"Ex-RBI<\/div>\n
Former Reserve Bank of India (RBI) Governor Raghuram Rajan<\/a> has advised against reducing taxes in the upcoming Union Budget<\/a> to spur demand and consumption, emphasising instead the need for targeted investments in education, healthcare, and job creation to foster long-term prosperity. In an interview to India Today <\/em>in Davos, Rajan pointed to the limitations of fiscal space and the importance of efficient government spending to address structural challenges in the economy.<\/p>\n

Concerns over fiscal constraints<\/h2>\n

Rajan noted that while tax cuts might seem appealing to boost consumption, the current fiscal situation leaves little room for such measures. \u201cThe country’s fiscal situation…is not that sound,\u201d he said, highlighting the combined deficits of central and state governments. He warned that further expanding spending without careful consideration could lead to unsustainable debt levels.<\/p>\n

Instead, Rajan suggested that effective public spending on human capital development would yield better results. \u201cAt this point, it\u2019s not so much about cutting taxes…focusing on increasing the quality of our human capital at every level gives us a chance in the new economy of the future,\u201d he stated.<\/p>\n

‘Taxation not a big problem’<\/h2>\n

In an interview with ET, Rajan was asked if taxation is becoming a problem for people. He responded, \u201cIn the sense of being too high? If you’re not generating strong income growth, then anything is going to be problematic. But I don’t think that, at our levels of taxes, especially, that that’s a huge problem. I would say we need to reexamine it every time. But I would say the more important issue is that we need stronger job creation.\u201d<\/p>\n

Sluggish consumption and its impact<\/h2>\n

Rajan also addressed the ongoing slowdown in consumption, which he attributed to economic uncertainties. While lower and middle-income groups have faced consumption challenges for some time, he highlighted a growing trend of cautious spending among the upper middle class. \u201cDo we have reasonable jobs? Are our children getting well-employed? Do we feel confident enough about the future to spend?\u201d he asked, linking these concerns to sluggish demand in the economy.
<\/p>\n

The role of government spending<\/h2>\n

Rajan praised the government\u2019s infrastructure investments, which have driven growth in recent years. However, he pointed out that infrastructure alone cannot address deeper issues like job creation and skill development. \u201cFocusing on education, healthcare, and improving the quality of universities can create a more productive workforce and drive sustainable growth,\u201d he said.<\/p>\n

Private sector investment remains a puzzle<\/h2>\n

Rajan expressed concern about the lack of investment from the private sector, describing it as a longstanding issue. \u201cWhen I was Governor 8 years ago, I used to worry about why investment wasn\u2019t coming back on. That\u2019s the big puzzle,\u201d he said. He attributed this hesitancy to a mix of factors, including doubts about future demand and a lack of confidence among business leaders.\u201cInvestment is a lot about animal spirits. It\u2019s about the sense of confidence that private industry has about the future and also involves a certain amount of risk-taking,\u201d Rajan explained. Without a clear sense of economic stability and demand, businesses are unlikely to invest heavily, he added.<\/p>\n

A balanced approach for the future<\/h2>\n

As India faces economic challenges, Rajan\u2019s message to the government is clear: prioritize human capital development over short-term measures like tax cuts. By investing in education, healthcare, and skills, the country can build a robust foundation for sustainable growth and improve prosperity for all citizens. <\/div>\n


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Former Reserve Bank of India (RBI) Governor Raghuram Rajan has advised against reducing taxes in the upcoming Union Budget to spur demand and consumption, emphasising instead the need for targeted investments in education, healthcare, and job creation to foster long-term prosperity. In an interview to India Today in Davos, Rajan pointed to the limitations of […]<\/p>\n","protected":false},"author":2,"featured_media":222827,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"tdm_status":"","tdm_grid_status":"","fifu_image_url":"https:\/\/img.etimg.com\/photo\/msid-117509316,imgsize-55462.cms","fifu_image_alt":"","footnotes":""},"categories":[602],"tags":[1559,5002,125066,165369,175179,175178,302,3177,6062,2993,42101,83978,17652,7402,1814,175180,35170,32969,5801,3176,4254,301,40637,158270],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/222826"}],"collection":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/comments?post=222826"}],"version-history":[{"count":1,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/222826\/revisions"}],"predecessor-version":[{"id":222828,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/posts\/222826\/revisions\/222828"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media\/222827"}],"wp:attachment":[{"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/media?parent=222826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/categories?post=222826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/news.talkwithrattan.com\/index.php\/wp-json\/wp\/v2\/tags?post=222826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}