India’s macroeconomic record since 2022 is frequently cited as responsible governance under pressure. External shocks were absorbed. Fiscal signals stayed controlled. Energy sourcing shifted without visible disruption. These outcomes are real.
 
But the stability narrative measures outputs, not distribution. The central question is not whether volatility was contained. It is how the costs of containment were allocated across social groups. That question sits within the S dimension of ESG, and it remains largely unexamined.
 
The instruments used to produce stability carry distributional effects. Fuel pricing offers the clearest entry point. International crude prices softened at intervals after the 2022 spike. Domestic retail prices showed relative rigidity. This divergence sustained revenue flows through excise duties and state-level VAT while dampening fiscal stress. The consequence appeared not at the point of taxation alone but across the consumption chain. Transport costs stayed elevated. Logistics pricing adjusted slowly. Everyday goods absorbed these embedded costs. The burden diffused, but it did not disappear.
 
The broader tax structure follows the same pattern. Union Budget 2025-26 data shows that total indirect tax collections were estimated at Rs 17,35,100 crore, of which GST alone accounts for Rs 11,78,000 crore. Indirect taxes are broad-based and easier to administer. They also shift the incidence of taxation toward consumption. For a salaried household, effective fiscal pressure is not limited to income tax slabs. It runs through daily expenditure. Under the Union Budget 2025-26, no income tax is payable up to income of Rs 12 lakh under the new regime, with the limit at Rs 12.75 lakh for salaried taxpayers due to the standard deduction of Rs 75,000.
 
But the indirect tax exposure of that same household through GST and fuel-linked costs remains unchanged. For households earning between Rs 12 lakh and Rs 25 lakh, the income tax relief and the indirect tax burden operate on entirely different tracks, and it is in that gap where the real fiscal cost accumulates.
 
The RBI Annual Report 2024-25 confirms that this pressure is registering inside household finances. Gross financial savings of households rose from 10.7 percent of GNDI in 2022-23 to 11.2 percent in 2023-24, while household financial liabilities increased from 5.8 percent to 6.1 percent of GNDI in the same period, resulting in net household financial savings of 5.1 percent of GNDI in 2023-24, up from 4.9 percent the previous year.The partial recovery follows what the RBI’s own data recorded as a multi-year low in net financial savings in 2022-23. The trajectory points to households drawing down buffers under sustained indirect cost pressure rather than expanding consumption freely. When indirect costs remain firm and income growth is uneven, the correction happens inside household balance sheets. It is gradual and it accumulates.
 
Public expenditure has responded at both ends of the income distribution. Direct benefit transfers and food support mechanisms protect lower-income groups from volatility. Production-linked incentives and capital-focused policies address structural transformation at the other end. Both directions are defensible. But they leave a gap in the middle, and that gap is precisely where ESG measurement fails to look. Households that do not qualify for direct welfare and do not participate in capital incentive schemes remain outside both streams. They continue to contribute to the fiscal base without a corresponding policy channel directed at them.
 
Current ESG frameworks do not track this. The S is typically interpreted through metrics of poverty, access, and inclusion at the lower end of the income distribution. Corporate disclosures track labour standards, diversity, and community impact. What ESG disclosures do not track is fiscal incidence by income band, which means the cost absorbed by middle-income households during periods of macroeconomic stabilisation stays invisible to investors and governance analysts.
 
This is not a problem unique to India. It is a structural gap in how ESG frameworks read stabilisation economies. An IMF working paper on Brazil’s tax system found that due to bracket creep from non-indexation of thresholds since at least 2015, the burden of personal income tax fell disproportionately on the middle class, with the country’s cumulative indirect taxes compounding this pressure across income bands. In Indonesia, research using CGE-microsimulation found that fuel subsidy rationalisation increased costs that fell disproportionately on non-poor groups, since the top 30 percent of income earners had consumed nearly 72 percent of gasoline subsidies, while targeted cash transfer programmes were calibrated only to protect the poorest households.
 
In both cases, ESG frameworks assessed sovereign fiscal improvement and poverty-level welfare delivery while the distributional signal in middle-income household finances went unmeasured. India’s current trajectory follows a structurally similar pattern.
 
A more complete ESG framework would change this. Graduated incidence analysis, which maps how fiscal instruments distribute costs across income bands rather than only identifying the most vulnerable, would give investors and governance analysts a fuller picture. Household-level tax burden metrics, tracked alongside welfare delivery data, would make the distributional profile of macroeconomic decisions visible rather than implicit. These methodologies exist in public finance literature. What is missing is their integration into ESG assessment practice.
 
The stakes are structural, not immediate. Middle-income households anchor consumption demand and contribute to tax buoyancy. Their financial behaviour shapes savings rates and credit conditions. If their margins narrow over time, the effects will surface in aggregate indicators with a lag.
 
India’s stability story remains valid. But stability is not a sufficient measure of responsible growth. ESG frameworks that evaluate economic transitions without tracking fiscal incidence by income band will systematically miss the group that absorbs the most diffuse and least visible adjustment costs. That is not a measurement gap at the margins. It is a gap at the centre of what the S is supposed to assess.

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