The 2025 Budget gave a much-needed boost to consumption to the middle class through sweeping changes in the income tax structure. The government's decision to exempt income up to Rs 12 lakh from tax, under the new regime, indicates a significant shift towards easing the financial burden on the middle class. This comes at a time when the country is exhibiting slowdown in demand trends across urban and rural markets on account of sluggish consumer sentiments and high inflation.
The new tax structure will be beneficial for all individuals under various income slabs, with maximum possible savings of nearly Rs 1.1 lakh. Therefore, the massive reduction in tax burden will have a substantial impact on the disposable income and spending power of the middle-class population, which forms the bedrock of our economy. Higher discretionary income will stimulate demand across sectors, primarily for low to mid-range ticket items.
Key beneficiaries of this boost to consumption are likely to include businesses in sectors catering to daily needs and convenience, such as food delivery platforms like Zomato and Swiggy. With more disposable income, consumers may be more inclined to order in and indulge in convenient dining options, driving demand for these services. Further, electronics goods majors such as Havells, Polycab, Crompton Consumer, and Bluestar also stand to gain from higher demand for white and brown goods such as fans, juicers, mixers, refrigerators, washing machines, dishwashers, air purifiers and air conditioners. The cut in personal income tax rates would give a fillip to the premiumisation trend, that is being witnessed in liquor companies such as Radico Khaitan and Allied Blenders & Distillers. Among others, building materials companies, including Kajaria, Cera Sanitaryware and Prince Pipes, which have been exhibiting lacklustre performance in recent quarters, could see some demand revival owing to positive trends in home improvement.
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