Inflation is not taken into consideration in the SBI Research paper, which projects an increase in per capita income from the current level of 2 lakh rupees to 14.9 lakh rupees.
According to the estimate, by 2047, there would be approximately a sevenfold increase in the number of Indians filing taxes. According to an SBI Research analysis, India’s per capita income is expected to increase by more than seven times by 2047, when the nation would be commemorating its 100th Independence Day.
The paper, titled “The Ascent of the new Middle Class in circular migration,” was published on India’s 77th Independence Day and forecasts an increase in per capita income from the current level of 2 lakh rupees to 14.9 lakh rupees.
But there’s a problem.
The SBI Research research predicts an increase in nominal income but ignores inflation between 2023 and 2047. In 24 years, the worth of Rs. 14.9 lakh won’t be the same as it is today.
According to an estimate, the rise in per capita income will only be doubled after inflation. The real worth of today’s $14.9 lakh will be roughly $4 lakh in 2047 if annual inflation is assumed to be at the average rate of 5% over the past 10 years.
India currently has one of the lowest per capita incomes among lower middle class nations, even lower than Bangladesh.
The SBI report also includes a number of predictions on the growth of India’s labor force and taxpayer base. It claims that from 7 crore in FY23 to 48.2 crore in FY47, the number of Indians who submit taxes will increase by almost seven times.
The report claims that the “Middle Income Economy cohort is going forward as the tax filer base, helped by ongoing reforms and confidence-building measures combined with a galvanizing economy firing on all cylinders promises to bring to the net 482 million IT filers in FY47, The formalization drive of nearly 70 million MSMEs promises to broad base the cohort suitably.”
It also notes that 25% of income tax payers are expected to exit the lowest income bracket by 2047, up from 13.6% between 2012 and 2013. According to the research, around 17.5% of filers are anticipated to move up to the income groups of between Rs. 5 lakh and Rs. 10 lakh, Rs. 10 lakh and Rs. 20 lakh, and Rs. 20 lakh and Rs. 50 lakh.
The annual weighted mean income of income tax filers will increase by less than 4 times, from 13 lakh rupees in FY23 to 49.7 lakh rupees in FY47, according to the SBI Research report, even though overall per capita income will increase to 14.9 lakhs.
The percentage of income tax filers in the overall taxable workforce is anticipated to increase by 3.8 times, according to a report that examined data from income tax returns. Only 22.4% of the workforce as a whole who had taxable income in 2023 submitted income tax forms. This is anticipated to increase to 85.3% in 2047.
The analysis predicts that by 2047, the population with taxable income would increase by 80%. It is anticipated that by 2047, 56.5 crore people—or 78% of the expected population—will have taxable income, up from FY23’s 31.3 crore (59% of the overall workforce).
The country’s workforce is expected to grow along with income and tax compliance, which will lead to an increase in the number of persons paying income tax. According to the report, a 37% increase in employment is expected in India. 53 crore (38 percent of the population) made up India’s labor force in FY23; by 2047, this number is expected to rise to 72.5 crore (45 percent of the population).
According to the research, 48% of all income tax returns filed are from only 5 states: Maharashtra, Uttar Pradesh, Gujarat, Rajasthan, and West Bengal. 64% of the population, or 68.5 million persons, submitted income tax returns in FY23, with the average household income remaining at up to 5 lakhs.
Send in a remark “Indian Banks, resurgent, strong, capital-healthy, tech-oriented, and adopting best global practices look confident and ready to lead the aspirations of this new India and the aspiring Indian middle class, as it is more about the mentality that best defines the Middle-Income Class on the move,” according to the SBI report.
