IGI Logo

IntroductionThe Union Budget 2025 has introduced a strategic shift towards stimulating consumer demand through tax relief and rate cuts. As per the Motilal Oswal Financial Services (MOSTAdvisor) February 2025 report, these measures aim to boost disposable income and drive retail, auto, and real estate sectors. The budget’s focus on consumption over capex marks a notable change in fiscal policy. With India’s economy at a critical juncture, these changes could redefine the growth trajectory of multiple industries.

Key Measures Driving Growth

Tax relief for income up to Rs 12 lakh, expected to increase disposable income and encourage spending among the middle class.

RBI’s repo rate cut by 25 bps to 6.25%, reducing borrowing costs for consumers and businesses alike.

Increased allocation towards rural employment and direct benefit transfers, boosting rural purchasing power.

Government incentives for startups and MSMEs, aimed at encouraging entrepreneurship and innovation in high-growth sectors.

Expected Economic Impact Motilal Oswal Financial Services (MOSTAdvisor) February 2025 report highlights that lower taxes and interest rates will likely lead to increased consumer spending, particularly in urban centers. The retail, auto, and housing sectors are poised to benefit from increased affordability and improved consumer confidence. With disposable income rising, businesses are expected to expand their operations, further driving job creation.

Additionally, financial institutions may see a surge in demand for credit, particularly in housing loans, personal loans, and auto financing, further accelerating growth in these industries. The increased demand is likely to provide tailwinds for banks and NBFCs, which may experience growth in their loan books.

Challenges and RisksDespite these positive developments, challenges remain. Inflationary pressures and global economic headwinds could dampen the anticipated consumption boom. The MOStAdvisor report cautions that if global oil prices rise, inflation could eat into consumer savings, offsetting some of the benefits of tax cuts.

ConclusionThe 2025 Budget’s tax and monetary relief initiatives position India for strong domestic demand growth, with potential long-term benefits for the economy. However, the sustainability of this strategy depends on execution and global economic trends. Policymakers must remain vigilant, ensuring inflation is controlled while continuing to stimulate economic activity.

To Read Complete Report in Detail : Click Here

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412