Budget 2025 signals shift towards consumption-led growth, says Pankaj Tibrewal

He also added that with more disposable income in the hands of the middle class, the market could see a gradual but meaningful pivot from investment-led growth to a consumption-driven economic expansion

The Union Budget 2025 has set the stage for what could be a long-awaited shift in India's economic trajectory—from an infrastructure-driven growth model to one fueled by domestic consumption. Pankaj Tibrewal, Founder and Chief Investment Officer at Ikigai Asset Management, sees the latest tax reforms as a critical catalyst in this transition, particularly in boosting middle-class spending power.

"The sentiment change is evident. The government has prioritized the middle class, and this is likely to have significant implications for consumption-led growth, something we haven’t seen in the past few years," the market veteran said.

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A key highlight of the budget is the restructured personal income tax regime, which offers substantial relief to taxpayers. With the highest tax slab of 30 percent now applicable only beyond an annual income of Rs 24 lakh, and no tax liability up to Rs 12 lakh, the additional disposable income in the hands of consumers could provide a direct boost to spending.

"Our back-of-the-envelope calculations suggest that the new tax adjustments translate to an annualized benefit of around Rs 75,000 to 80,000 per household. This could be a game-changer for demand," Tibrewal noted.

Beyond personal income tax changes, the budget maintains a strong capital expenditure (CAPEX) push. The revised CAPEX for the current fiscal year stands at Rs 10.1 lakh crore, with an estimated increase to Rs 11.2 lakh crore next year—a growth of 10 percent. While its definitely lower than what Street was expecting, Tibrewal said the real focus of the budget appears to be encouraging consumer spending.

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"Full marks to the government for addressing the consumption side, which was much needed. The recalibrated tax slabs will likely drive a smoother transition from the old tax regime to the new one," Tibrewal said.

With more disposable income in the hands of the middle class, the market could see a gradual but meaningful pivot from investment-led growth to a consumption-driven economic expansion—a shift that investors will be watching closely.

The 30-share Sensex provisionally ended the day at 77,505.96, up 5.39 points. However, for the broader Nifty 50, it was the fourth successive year when it ended in the red on the day the Budget is presented. The Nifty 50 provisionally settled the day at 23,482.15, down 26.25 points.