The report says that the number of Indians who file taxes will go up nearly seven times by 2047.
India’s per capita income is projected to grow over seven times by 2047, when the country will be celebrating its 100th Independence Day, an SBI Research report has said.
Released on the 77th Independence Day yesterday, the report – ‘The Ascent of the new Middle Class in circular migration’ – predicts that the per capita income will go up from the current Rs 2 lakh to Rs 14.9 lakh rupees.
But there is a catch.
The SBI Research report projects a rise in the nominal income, and doesn’t account for the inflation from 2023 to 2047. The sum of Rs 14.9 lakh won’t have the same value 24 years later as it does today.
A calculation shows that the increase in per capita income, accounting for inflation, will be just two times. Assuming an annual inflation rate of 5%, which is the average of the last 10 years’ inflation rates, the real value of today’s Rs 14.9 lakh will be around Rs 4 lakh in 2047.
India’s per capita income currently is among the lowest in the lower middle income countries, even less than that of countries like Bangladesh.
The SBI report also makes several projections on the rise in India’s workforce and taxpayers. It states that the number of Indians who file taxes will go up nearly seven times, from 7 crore in FY23 to 48.2 crore in FY47.
“‘Middle Income Economy cohort is going forward as the tax filer base, helped by ongoing reforms and confidence-building measures coupled with a galvanizing economy firing on all cylinders promises to bring to the net ~482 million IT filers in FY47, The formalisation drive of nearly 70 million MSMEs promises to broad base the cohort suitably,” the report states.
It adds that 13.6% of income tax filers left the lowest income strata from 2012-23, and 25% are likely to leave by 2047. The report says around 17.5% of filers are expected to move up to the Rs 5 lakh-Rs 10 lakh income group, 5% to the Rs 10 lakh-Rs 20 lakh group and 3% to the Rs 20 lakh-Rs 50 lakh income group.
While overall per capita income will grow to 14.9 lakhs, the annual weighted mean income (calculated by giving different weights to some of the individual values) of income tax filers will go up by less than 4 times – from 13 lakh rupees in FY23 to 49.7 lakh rupees in FY47 – says the SBI Research report.
Analysing data of income tax returns, the report says that the percentage of income tax filers in the total taxable workforce is projected to grow by 3.8 times. In 2023, only 22.4% of the total workforce with a taxable income filed income tax returns. In 2047, this is projected to go up to 85.3%.
According to the report, the number of people with a taxable income is also projected to grow by 80% by 2047. In FY23, 31.3 crore people (59% of the total workforce) have a taxable income and this number is projected to grow to 56.5 crore (78% of the projected workforce in 2047).
The number of people paying income tax is projected to increase not just because of a rise in income and tax compliance, but also due to a rise in the country’s workforce. The report says that India’s workforce is projected to grow by 37%. In FY23, India’s workforce has 53 crore people (38% of population), and this is projected to grow to 72.5 crore (45% of the population in 2047)
The report also says that just 5 states – Maharashtra, Uttar Pradesh, Gujarat, Rajasthan and West Bengal – account for 48% of the total income tax returns filed. In FY23, 68.5 million people filed income tax returns, with 64% of the population still in the income group of up to Rs 5 lakhs.
“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,” says the SBI report.