India grew by just 4.5% in the three months that ended in September — it was the slowest expansion in six years for Asia's third-largest economy.
. Several analysts have predicted the government might cut personal income taxes in the coming budget to boost consumer spending. That may not help the Indian economy, said Arun Kumar, Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences in New Delhi.
"In India, personal income tax is paid by effectively only about 20-22 million people," he told CNBC's"Out of a population of 1.3 billion, only concession to 22 million people, that's not going to raise demand very much. So, I think expenditure is a better way to do it rather than tax cuts," he added.
Kumar said government spending has to target the rural economy and "unorganized sectors." The latter refers to parts of the economy that employ workers without written contracts, paid leave, and health or social security benefits. The informal sectors account for roughly 94% of India's total employment and 45% of the country's output, Kumar estimated. That's also where the growth opportunities are, he added.
One way to lift that part of the Indian economy is to increase government spending in rural infrastructure, education and health — which would in turn create and improve work opportunities for workers, said the professor.
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