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India’s macroeconomic record since 2022 looks strong on paper. The rupee held its value. Inflation stayed within the Reserve Bank of India’s tolerance band for most of the period. Fiscal consolidation continued. But the headline numbers do not tell the full story. Budget documents and consumption data together point to one group that absorbed the cost of that stability: the salaried middle class.
India began importing Russian crude at significant discounts from 2022 onward, which reduced the government’s input costs substantially. Retail prices did not follow. Petrol and diesel prices remained largely unchanged even as international crude fell from over $120 per barrel in mid-2022 to under $80 by 2023. The central government’s excise duty on petrol stood at Rs 19.90 per litre and on diesel at Rs 15.80 per litre through most of this period. State VAT added further to the price at the pump.
The gap between what the government paid for crude and what households paid was not passed on. It was retained as revenue. According to Petroleum Planning and Analysis Cell data, India’s average crude import price fell from around $105 per barrel in 2022-23 to $84 per barrel in 2023-24. Retail petrol prices moved by less than Rs 2 per litre in either direction over the same period. This matters because fuel is not optional spending for most middle-class households. It is a fixed cost built into commuting, logistics, and the price of every good transported by road. A household with two working adults commuting 20 kilometres each way daily spends Rs 4,000 to Rs 6,000 per month on fuel at current prices. That figure would have dropped sharply had retail prices tracked the fall in crude.
The GST burden falls unevenly.
The Union Budget data reinforces the pattern. Gross tax revenue in 2023-24 was budgeted at Rs 33.6 lakh crore. GST alone accounted for Rs 9.6 lakh crore. Indirect taxes as a share of total tax revenue remained above 50 per cent. The structure of GST places a proportionally higher burden on households in the middle of the income distribution.
Households below the poverty line are partially protected through exemptions on essential goods. Wealthy households hold financial and physical assets that generate capital gains, which offset their consumption costs. The salaried middle class, with fixed incomes and limited asset holdings, pays GST on consumption without either protection. It faces the full weight of indirect taxation on household appliances, restaurant meals, clothing, and services, with no offsetting cushion. A family earning Rs 12 lakh per year and spending Rs 8 lakh on taxable goods and services contributes more than Rs 1.1 lakh annually in GST.
Expenditure allocation tells the same story from the other side. The Union Budget 2024-25 maintained allocations for PM Garib Kalyan Anna Yojana and PM Awas Yojana, directed at lower-income households. Production-linked incentive schemes and capital expenditure target long-run growth. Both are legitimate priorities. But the middle class sits outside the reach of welfare transfers and is not the direct beneficiary of production incentives. It contributes to the fiscal base consistently and draws relatively little back.
This is not an argument that welfare transfers should be cut. It is an observation that the fiscal architecture creates a structural gap: one group bears a large share of the revenue cost while receiving a small share of the expenditure benefit.
RBI household finance data adds a third indicator. Net financial savings fell to 5.1 per cent of GDP in 2022-23, the lowest in decades. Households drew down savings and took on more debt to sustain consumption. Household liabilities rose to 5.8 per cent of GDP in the same year, up from 3.8 per cent in 2020-21. This was not discretionary behaviour. It was households managing rising fixed costs against incomes that did not rise at the same pace. When a household cuts its savings to pay fuel bills and EMIs, the signal is stress, not prosperity.
The fall in net financial savings is not captured in aggregate growth figures. GDP growth remained above 6 per cent through this period. Headline inflation was within the RBI band. Neither number shows a household running down its buffer.
Stability is a public good, but its cost is unevenly shared.
The standard defence of this arrangement is that macroeconomic stability benefits the middle class directly. A weaker rupee would have eroded savings. Higher inflation would have cut into real wages. A wider fiscal deficit would have raised borrowing costs. This is correct. Stability is not a neutral backdrop. It is a public good that middle class households depend on.
But a public good does not require one group to bear a disproportionate share of its cost. The distributional consequence of how stability is financed is a separate question from whether stability is worth pursuing. India’s fiscal architecture answers the first question by defaulting to indirect taxation and fuel revenue retention. That default is not inevitable. It reflects a policy choice about whose costs are made visible in budget documents and whose are not.
India’s geopolitical balancing act since 2022 was successful. Discounted Russian crude reduced import costs. Careful trade positioning preserved relationships with multiple partners. Tight fiscal management kept sovereign borrowing costs stable. These were deliberate choices that worked.
The cost of that success was distributed unevenly. Fuel excise retention and reliance on indirect taxation shifted costs onto a group that had no formal mechanism to contest them. Making that distribution visible is not a demand for reversing the fiscal strategy. It is a precondition for an honest conversation about who bears the burden of the choices a stable economy requires.
The next Union Budget presents a direct opportunity. Policymakers should publish a distributional analysis alongside revenue estimates, showing how indirect tax changes affect households across income groups. This is standard practice in several OECD countries and asks nothing that India’s own data systems cannot support. The National Sample Survey, CMIE’s Consumer Pyramids data, and RBI household finance surveys already contain the inputs needed. Without that transparency, fiscal policy will continue to make the middle class bear costs it cannot see, cannot contest, and has no platform to name.
Sagari Gupta is a public policy researcher with over eight years of experience in social development, governance reforms, and data-driven policy analysis in India.
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth