Moneycontrol Pro Panorama | Budget 2025: A pivot to consumption

The NSE Consumption, Nifty FMCG, and Nifty Consumer Durables indices were among the top gainers in trade today.

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It was inevitable and it was necessary. The Union Budget took to heart the demands of a consumption boost and went for the one tool that leaves more money in the pockets of the average Indian – income tax. Starting April 1, anyone earning an income of up to Rs 12 lakh would effectively pay no tax. The tax slabs for various income levels have also been tweaked by the finance minister. With her tax proposals, Nirmala Sitharaman said the government will forgo Rs 1 trillion worth of revenue, which is the amount her taxmen leave behind in our pockets for us to choose to either consume or invest.

The fact that this applies to the new tax regime will help the finance minister in pushing more Indians towards it from the old regime that was rife with exemptions. Whether the tax burden has gone up or down will depend on which tax slab you were in the old and new regime as well as how many exemptions you were milking. But it is clear that the Budget has aimed to leave more of our income in our pockets to spend.

It shouldn’t surprise that consumer stocks were in vogue today. From biscuits to air conditioners, discretionary consumption is likely to get a boost.

The Budget also focused on reviving rural consumption demand. Several proposals were aimed at boosting agriculture and allied activities for the rural populace to increase their earnings. That said, much of these efforts stretch for the full five years of the term of the government rather than for an immediate lift in the next fiscal year. Schemes such as Dhan Dhanya Krishi Yojana, national mission for edible oil seeds, cotton productivity etc are ongoing projects of the government aimed to lift farm output and incomes. They are at best sentiment boosters in the immediate term. Similar are the variety of schemes announced for small businesses, labour intensive sectors, skills, education etc. Outlays of several schemes have been increased, some others kept unchanged and some reduced as well.

That said, equity markets seem to shrug off the Budget in totality although many appreciate the consumption boosting efforts. The benchmark Nifty ended slightly in the red post the Budget. To be fair, markets should not complain. Budgets under Prime Minister Narendra Modi’s government have all been about enablers than subsidies, discounts, and all out stimuluses. The Budget of 2025 was no different. Credit guarantee schemes have been enhanced, kisan credit card limit increased, and small tweaks done to make individuals and small business borrow more easily.

This puts banks in a tough spot, especially when they have been asked by the regulator to use discretion in giving credit. Dinesh Unnikrishnan explains here why banks are not that happy today.

Under Modi, Budgets have also been about fiscal consolidation. Given that the government will forgo revenue, it has kept a tight leash on its spending. The total expenditure of the exchequer will increase by a mere 7.4 percent in FY26 over the revised estimate of FY25. That is not a big stimulus from the fiscal authority. Much of this increase is gone towards consumption and so capital expenditure has been increased by 10 percent from the revised estimate of FY25. While it is not chump change, it doesn’t move the needle much for the markets to cheer.

While equity markets may be forlorn, the bond market has nothing to complain about. We explain here how a reasonable bond supply amid robust demand and an eager buyer in Reserve Bank of India make it easy for bond yields to ease. All the bond market now needs is a rate cut.

For that to happen, the Budget has ensured it is not a hurdle. The fiscal deficit is pegged at 4.4 percent of gross domestic product (GDP) for FY26, lower than market expectations of 4.5 percent and much lower than the 4.8 percent for FY25. It makes it just a little easier for the RBI to consider cutting policy rates when its monetary policy committee meets next week.

Our Analysis of Budget 2025

Meets the Mark, But Misses the Magic: The Budget 2025 Big Picture

A sizeable boost for urban consumption in Budget, will private capex revive now?

For stock market traders, it’s business as usual after Budget 2025

Government did not rock the boat for bonds as Budget restrains borrowing 

Big reforms missing in Budget, but banks could benefit from FM’s consumption boost

Nuclear power gets long overdue attention in Budget 2025, execution is key

Short-Term Volatility, Long-Term Uncertainty: Budget 2025's impact on markets

The focus shifts from capex to consumption in Budget 2025

Technical Picks: POWERGRID, JYOTHYLAB, LAURUSLABS, ITC, KALYANKJIL

Aparna Iyer Moneycontrol Pro