Budget likely to boost consumption, spur retail investments in stock markets

Indians are set to splurge more over the coming months as the government leaves more money in the hands of taxpayers, startup executives and other stakeholders said.

On February 1, Finance Minister Nirmala Sitharaman announced that there will be no tax payable on income of up to Rs 12 lakh. The tax relief will especially work well in the top 8-10 cities. “Affordable segment in metro pockets will see more goodness. This segment is inherently biased towards online channels,” said Prakash Sikaria, CEO of super.money, a credit-first UPI fintech app.

E-commerce websites also hailed the FM’s move as it will result in more customers spending on their platform.

“...the paradigm shift in income tax…will allow many more mass Indians to fulfil their aspirations,” said Dhiresh Bansal, Chief Financial Officer at Meesho, an e-commerce platform.

Kunal Shah, founder of Cred, a fintech platform, which also runs an online shopping portal, also anticipates a spur in consumption. “New income tax limits could cause a big jump in Gen Z consumption spends,” he said.

"A key highlight is the tax relief for the middle class, benefiting millions of salaried individuals. With the revised income tax slabs and the elimination of taxes for income up to Rs 12 lakh, disposable income will increase, stimulating consumption and further boosting India’s consumption-driven growth," said Sarbvir Singh, Group CEO of PB Fintech.

Similarly, more money left in the hands of taxpayers could result in more people spending on aspirations and experiences. “No income tax up to Rs 12 lakh is very significant. Probably the biggest announcement for (the) middle class in (the) last 10 years,” Anuj Rathi, CEO, Cleartrip, the travel portal part of the Flipkart group.

More stock market investments

Apart from more consumption and people spending more on e-commerce websites, experts also predict an increase in retail investments in the stock market.

“The revised tax structure leaves more money in hand for the middle class, empowering retail investors to allocate more towards wealth creation. This will further boost financialisation of savings, as retail investors look to build long-term financial security,” Harsh Jain, co-founder & COO, Groww, the country’s largest broking firm.

The move will also lead to disposable income and encourage consumption which will help “in long-term wealth creation through smart investments,”  said Sarvjeet Singh Virk, Co-founder & MD, Shoonya by Finvasia.

The additional money will also lead to heightened stock market activity.

"Clearly, when your income level is about Rs 15-24 lakh and you get a benefit of about Rs 70,000-80,000, that money will go into consumption, and that is what the market is betting on. So, I would go by the market judgement that consumption, particularly FMCG companies like Zomato, which sells small-ticket items, will get benefitted," Raamdeo Agrawal,  Chairman and Co-founder, Motilal Oswal Financial Services said.

"I would rather spend my money on digital, quick-commerce companies with 70-80% growth rate than old companies, where the growth rate at best will be 10-15%. Clearly, if consumption companies were worth Rs 100 yesterday, today they are worth Rs 105," the veteran investor added.