The past few years have seen high inflation eroding the spending ability of the middle class. It has hurt demand for staples, snacks and most other consumer goods. Some of this will now reverse with the budget's proposal to provide income tax relief, and the measures to support the rural economy and small & medium enterprises.
"The substantial tax relief measures, particularly making income up to Rs 12 lakh tax free, will provide essential financial respite to middle-class families, increasing their disposable incomes, encouraging spending," said Mohit Malhotra, CEO at Dabur India. Jagrut Kotecha, CEO at PepsiCo India said the Budget measures should alleviate the burden of inflation and rising costs, and give a boost to consumption.
While demand for premium products across FMCG, retail and consumer durables have been intact, and even growing for most companies, the mass categories driven by lower to mid-income households have been lagging. The lower middle class in urban areas have been the most impacted by inflation and consumers have shifted to smaller FMCG packs due to rising cost of products. The middle class, because of their size, is key to driving sales volumes and companies have been offering easy EMI options, schemes and discounts to get them to spend. The segment, in fact, now drives nearly 60% of domestic consumption, said Gautam Singhania, CMD at Raymond Group.
Paresh Parekh, partner and retail tax leader at EY India, said the Rs 1 lakh crore of personal tax the govt has foregone with the tax relief is almost 6% to 8% of total collection. "It is a significant infusion of liquidity in the hands of consumers and taxpayers. This should positively impact urban consumption," he said, adding that the employment and manufacturing push being attempted through Make-in-India reforms, MSME support and agriculture reforms will also benefit consumption.
Anand Ramanathan of Deloitte India, said the proposals to offer social security to gig workers, extend Mudra loans to homestay providers, and make credit more accessible to farmers will help broad base the consumption support beyond the formal sector to more unorganised parts.
Get real-time updates on Budget 2025 and Income Tax Slabs on Times of India. Check out the latest income tax slabs FY 2025-26.
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