Responding to the general debate on the budget for 2026-27 in the Rajya Sabha, Sitharaman said that higher personal income tax does not mean that the middle class is being squeezed in any way, as claimed by the opposition.
However, she added, the middle class is expanding, as reflected in the rise in income tax payers with income up to Rs 12 lakh a year exempt from tax despite last year’s tax slab revision.
Sitharaman said the high-level committee on services sector, proposed in the budget, recommends steps to expand artificial intelligence (AI), cloud-based services and other new-age technologies and promote such exports.
She suggested that the panel would focus on the areas of fintech, logistics, healthcare, tourism and creative services, besides doubling the traditional Indian edge in software and IT services.
India is expected to grow 7.4% in the current fiscal year, against 6.5% a year ago, and is expected to remain the world’s fastest-growing major economy for at least the next two years. Retail inflation has slowed to 1.7% this year. Over a 10-year horizon, retail inflation remains at its lowest level, the minister said, indicating India’s macroeconomic stability. The budget, she emphasized, is not just an annual government calculation; It provides a clear path for India to realize its goal of emerging as a developed country by 2047 while addressing both short and medium term challenges and objectives.
No middle class pressure
Sitharaman dismissed the opposition’s accusations that the middle class was being squeezed between the rich and the poor as personal income tax collections exceeded corporate tax collections.
“Indeed, there is ample evidence of middle-class historical expansion, and formalization, driven by the economic reforms that have taken place over the past ten years,” she said. “So, the economy is no longer narrow, and it’s not just limited to the elite.”
Between 2013-14 and 2024-25, the number of taxpayers – people who file returns or have their tax deducted at source – more than doubled from 52.6 million to 121.3 million.
The taxpayer base is widening despite the IT relief announced last year. Moreover, the GST cuts, announced in September 2025, have reduced household spending, she said. “So, the notion of a middle-class squeeze cannot be combined with rising real incomes and record-low inflation.”
No reduction of funds
Sitharaman rejected allegations that the government has achieved fiscal consolidation by cutting spending on many social and rural sectors.
The government’s revised estimates of expenditure on 14 such schemes are at least 1% less than the overall budget estimates in the last decade, down from a gap of 6.4% during the UPA era, she said.
