Indian Govt wants to keep intact the Domestic Consumption
UPA-II is planning to provide some relief to the individual taxpayers in their first coming budget, by increasing the deductible amount under 80C from 1lakh to 1.5 lakh.
The mostly affected Exporting business and its connected manufacturing sector has made the main problem to the Indian growth rate. For which Indian Govt. is not able to do so much due to more International control on it. If we look carefully to the urban areas are mostly affected here than the rural areas. And, due to the job losses or unsecured future or salary cuts, in the previous months the consumption of the pattern also has decreased in the urban areas.Basically, this financial crisis was originally originated in US and spreaded all over , but it has not much affected the Indian rural consumption pattern.
Now the new government is planning to increase the amount of long term investment and tax slabs. From both these moves, there are both advantages and disadvantages which can affect the country's economy in coming future. First if we look at the country's fiscal deficit which is standing at around 3 lakh crores ($750Billion) which is 6% of total GDP may widen because of these moves due to exchquer to tax government is collecting from these routes. And at the same time government must be consider the possibility another speculative bubble in various sectors like stock market, real estate and etc due to excessive pumping of the money.
On the other hand, keeping the domestic consumption intact, infact making it increasing is having the most important advantage. From increase in 80 C tax deductible amount government is pushing for long term investment. Which amount in turn can be used for various development activities like infrastructures, government schemes like NREGS & etc. And one more basic fundamental learning from this crisis in US is "SPENDING ECONOMY NOT SAVING ECONOMY". And from this move governmet wants stress on the savings also. Thats why, if government goes for tax slab increase then that is obviously lead to more consumption in an economy which is very promising approach in present condition.