The government’s proposal to reduce personal income taxes announced in the Union Budget 2025 has been met with approval by many commentators in mainstream press and policy circles. Some viewed it as a courageous move that would lead to significant macro­economic expansion, while others saw it as a purely political move to shore up the ruling party’s weakening middle-class support. These cuts would have some effects on demand and output, and would no doubt lead to macroeconomic expansion. However, it would not have as much of an effect as an increase in government expenditure, since the multiplier effect in the case of tax cuts is always smaller than what could be achieved through increasing investment and/or government spending. Moreover, the government’s commitment to a fiscal deficit target means that slow rates of macroeconomic expansion would lead to lower-than-expected tax collections and further cuts in government spending, harming the growth momentum of the economy even more.