Unlocking India's Spending Power: How Budget 2025 Could Ignite a Consumption Revolution

As India gears up for Budget 2025, a significant buzz surrounds the potential for income tax reforms, specifically tailored to inject vitality into low to mid-ticket consumption. Following the general elections, the government is widely expected to prioritize measures that put more disposable income into the hands of a broader population, aiming to stimulate demand and drive economic growth.

The current discourse centers around making the New Tax Regime (NTR) more appealing. While the NTR, introduced to simplify taxation with lower rates but fewer exemptions, saw a rise in adoption, it still trails the Old Tax Regime (OTR) in overall popularity. Analysts suggest that a strategic rejig could involve raising the basic exemption limit, increasing income slabs, or even lowering tax rates further, especially for income brackets that typically drive mass consumption. The goal is clear: encourage more taxpayers to shift to the NTR by making it undeniably advantageous, thereby freeing up cash that would otherwise be locked in investments or tax savings under the OTR.

The ripple effect of such a move could be transformative. Increased disposable income for lower and middle-income households directly translates into higher spending on everyday essentials, consumer durables, and discretionary goods and services. Sectors like Fast-Moving Consumer Goods (FMCG), consumer discretionary, and various services—from entertainment to travel—are poised to benefit significantly. This focus on consumption-led growth aligns with the government's broader economic strategy, recognizing that robust domestic demand is a cornerstone of sustained prosperity.

Previous budgets have already hinted at this direction, with the interim budget holding back on major announcements but setting the stage for a more comprehensive post-election fiscal policy. The expectation is that Budget 2025 will be the vehicle for these impactful changes, designed to accelerate the nation's economic momentum by empowering its vast consumer base. Moneycontrol Research, among other experts, projects that an income tax rejig would primarily benefit low-to-mid ticket consumption, creating a powerful multiplier effect across the economy and cementing India's position as a vibrant consumer market.