India’s economic growth story has been driven in large part by urban consumption since the pandemic, but the economy is slowing. Modi is now hinting at tax cuts for the middle class ahead of budget talks.

Indian Prime Minister Narendra Modi told the nation Friday that he prayed the Indian goddess of wealth “Maa Lakshmi continues to bless the poor and middle class of our country.”

The prime minister’s remarks came as the Indian Parliament came together for a session to discuss budgetary proposals for the Indian fiscal year beginning April 1.

Indian Finance Minister Nirmala Sitharaman will present a budget for 2025 tomorrow, on February 1.

Why do remarks matter?

The remarks are being seen as a possible signal for personal tax breaks for India’s middle class and other measures to improve welfare nets for rural dwellers, both considered key demographics politically and economically.

India’s economic growth has been driven in large part by urban consumption since the end of the pandemic, but that growth has been slowing over the last few months.

India’s economic growth is expected to slip to 6.4% in the financial year ending in March, the slowest in four years, according to the Statistics Ministry.

Urban dwellers spending lot less because of falling income

Urban dwellers have been spending less because wages haven’t keep pace with high inflation and high taxes, with middle class frustration having been a significant factor behind Modi’s weaker election performance last year.

Public spending, which makes up 60% of India’s economy, has seen a beating, which have hurt the earnings of big consumer firms over the last few months.

Modi expresses confidence of seeing through promise of making India a developed nation

Modi told the nation he was confident that “In 2047, when India will complete 100 years of Independence, India will fulfil its aim of Viksit Bharat and this budget will give new energy and hope to the nation.”

Modi announced his mission of “Viksit Bharat” to make India a developed nation during an address to the nation in January 2024.